Today, online retail is a lucrative business, accounting for nearly one-fifth of all commercial transactions worldwide. According to Statista, retail eCommerce sales totaled $5.2 trillion in 2021 and are forecast to reach $8.1 trillion by 2026. One of the better things about online retail is its inclusivity. Instead of solely relying on their own products and services, retail giants such as Amazon wholeheartedly welcome resellers to their ranks. This can end up being a lucrative gig. For example, Amazon reported that in 2020 more than 65,000 Amazon resellers raked in above $100,000 in sales.
Aside from a big payday, partnering with Amazon means getting the help you need during the startup phase. By contrast, going into eCommerce alone will require significant capital expenditure. Building an eCommerce storefront, paying for warehouse and transport costs, and raising your online profile can all add up to money you don’t have. On the other hand, Amazon resellers simply need to sign up and join the network. Even with minimal capital, they can start selling their goods under the Amazon banner and watch the buyers flock in.
The Pros of Being an Amazon Reseller
Being on Amazon does have its perks. For one, it allows resellers instant access to its worldwide network of online customers. At the same time, Amazon resellers can utilize the online giant’s existing infrastructure for warehousing and fulfillment.
Let’s find out a bit more about these advantages.
Expansive Customer Reach
According to the Harvard Business Review, Amazon is easily the most visited online retail platform in the US. The company logs 3 billion visits every month and brings in around $400 billion annually. With more than 200 million Amazon Prime members looking for the best deals and flash sales, finding an audience for your products and services is easier with Amazon as your partner.
Listing your products lets you take advantage of important sale days, such as Black Friday or Cyber Monday, which can boost your revenues significantly. For resellers trying to offload excess stock, participating in Amazon’s many promotional programs will also help reduce your inventory.
Hooking up to an existing network will always be easier and more cost-efficient than starting from scratch. Amazon has it all–from the cloud servers to the selling platform, and everything in between. Amazon resellers only have to sign up, plug in their inventory, and integrate their payment systems. And although this all comes at a price, for many resellers, the exposure alone is worth the retail membership.
Amazon provides logistical help with the Amazon Fulfillment option. Instead of managing store inventory and deliveries themselves, Amazon resellers can have both services outsourced. It’s the perfect option for retailers who don’t have the budget to establish their own warehousing and delivery network. They get to use Amazon’s network to make order fulfillment faster and more streamlined.
Moreover, Amazon makes these products available to their Amazon Prime members–which includes expedited two-day shipping.
The Cons of Being an Amazon Reseller
For most Amazon resellers, having competitors rushing to the same platform can pose a serious threat to revenues. In addition, joining a market-leading platform requires resellers to give up certain privileges in exchange.
Amazon generally isn’t too interested in exclusive partnerships. Rather, it encourages a free marketplace–meaning things can get competitive with your reseller rivals. As such, individual sellers will need to keep close tabs on market activities, adjusting prices and promotions in order to maintain their position. Frequently, sellers will also have to compete with Amazon itself for certain high-margin and popular products. If this happens, don’t expect Amazon to pull its punches.
Higher Margins to Amazon
Aside from direct competition, Amazon can also marshal its resources to draw insights from the vast volumes of data collected every day. This allows it to immediately pivot every time the market shifts. Unlike its resellers, who have to pay monthly fees and commissions, Amazon has no such obligations. As a result, it can afford to collect higher margins for itself or to lower its prices.
Part of a reseller’s deal with Amazon is ceding control on certain matters. This includes any attempt to handle how the platform will market your products and services. As the owner, Amazon has sole control of branding for the site. In many cases, Amazon resellers receive minimal recognition for the products they sell, as purchases will be packaged by Amazon anyway.
Further, Amazon has made moves to future-proof its business model. The company has exclusive control of the algorithm used and the rules implemented. When it decides to apply changes or updates to the platform, resellers have little say in the matter.
The Tradeoffs of Branding and Customer Relationships
Another significant tradeoff Amazon resellers will need to accept is their loss of control regarding branding and customer service. Sure, they can do an amazing job of marketing your products and providing excellent customer service to buyers. Nonetheless, this comes at the cost of your brand losing opportunities to get closer to its customers and nurture relationships.
Additionally, Amazon will likely benefit more from the sale of your products and services. Positive feedback from buyers can mean more revenue for you, but it also means increased loyalty to Amazon. And while you might save resources by having Amazon customer service handle the bulk of your calls, you’re also losing the chance to learn firsthand from customers.
Evaluating Amazon Reselling for Your eCommerce Venture
Agreeing to hand over the keys to Amazon in exchange for a bigger market and better order fulfillment is not easy. Make sure that your business goals align with becoming an Amazon reseller. If you’re in immediate need of a stable ecosystem as well as instant credibility as a seller, getting listed by Amazon is a good choice. Having limited resources can also make the choice of partnering with Amazon easier. Once you build enough equity and experience steady revenues, you can venture out independently.
However, if your business model is predicated entirely on the growth of your brand, you might find more success as an independent seller. Wanting the entire credit for any sales means doing the work yourself. It may be more laborious and time-consuming, but it also adds up to bigger revenues and a more loyal customer base.
Amazon Resellers and Direct Sellers Unite Under Smart Merchandiser
For many online sellers, the smart choice might be not to choose at all! Why not partner with Amazon as a reseller, but still maintain your own independent storefront? This way, you get the best from both routes, even as you start to enjoy revenue streams from each platform.
Zobrist Software Group’s Smart Merchandiser helps online sellers with independent platforms manage their inventories with ease and efficiency. Designed for companies with especially large inventories, Smart Merchandiser allows you to complete your online merchandising tasks in less time and with fewer staff. Real-time data from your integrated enterprise software ensures you have the latest information about each product’s inventory. Moreover, you can set your own rules.
Learn more about how Smart Merchandiser can serve as the ultimate merchandising solution for your digital storefront needs. Call or visit us today and tell us about your company’s unmet needs. We promise to respond within 48 hours–and to include a free demonstration of how Visual Merchandiser can help you.