Why It’s Harder Than Ever to Be an Amazon Seller

Being successful in the Amazon Marketplace is a different game than it used to be

Factory
Major brands use the same factories to manufacture similar goods, a recent study found. So how can brands stand out?
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Throughout 2019, Amazon has made concerted efforts to acknowledge the contributions of its third-party sellers, who CEO Jeff Bezos noted are “kicking [Amazon’s] first-party butt” in his 2018 shareholder letter.

Earlier this month, Amazon announced a new program to help small- and medium-sized businesses (SMBs) build their brands and grow online sales through seminars, webinars and community college courses. By its own count, the platform has released more than 150 tools and services targeting SMBs this year alone, which is part of a $15 billion investment.

And later this month, Amazon will announce the winners of its first-ever Small Business Spotlight Awards, including Small Business of the Year, Woman-Owned Small Business of the Year and Small Business Owner Under 30 of the Year.

In the words of Nicholas Denissen, Amazon’s vice president of small business, “Ultimately, our success depends on their success.”

SMBs are indeed important to Amazon: They sold 58% of its physical gross merchandise in 2018. That, according to Amazon, translates to more than 4,000 items per minute on average.

That’s a lot of proverbial widgets. But, sellers say, this immense opportunity comes with immense—and ever-increasing—competition from new sellers, similar products and even Amazon itself.

Becoming a third-party seller is easy (and profitable for Amazon)

According to ecommerce intelligence platform Marketplace Pulse, more than one million sellers have joined Amazon’s marketplace so far this year. That puts it on track to finish 2019 with more than 1.2 million new merchants.

The influx of Amazon sellers is in part because of so-called Amazon gurus, who use videos and blog posts to tout get-rich-quick-on-Amazon courses.

“It’s all bullshit—most of them don’t actually sell on Amazon, but they talk a good enough game to sell the dream to others, and they make their money pitching the fact that you can make money selling on Amazon,” said John Frigo, who sells home goods and gadgets on Amazon.

“Most of the people they bring in wind up buying an oversold, oversaturated product [and] wasting a few hundred or thousand dollars on marketing before eventually liquidating their inventory and throwing it all away.”

Amazon, however, is in all likelihood perfectly happy adding sellers, because more sellers mean more fees: Amazon makes $39.99 a month for every professional seller account. On top of that, it charges a Fulfilled By Amazon (FBA) fee for every product it ships on behalf of a seller, according to Deneiro Bartolini, who sells products on Amazon in categories like kitchenware, baby and mobile accessories.

Amazon said it has no plans to cap the number of sellers in its marketplace as it strives to offer the best prices, selection and convenience.

“Nearly 200,000 businesses worldwide surpassed $100,000 of sales in our stores last year, and we estimate these sellers have created more than 1.6 million jobs,” an Amazon spokesperson added.

Gartner analyst Christopher Ross agreed Amazon has lowered the barrier to entry for individual online sales.

“In many ways, this isn’t really any different than seeing the same products available at different retailers at different price points, but now the scale is much larger given the larger volume of merchants,” he added.

The sincerest form of flattery?

A new report from Amazon product research platform Jungle Scout found that retailers as diverse as Bass Pro Shops, Kmart, Lord & Taylor, Saks 5th Avenue and Sears source apparel from the same Bangladesh factory, Norp Knit Industries.

What’s more, it found countless other brands in sectors like consumer electronics, beauty and toys share manufacturers in countries including China, India and Taiwan even though the goods they sell sometimes come with vastly different price points for the end consumer.

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