Should You Sell Your Products On Amazon? 4 Things You Need To Know First
by Brad Hunt • March 18, 2024
As an Amazon Strategist, one of the most common questions I get asked is, “Should I sell my products on Amazon?”
Most sellers are concerned about the margin hit they’ll take on each sale if they sell on Amazon, but in many cases, the sheer volume and higher conversion rates can make it all more than worth it.
A business should answer four critical questions before they decide to start selling on Amazon.
1) What are my COGS? (Cost of Goods Sold)
Amazon is going to take their seller fee. I won’t dive into the different types of selling accounts here, but suffice it to say that the grand majority of sellers are looking at a minimum fee of about 15%. If you’re using Amazon’s Fulfilled by Amazon option, then you’re looking at higher fees based on the size and weight of your products (25%- 35% is about average).
If your COGS is much higher than 40%, it can be difficult to allocate money to advertising without losing money. It’s doable but generally difficult and requires deeper pockets.
2) Is my price competitive on Amazon?
It’s wise to do some market research to see which competitors are selling similar products on Amazon.
A quick search for a relevant keyword can get you started, and you can see how close you are in price. If you’re quite a bit higher, then you’ll need to justify why on the product listing in a compelling way. Higher prices tend to lead to lower conversion rates, which makes it difficult to rank organically.
If you’ve reached this point, things are looking good! For the following two considerations, we apply the 50k rule.
3) What’s the monthly search volume for my products?
Start by utilizing some Amazon tools to reveal additional market data. Tools like Helium10 or Junglescout will show you the monthly search volume for specific keywords. We usually look for at least 50k in monthly search volume for relevant keywords to justify marketing spend.
4) How much, on average, are competitors selling each month?
Finally, you’ll want to use a tool like the two I mentioned above to understand the current market better. How you proceed will depend on your goals for selling on Amazon. As an agency, I’m typically looking for at least $50k in revenue being sold on Amazon before it makes sense for us to enter the marketplace with a new brand.
If you’re selling on your own and aren’t using an agency, you won’t have to worry about those fees, so you might be willing to settle for less. Again, this part depends on your business goals and your vision for the role Amazon will play in your overall business objectives. But I’ve found that the 50k rule works well here.
If all four of these things are lining up, it’s time to start selling on Amazon!
If you’ve gone through this list and you’re still wondering whether or not to sell on Amazon, feel free to reach out to us at Disruptive Advertising. We can audit these things to help you determine whether it’d make sense for you to get going—free of charge!
