by Drew Estes
Despite all the chaos of 2020, starting an Amazon business might be a better idea now than ever. The ecommerce market is growing, and online retail has never been easier to get into. The logistics of Fulfilled By Amazon (FBA) make it easier than ever to take advantage of amazing shipping standards as a third-party seller.
But is Amazon FBA right for you? Of course we might be tempted in our bias as ecommerce marketers to give an unequivocal “yes.” Yes it can be an incredibly profitable venture, but the fact remains: you should know what you’re getting yourself into when selling online these days.
First let’s just address the elephant in the room: COVID-19. It’s been smashing apart the global economy since March of 2020, and as of autumn 2020 it looks like we’ll be dealing with it for a lot longer.
So what does this mean for ecommerce businesses? What should you consider about starting an online retail store, during a pandemic that has screwed up manufacturing and global supply chains so much already?
Whether you struggle to sell online or thrive during coronavirus pandemic depends on your industry. Categories like games or workout equipment have been performing exceptionally well this year, while businesses selling things like party supplies have obviously been suffering.
The overall trend is important though: more people are shopping online because they aren’t leaving their homes as often. For instance, Massview founder Paul Johnson has seen his product sales spike over 400% from previous numbers since the pandemic started.
Similarly, many small businesses that saw a small drop at the beginning of the pandemic were able to make adjustments and ultimately come out ahead. Companies like Phoenix Leather Goods for instance had a serious dip in March of 2020, followed by massive sales spikes in April.
Consider your own Amazon usage since March 2020. What have you bought online that you hadn’t bought online before? How much more often are you making online purchases?
While some categories might suffer in the short term, this trend means more people are comfortable shopping on Amazon than ever. This might seem like a short blip of course; a fluke in the data that won’t continue for very long. But remember: this trend was growing before the virus. The pandemic just accelerated it in the same way it accelerated the trends of video conferencing and remote work.
This Marketplace Pulse graph shows the growth rate of the ecommerce market each quarter since 2001. Note that the Y-axis is the percentage of growth, so the flat line after the 2008 recession isn’t a lack of growth – it indicates steady annual growth of around 15% per quarter. Also notice that the growth rate spiked to over 44% in Q2 of 2020 when the COVID-19 crisis got into full swing.
In simple English, since more people are getting used to buying online, it stands to reason that many more people will be buying online than expected, even after things become more normal.
Further still, internet usage is growing globally, and as younger, more web-savvy people get jobs and have their own source of income, these numbers will only increase.
While you can rest assured that ecommerce has a bright future ahead, you should still ask yourself: are you ready to sell on Amazon?
Any reasonable person will do some research before investing hundreds if not thousands of dollars into starting an Amazon business. So what kind of questions should you ask? What should you be prepared for?
We’ve written explanations on how to budget for starting an Amazon business already, covering different angles. For an explanation of different business plans and associated costs, read our post about how much it costs to sell on Amazon FBA.
If you’re on a low budget, read about how to sell on Amazon with a tight budget. If sourcing is more your concern, and China is unreasonable due to its costs (or many other reasons), read our explanation of sourcing products from outside China, which gives you several alternatives, some of which are much cheaper.
When it comes to starting a business, soft skills are as important as hard skills, if not more so. Becoming a successful Amazon FBA seller is hard work: it takes grit and persistence for months at a time, maybe years, before you get the results you want.
This means you need to be in it for the long haul, past the inevitable mistakes and the market downturns, and through all the other problems that will surely arise during your journey. If you give up easily, this might not be the path for you.
Do you have the attitude of an entrepreneur? Check out our post on it to learn more about the types of mindsets that will set you apart from people who don’t.
If there’s one thing Amazon sellers have had to learn this year, it’s how dependent we are on our supply chains.
Sure, FBA takes care of this in terms of warehousing and final deliveries, but getting your product to FBA fulfillment centers in the first place has been a nightmare this year for many sellers, especially for those sourcing products from abroad.
While 2020 isn’t exactly a “typical” example of what it’s like being an Amazon seller, it shows us how important it is to add failsafes to your supply chain.
When you start sourcing your product and organizing shipment plans, you’ll need to continually ask yourself what else you can do to guard yourself from risk, such as upsets in the supply chain.
Learn all about freight forwarders, and once you know how to choose a freight forwarder, pick one and learn all the ins and outs of their process for your products. The better you understand your system, the more power you have to fix problems that arise within it.
To spread your risk, you may want to consider sourcing from more than one country.
You’ll also want to pick a product with a good cushion of profit margin, so random problems or an unforeseen spike in delivery costs won’t eat too much into your bottom line. Use a good product research tool to find these, and use a free FBA Fee Calculator when doing your freight forwarder research, so you can calculate your profits after expenses such as shipping and storage.
For most merchants, selling on Amazon is going to be your best bet. If you have some funds and you want to sell new merchandise, that is.
Once you grow your Amazon store to a sizable level, you may want to expand to the Walmart Marketplace too. It’s not quite as developed as Amazon yet, but there’s less competition than on Amazon (for now), and it’s a great place to launch a product if you own a brand.
For merchants who have more of a knack for brand building and social media, Shopify might be right for you. What it lacks in ease of startup effort, it makes up for in versatility and customization. We’ve covered Shopify versus Amazon in another post, so check that out if you’re deciding between the two.
Depending on your business model, WooCommerce and AliDropship might be worth checking out if you want something similar to Shopify.
If you want to sell used items, or more unique items that wouldn’t do as well on Amazon, you might be better off selling on eBay. If you’re an artist or make some kind of handmade craft, you should check out Etsy.
If it sounds like selling on FBA is right for you, it’s time to get the ball rolling. Start with a product research tool like we mentioned above to find out which categories and products have the highest demand and lowest competition. We linked to ours – it has a free 7-day trial with unlimited access, so give it a try! There’s no commitment necessary.
For a full guide to selling on Amazon, read our post all about it! (And remember to bookmark it for easy reference).
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