As sellers turn to Amazon, there’s no better time to source from China
The coronavirus pandemic has clobbered businesses worldwide with one exception – e-commerce, particularly Amazon. As lockdowns and mobility restrictions in early 2020 drove brick-and-mortar shops to down their shutters, many of them permanently, Amazon sales rose 40% year-on-year in the April-June quarter. It earned $5.2 billion in profits, doubling its earnings from the same period last year. This, despite the e-commerce giant hiring 175,000 new workers to deal with the sales rush and spending $4 billion on coronavirus-related safety measures. The record sales and revenue were driven by locked-down shoppers taking their buying online. And it wasn’t just Amazon that benefited in those early days of fear. According to a Mastercard SpendingPulse report, e-commerce accounted for 22% of retail sales in the United States in April-May, up from 11% in the same period in 2019. In the United Kingdom, this figure was a record 33%. (The US and UK are the world’s second and third largest e-commerce markets with China taking the top spot).
The rise of e-commerce in a Covid-19 world, we believe, underscores a broad shift to digital in the way we live, work and buy. Months on, the virus continues to affect economic and social activity. A return to the old ways of doing business seems impossible, at least any time soon. Hence, many sellers are looking to take their businesses online.
This blog explores what it takes to be an Amazon seller, with a focus on how a trustworthy sourcing agent can help make the experience a profitable and fulfilling one. If you are not a manufacturer of goods, you might be aware that sourcing the right product from the right place is key to being a successful seller on Amazon. This is where a sourcing agent like Sourcing Allies comes in, with our experience and expertise in sourcing a wide variety of products from China – the world’s factory. Read on.
Amazon, the world’s marketAmazon is the world’s second largest retailer after Walmart, according to Forbes. It has 2.2 million active sellers, 742,000 of whom joined its platform this year, says e-commerce data analyst Marketplace Pulse. It consistently places near the top of consumer satisfaction rankings.
Amazon sells just about everything, from home appliances, electronics, office supplies, books and toys to food, beauty products, shoes and apparel. Where does it sell this vast inventory? On Amazon.com and Amazon Marketplace, the two entities on the Amazon website that make one whole.
Amazon.com: Products owned by Amazon are sold on amazon.com. It sources wholesale goods from distributors/manufacturers through the invitation-only programme Amazon Vendor Central. The first-party sellers sell their inventory in bulk and pass on ownership to Amazon. Products on this platform come with a “ships from and sold by Amazon.com” tag. Amazon Marketplace: This is where third-party sellers sell their products (new and used) under their own brands to Amazon customers directly. They retain ownership of the goods but Amazon gets a share of the profits. Third-party sellers account for more than half of Amazon’s sales. Marketplace is open to individuals and companies through the Amazon Seller Central programme. Marketplace products are either Fulfilled by Amazon (FBA) or Fulfilled by Merchant (FBM).Fulfilled by Amazon (FBA): The seller sends inventory to an Amazon fulfillment centre and the company handles packaging, shipping and customer communication. This saves the seller the hassle of logistics and makes their products eligible for Amazon Prime’s fast shipping benefits. Fulfilled by Merchant (FBM): The seller takes care of packaging and shipping. The benefits include lower Amazon fees – no need to pay FBA storage/fulfilment charges – and higher profits. The seller also has immediate access to inventory and can respond quickly to customer complaints. 5 ways to sell on AmazonDrop shipping: A third party manufactures and ships the product on the seller’s behalf. Amazon’s drop shipping policy, however, requires that all packaging, invoices and communication carry the seller’s name. Retail arbitrage: The seller buys goods on discount from a retail store and sells them at a profit on Amazon. Arbitrage is associated with low margins. The trick is to pick the right product.Selling wholesale: The seller buys wholesale goods in bulk and sells them on Amazon. This is the business model favored by a quarter of third-party sellers. Selling private label products: The seller buys products made by a third-party company and sells these on Amazon after branding and marketing them as their own. Manufacture and sell: The seller is the manufacturer too. The profit margin is higher and they have greater control over product quality, but they also incur manufacturing costs. Additionally, Amazon has an artisan-only community, Amazon Handmade, for handcrafted goods. Why Amazon?Household name: Everyone knows Amazon and trusts it.Huge market: Selling on Amazon means access to its 300 million active customer accounts.It’s easy: Joining Amazon is simpler than launching your own website. Amazon also does a lot of the heavy lifting for you (marketing, logistics). Big savings: With FBA, Amazon stores your inventory, for a fee. But you’re still saved the expense of getting your own storage space. Grow your business: If you’re not with Amazon, you might get left behind. But beware! Some drawbacks Intense competition: This might compel you to sell at a lower price, especially if you sell a product sold by many. Gaming the Amazon system: Unscrupulous sellers might hijack your sales listings to sell their products, which might be counterfeit. They might also deface your product listings and leave fake reviews to sabotage your business. Here’s how listings get hijacked. High commissions: From storage to shipping, Amazon conveniences come for a price. This, and its insistence on free delivery, can narrow profit margins.Getting started
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