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How does anyone make a profit selling on Amazon?

     
3:16 am on Jun 19, 2009 (gmt 0)

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Hi,

I was interested in selling my products on Amazon, but after looking at the fees they charge it doesn't make sense to sell on there since I would lose money.

How do people afford to sell on Amazon?

For example, Amazon charges a referral fee of 15%; so let's say you mark-up your product by 12% to stay competitive. That means you're already losing money since Amazon is taking a 15% cut.

Maybe I'm mis-reading something, but if a merchant is in a competitive market they would need to overprice there products to 20% just to make a profit of 5% on Amazon. But if they markup to 20% there is a good chance no one will buy there products at those prices.

Thank you,

olimits7

10:10 am on June 19, 2009 (gmt 0)

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Gee a twelve or 20% markup does not seem much either way !
Is it worth selling stuff for that low a markup ?
Or is that what everyone is reduced to when selling online ?
Yes that referral fee seems a bit high.
10:23 am on June 19, 2009 (gmt 0)

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Two thoughts:
1) think of the 15% as a one-time payment for a new customer. chances are, he will buy directly from you the next time.
2) people are buying from amazon directly, allthough amazon is, on average, always much more expensive than the smaller competitors. It's the "it's not a scam"-certainty that is well worth money for many people.
11:49 am on June 19, 2009 (gmt 0)

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Apparently you don't have as good of a supply connection as you thought you did. Take a risk, beat your supplier down on price by ordering a large volume. :)
1:42 pm on June 19, 2009 (gmt 0)

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In my industry that is about the average markup that you can get away with without being overpriced vs competitors.

My niche is in the high volume lower margin category; so this is why I have to keep the markups low. If I sold low volume high margin products then this 15% referral fee wouldn't sting as much.

Yes, that's a good point I never thought of it as a "one-time" fee. As long as they bypass Amazon the next time they order from me; then the 15% referral fee would fine.

olimits7

2:13 pm on June 19, 2009 (gmt 0)

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And to help ensure they bypass amazon the next time, send ads to buy from you direct with some sort of incentive with every order you send.
2:49 pm on June 19, 2009 (gmt 0)

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It is very expensive to sell on Amazon. Very.

You have to pay 15% plus a monthly fee.

You have to cover the costs of returns when Amazon make errors. Common errors include:

1) Wrong barcode matchup - You give them a barcode from the box but they match it up to something different. You can email them about this, but you will be ignored.

2) Incorrect titles - A competitor may list something as packs of 10 and price accordingly. Amazon use their description but use your price against this product for singles. You can email Amazon about this, but prepare to be ignored.

3) Some categories are only charged at 7% however many products are in the wrong categories, so you will be charged 15%. You could email Amazon about this but... yes, you will be ignored.

I have removed many products from Amazon. One was an error in their barcode matching, putting my price against an incorrect product so I removed the product. Now Amazon keep on emailing me to say that there is no one advertising on that product and that I should because lots of customers are visiting the page! I wonder why no-one is advertising on the product?

It is very expensive and has no helpful customer service at all which unfortunately will cost you more money.

So I would be interested in how to make money on here too?

[edited by: PCInk at 2:50 pm (utc) on June 19, 2009]

8:28 pm on June 19, 2009 (gmt 0)

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We make plently of money with Amazon. It has turned into a fantastic sales channel for us.

Only some of our products fall into that 15% category, most of our products are less than that. Also, they are processing the credit card, so that is saving us a couple points right there.

We have had very few problems with our orders from Amazon. The only issue that bothers us is that they will overwrite our product descriptions with the descriptions that they choose. There is a little trick to get around this problem for some products but I can not reveal it publically.

We are glad that some of our competitors can not master Amazon as a sales channel ;-) .

4:47 am on June 20, 2009 (gmt 0)

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Amazon is no different than any other online marketplace. They establish their fees and shipping allowances, you craft a pricing formula taking into account their costs, and you list your products according to that forumula. You will never "lose money" with a correct formula. But you may never sell anything either.

If you can't "afford to sell on Amazon", you haven't developed the pricing formula. A proper formula is going to generate a different selling price than what you're used to.

In my experience, my competitors used the same Amazon Price as the price at their own website. That's a mistake, as their costs are very different, and they are likely losing money on every Amazon order.

Given that fact, I haven't had much success selling on Amazon, but have slept soundly knowing that my competitors aren't making a killing either. At the end of the day, I haven't lost money.

Amazon can be a great opportunity, but you must recognize thst their cost structure is very different, and your pricing formula needs to take that into account.

7:00 pm on June 20, 2009 (gmt 0)

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Ha ! a lovely niche here.

Go find products related to on going TV shows that are out of production but listed on Amazon with no one selling them, approach the firm that produced them asking if they have any cases left. Smaller production firms often have and will sell for half the original wholesale price. Put them up for sale on Amazon at way over the original price.

Sit back count the cash, works very well at Christmas

7:06 pm on June 20, 2009 (gmt 0)

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Gee a twelve or 20% markup does not seem much either way! Is it worth selling stuff for that low a markup ?

Tons of people do it on Ebay. I'm glad I don't. Watching that low a margin would drive me bonkers. Even ripping a stamp by mistake or paying tax on shipping supplies would eat up a sales profit.

[edited by: MrHard at 7:10 pm (utc) on June 20, 2009]

3:51 pm on June 21, 2009 (gmt 0)

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You have to cover the costs of returns when Amazon make errors. Common errors include:

I tried selling automotive parts on Amazon. When they started recoding what the parts fit and gave me some $200 headaches I dropped them. Their little "see if it fits" search engine got about half of my listings fitting the wrong vehicle.

4:03 pm on June 22, 2009 (gmt 0)

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We are listed on amazon, but have to inflate our prices to make it worthwhile (and that's taking in to account how automated we are). It's more about volumes for us, but I don't bother spending too much time on amazon as its not our core business.

I don't buy in to the 'first time fee' idea. Amazon limit your contact to the buyer (if you follow the T+Cs to the letter), and I suspect most people buy from amazon due to habit more than anything else.

3:29 pm on June 23, 2009 (gmt 0)

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I signed up to Amazon last month, but i'm going to stop using (and paying) for the service at the end of the month - I havent had even one sale from it.
9:06 pm on June 25, 2009 (gmt 0)

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How do people afford to sell on Amazon?

Simple:
1) Sell widget on Amazon.com
2) ?
3) Profit

OK, all joking aside, I fail to understand how people lose money selling on Amazon! It may be due to differences in the types of accounts we have; Amazon contacted me and asked if we would list our products on their site. They helped us integrate and everything...haven't had an issue in almost 7 months since we got up and running. Granted, they were looking to fill out their Home Improvements section and let us in on the ground floor of their endeavor. They take 12% off the top of every order -- this works out to be about 3% to 5% less than I was paying per order for AdWords, credit card processing, data maintenance, etc. per order. So for me, it's a no-brainer.

Still have the other e-commerce sites live and they outsell Amazon at least 10:1. However, I don't believe that anyone who has purchased from me on Amazon.com would have ever bought from my sites.

Sorry if my post doesn't help at all, olimits7. The only reasons I can fathom are 1) product type/category or 2) account type.

1:05 am on July 8, 2009 (gmt 0)

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Is it worth selling stuff for that low a markup ?

depends on the item (total sales per day)
and total price.

  • If you get 20 sales a day, customer pays 5 dollar total, and you make 75 cents (15%), you better change product.
  • If you get 3 sales a day, customer pays 500 dollars total, and you make 75 dollars (15%), it seems worthwhile.
  •