Starting an Amazon business as your first online venture may not be the best idea. Here are at least 10 reasons to do almost anything else first.
Amazon FBA Process
Selling Physical Products Online is a business model that everyone can understand. And on first glance, opening an account with the world’s largest Online marketplace would seem to be a smart place to start.
In reality, the Amazon Marketplace is a minefield. As you will see, there are an endless number of unforeseen challenges to Navigate.
If that is not enough, Amazon is also incredibly competitive, heavily regulated and constantly changing. Perhaps the biggest issue of all is that as a “private label Seller” on Amazon you have very little control over anything.
So what is wrong with starting an Amazon Business
When you are starting out online, everyone is looking for a quick result, to prove to themselves that “they can do this.” There are no quick results on Amazon FBA.
We have been down this track. Sure we eventually exceeded our target of $100,000 monthly sales on the US marketplace. But it took 2 years to get there.
Starting an Amazon Business-Problem #1
The first problem is product selection.
To have any chance of success your product has to be visually superior. It also needs to be cheaper to make than its Amazon competitors.
Consider this, most of the products on there are already made dirt cheap in China.
Not only that, the successful ones are made in bulk, and shipped in by the thousands or tens of thousands.
Settling on a product, getting a unique design, finding a manufacturer, then getting and testing samples alone will take at least 6 months.
Problem #2
Manufacturing your new product in China can be a nightmare.
It is not enough to approve a sample, place a large order, and wait until the product is ready to ship. In most cases, you simply cannot rely on the Chinese factory to exert any decent quality control.
In fact, the standards are so low there is a completely accepted and expected practice of sending in your own Inspectors. The Inspection company will do anything from batch testing to inspecting or testing every single product. This is expensive but consider this:
It only takes one bad “1 Star” review from an Amazon customer to stop your new Product dead in its tracks in the United States market.
The third problem starting an Amazon Business
To get access to the same listing options that your Competitors’ enjoy, your new Brand needs to be Trademarked. Getting a Trade Mark in the United States will take about 9 months after the application is lodged by an approved Attorney.
Problem #4 Piracy
To be honest, you are probably already guilty of this yourself before you get a product live. Most new products are just modifications of something already selling on Amazon. Found by tracking down the Chinese factory, making a big enough change to set it apart, then shipping it in. There are two issues here.
If your product is too similar to the original, you might find yourself locked out of Amazon. You could have many thousands of dollars of product you can’t sell. All because you have violated someone’s product Patent. The second issue starts if you do create a truly unique product yourself.
#5 Starting an Amazon Business without Patent Protection
This gets interesting fast.
If you have invested 6-12 months developing a unique product, the moment it gets listed on Amazon you are exposed. Unless you have a fully registered patent in place first.
Getting a patent application lodged with USPTO will cost you $1,500 to $3,000 for a basic product. But, it will also take a year for the application to be processed and hopefully approved.
That is a year for another Amazon seller to do to you what you already did to the guys you “copied” from.
.
.
If that seller is more established than you. Better financed, Trademarked, Brand Registered etc, they can have your product outselling you. Undercutting you and releasing your design via Amazon in numerous countries. All while you are still trying to get it work in your first market.
Problem #6 Amazon PPC advertising
This thing is a beast. But unless you have managed to find exactly the right sub-niche to go after on Amazon, with the perfectly modified, obviously better, hopefully cheaper offering than your competitors, it is a Beast you have no choice but to tame.
Don’t be surprised if your PPC (pay per click) cost per sale is more than the manufacturing cost, especially in the early days. Not only that, but you can expect to spend many hours every week trying to get this thing to work for your product.
You can also pay a specialized Amazon PPC agency to do it for you. They will likely charge you 15-20% on top of your advertising spend. They will have a sizeable monthly minimum that you have to spend, and there is no guarantee or accountability for the result. Been there, done that.
Problem #7 False 1-star reviews.
Remember we mentioned that even a single “1-Star” review can stop your product in its tracks.
Well, your established competitors know that too. As long as they are paying attention, it is so easy to use Amazon’s star rating system to beat out new competitors like you.
All they need to do is have someone, anyone, buy your product, post a reasonably vague 1-star review and your sales will stop.
After all, who wants to buy a new product with only 1 review, especially a negative one, when there are similar, well-established options with hundreds of 5 star reviews?
Starting an Amazon Business Problem #8
Bogus claims sent to Amazon by competitors. All it takes is one claim sent to Amazon suggesting that your product is not what it’s claimed to be. Just saying it contains something that it shouldn’t will see Amazon suspend your product indefinitely.
Not only that, but you will not be advised and nothing will happen until Amazon conducts its own Investigation. There is no fixed timeline for that investigation, and you will likely not be asked for input.
Most frustrating of all, as soon as your product is cleared again for sale, all they have to do is make another claim. Just as long as they complain about something different your product will be suspended again and it starts all over.
We went through this repeatedly, when a high quality consumable product started to gain market share. It suddenly contained numerous illegal, and poisonous ingredients.
Each ingredient was reported to Amazon sequentially. As soon as the last was investigated, rejected and our product made available for sale again. We were effectively locked out of the catalogue on and off for months. This makes it impossible to gain sales momentum. As sales volume determines your Amazon ranking it means you also get to keeping spending all of your profit on PPC just to win initial customers.
Problem #9 Contacting “your” Customers
On Amazon, your customers are NOT your Customers. They are all Amazon’s customers and your access is extremely limited
You can communicate with them under very limited circumstances, and every communication is subject to scrutiny by and action from Amazon
.
This can make dealing with a genuinely dissatisfied customer difficult, even if all you want to do is rectify something that really did go wrong.
Problem #10 Unrealistic Expectations of Customers
We all know that “the Customer is always right”, and on Amazon that is taken to the most ridiculous levels. Amazon will accept any product back from any Customer at any time.
It can be in any condition, it can have been purchased years ago, used for years, or misused. It can even by a totally discontinued line and Amazon will still issue a full refund.
They start by deducting the original price from your account. They charge you freight for the return, and classify the item as “unsaleable”. Then they charge you storage on it for a period of time and finally they charge you to dispose of it as well.
The other thing about Amazon, is that the entire site is based on selling products at the cheapest possible price to the Customer. Not normally the place that any active marketer wants to start.
Starting an Amazon business successfully
We still made Amazon work, and managed to generate over $100,000 per month in sales from only one Product. But it did not happen quickly and it did not happen cheaply.
We tried it with close to a decade of online marketing behind us. Without doubt this is easily the most difficult thing we have done online.
Be warned, getting that first product established will take at least 18-24 months. It will also easily soak up $100,000 in expenditure along the way.
If you really must turn to Amazon FBA, the very first thing you need is Zonguru.
The brilliant Zonguru tools allow you to research possible products to sell. It provides wide ranging information about every Niche and every individual product currently selling.
Zonguru offers free weekly training and is one of very few research tools licensed to provide real-time data from Amazon and Alibaba’s own platforms. The sales volumes, price info etc provided is all real and is an essential basis for your product research and Targeting.
The Profitability challenge
In exchange for bringing the traffic, storing the products and doing your shipping, Amazon will take a 15% commission on the sale, charge you storage on every square inch your products occupy in their warehouses, (with substantially higher storage on slower moving items), and of course you still pay the delivery costs (although rates are competitive).
We already mentioned PPC. To have your products seen, you will need to spend substantial amounts in advertising via Amazon’s in house Cost per Click advertising program.
For your listing to convert, it needs to be very well written, with careful attention to Keywords, Amazon rules etc.
Finally you absolutely must have high quality, professional product photography and product videos to catch the eye of the many shoppers flicking through Amazon each day.
Do all of that right, with the correct product costs, mark-ups, patents, insurance and supply lines etc and you can make a lot of Money as an Amazon seller.
Less than 2% of people who open an Amazon Seller account ever get a product listed for sale.
Far fewer survive.
It takes time, money and a lot of work to get this one to the starting line.
In summary
If you are new, and want to build your financial future online, starting with Amazon FBA is not your smartest move. I would absolutely start here instead.
However, if selling on Amazon is your chosen path, along with Zonguru for research you really must invest is a quality training program to follow, and the Reliable Education Academy, and community is outstanding.
This needs to guide you through all stages of researching products, sourcing, and shipping. From there it must also guide you through the maze that is the Amazon Seller Central platform and help you with creating your listings, and the essential Amazon Pay Per Click advertising process.
That’s why the only training we would recommend is the Reliable Education Academy.
This stunning training is not cheap, but covers everything and is constantly updated. It gives you access to their community of literally thousands of other sellers, all willing to help you on your way.
There is no doubt that a lot of people make a lot of money selling on Amazon, we have, BUT this is no place for a new online entrepreneur to start.
Like any new online venture, it is going to take well over a year to see any result. The difference with this one is that all year long you will be forking out cash. Not only that, with no experience you will find it extremely challenging when one of the problems listed above, (or any number of others) happen to you.
Be smart, consider other online income sources, get some quality training and build some online skills away from Amazon first. It might also pay to book a discovery call with us. An hour of your time could save you many thousands of dollars here.
Leave a Reply