Amazon provides sellers with the largest platform to reach out to millions of prospective customers.
There are many businesses thriving on Amazon and generating most of their revenue from this single platform. But this does not come easily to the sellers, and there are many challenges faced by them to survive and thrive on the world’s largest e-commerce platform that is Amazon.
Let us look at some of these challenges faced by most sellers on Amazon:
A third-party seller is usually completely at Amazon’s mercy as it has incredible power over them. They work with ‘act first, ask later’ and might suspend your account at the smallest non-compliance, mistakes, or violation of rules without asking for an explanation. Most of the times, the suspensions are justified but in a few cases, a seller makes an honest mistake and has to pay a huge price of suspension without having a clue of what they have done wrong.
There is no regulation on the competition you will face in your line of business on Amazon. The competition could be extremely brutal as a large number of sellers compete for higher visibility in the search results.
Excessive competition makes it hard for new sellers to break into a category. Also, buyers tend to choose established products with name recognition and a large number of positive customer reviews over the new products. It makes it more difficult for the new sellers to start making sales against existing sellers.
Excessive competition tends to drive the prices low. As one seller lowers its prices, the effect can be seen trickling down to other sellers who lower their prices as well to sustain the competition. This leads to thinner margins on products and reduced profit.
Seller feedback and Reviews
Seller reviews and product feedback are important metrics for buyers while making purchase decisions. Sellers need to know the difference between the two. If you sell through Amazon’s FBA program (Fulfilled by Amazon), many potential issues could arise as seller feedback which is irrelevant to the seller since Amazon handles the fulfillment and shipping.
A bad seller profile would hamper sales for a seller. Due to the strict policies of Amazon, it is also difficult for sellers to get reviews for new products since they cannot reach out to customers for the same. Also, the fact is that many customers do not make an effort to leave reviews until they have had a bad experience.
Changing Tax Laws
Sales tax laws change too often and many states are passing new laws every now and then. As a seller, it is difficult to stay on top of the laws in all 50 states is nearly impossible. Historically, Amazon has placed the onus of filing and paying sales taxes on the third-party sellers, but now some states are now forcing Amazon to take a more active role which can be a good initiative for third-party sellers.
Restricted and Unsellable Products
Certain large manufacturers might decide that they do not want third-party sellers to list their products on Amazon. In such cases, Amazon can deem these products as restricted at any given point in time.
When this happens, the sellers will have to remove their restricted inventory from Amazon’s FBA warehouses and have to pay Amazon to get these items sent back to them.
Amazon is known to be extremely customer-friendly, so much so that sometimes the seller has to pay the price. One of the most common examples of this is customer returns. As a third-party seller, you are the one who bears the cost of free returns provided to buyers. Also, the returned products are mostly opened and sometimes are not in the state to be resold. This accounts for the loss of sale, bearing the cost of the return, and losing the resale of the product, all of it which is a big loss for the seller.
Amazon’s communication with its sellers could use improvement. There are many challenges faced by sellers regarding rules, regulations, and compliance that could be easily solved with a better communication system put in place. There are instances where sellers face account suspension without any clear explanation. It is also very difficult to reach out to Amazon support and seek redressal in such cases.
Intellectual Property Concerns by Amazon Sellers
For few Sellers selling on amazon and hence many such cases of copyright infringement are a common practice on Amazon. Sellers are allowed to list their products without brand authorization which is an area of concern for genuine sellers and brands.