For many aspiring entrepreneurs, selling on Amazon with Fulfilled by Amazon (FBA) seems like an easy way to start selling online. However, if you’re not careful, you can fail due to poor decisions and practices related to product selection, pricing strategy, listing optimization, customer service, and inventory management.
It’s essential to understand these potential points of failure if you’re hoping to build a profitable business on Amazon, without running into costly pitfalls along the way. Let’s take a closer look at the main reasons some Amazon sellers fail so you can avoid them yourself.
Table of Contents:
- Poor Product Selection
- Poor Pricing Strategy
- Poor Listing Optimization
- Poor Customer Service
- Poor Inventory Management
- FAQs in Relation to “Why Amazon Sellers Fail”
- Conclusion
Poor Product Selection
Poor product selection is one of the main reasons why Amazon sellers fail. It’s important to do your research and understand your product’s market and who your target audience is before you start selling on Amazon.
Not Researching the Market: Before launching a product, it’s essential to thoroughly research the market and make sure there is demand for what you’re offering, while also verifying there isn’t a lot of competition from other sellers selling similar products. You should also research other factors such as the product’s typical price range, how difficult sourcing the product will be, how easily the product can be shipped, etc., in order to determine if a product is worth selling.
Not Knowing Your Target Audience: Understanding who your target customers are can help you create an effective marketing strategy that resonates with them. Consider their age group, interests, lifestyle choices, and any other relevant information when marketing to potential buyers. If you don’t understand who is buying your product, how can you effectively market it to them?
Not Analyzing the Competition: Amazon is a hyper-competitive marketplace, so its essential to analyze competitors’ products and offerings. Look at price points, features & benefits offered by competitors’ products, and customer reviews and feedback they’ve received. This will provide insight into how best to tailor your product against theirs in terms of quality or value-adds provided with each purchase.
For example, if you find a product that is already sold by lots of other sellers, and if these products have hundreds or thousands of ratings and reviews, you should find a different product with less competition. Limiting competition is so critical that when people ask me for advice about finding products to sell on Amazon, I tell them the most important factor to consider when choosing a product is to have the least amount of competition possible.
Simply put, poor product selection is one of the most common reasons why Amazon sellers fail. To avoid this, it’s important to do your research and find a product that customers want to buy, but also isn’t already sold by dozens or hundreds of other sellers.
Poor Pricing Strategy
Having a poor pricing strategy is another reason why Amazon sellers fail. Setting prices too high or too low can make it difficult for customers to justify buying your product. It’s also important to understand how seasonality affects pricing so you don’t miss out on potential sales.
Setting Prices Too High or Too Low: One of the most common mistakes made by Amazon sellers is setting their prices either too high or too low compared to their competitors’ products. If your price is set too high, customers may not find enough value in what you’re offering and look elsewhere for a better deal. If your price is set too low, customers may think your product is “cheap” or has something wrong with the quality of your product if it’s priced significantly lower than similar items from other sellers.
The other obvious downside to pricing too low is your profit margins will be low, which is the opposite of what you’re trying to achieve when selling your product! To ensure success as an Amazon seller, it’s important to research competitor pricing strategies and adjust yours accordingly so that you price low enough to remain competitive while pricing high enough to make a profit.
Ignoring Seasonality: Another mistake Amazon sellers make when setting prices is ignoring seasonality. For example, during peak holiday seasons such as Christmas, demand for most products increases, meaning you can raise your prices and maintain a sufficient sales rate of your product. Also, it’s common for competing sellers to stock out of their product during the holidays, and it’s difficult for them to restock because Amazon prioritizes fulfilling customer orders over receiving product from sellers during the holidays. If your products are priced higher than your competitors going into the holiday season, your competitors will run out first, leaving you to sell your product at higher prices later in the season, when customers typically get more desperate to find a gift.
On the flip side, during summer months where demand decrease due to people being away or on vacation, lowering prices slightly could help boost sales and maintain a healthy inventory turnover rate for your product.
Keeping track of these seasonal changes can help maximize profits over time while also keeping customer satisfaction levels high by providing them with fair deals throughout the year, no matter what time of year they shop with you!
*** If you want to read more about pricing strategy, you can find the six pricing scenarios you’ll encounter as an Amazon seller, with strategies for how to handle each of them here.
Key Takeaway: Successful Amazon sellers must research competitor pricing strategies and adjust their own accordingly, while taking into account seasonality when setting prices.
Poor Listing Optimization
Poor listing optimization is another common reason why Amazon sellers fail. Without an optimized listing, you’re missing an opportunity to properly showcase your product to potential customers. Let’s look at the ways a listing can be poor quality.
Not Using Keywords Effectively: One of the biggest mistakes Amazon sellers make when creating their listings is not using keywords effectively. Sellers need to research relevant keywords related to their product and include them in the title, description, bullet points, and back end search terms fields of their listing. This helps ensure that shoppers can find your product when searching for it on Amazon.
However, make sure to not “keyword stuff” your product title or descriptions to the point where they sound unnatural, because that is a turn-off for potential customers. Find a balance where you include relevant keywords in the title and descriptions without being overly reliant on them to describe your product.
Not Writing Quality Product Descriptions: Another mistake that many sellers make is not writing quality product descriptions for their products. Your product description should provide detailed information about your item so customers know exactly what they are buying before making a purchase decision. Be sure to include features such as size, material type, color options, etc., as well as any unique benefits or advantages your item offers over similar products from competitors.
Failing to Maximize Images and Videos: Not using high-quality images and videos is another reason why some sellers fail at optimizing their listings. Customers prefer visuals when shopping online, so having good photos and videos can help boost conversions significantly. People are more likely to buy a product if they can see what it looks like rather than just reading about it in a text description.
Not optimizing your listing will lead to decreased visibility and sales, so it’s important to make sure that you use keywords effectively, write quality product descriptions, and include high-quality images and videos.
Key Takeaway: Amazon sellers need to optimize their listings by using relevant keywords, writing quality product descriptions, and including high-quality images and videos in order to be successful. Without proper optimization, a seller’s products may never be seen by potential customers and they will miss out on sales opportunities.
Poor Customer Service
Poor customer service is another reason why Amazon sellers fail. It’s important to remember that customers are the lifeblood of any business, and providing a high level of customer service is essential for success on Amazon. While Amazon handles common elements of customer service for your business, such as returns, there are a few areas where you should pay special attention because Amazon does NOT handle them.
Ignoring Customer Reviews and Feedback: One way in which poor customer service can hurt an Amazon seller’s business is by ignoring customer reviews and feedback. Customers expect their opinions to be taken seriously, so it’s important to respond promptly to negative reviews and feedback. Not only does this show respect for your customers, but it’s also an opportunity to address any issues they may have had with your product and make improvements to your product in the future.
Not Responding Quickly Enough: Another issue that can arise from poor customer service is not responding quickly enough when customers reach out with questions or concerns about products or orders. In today’s digital world, consumers expect fast responses, and if a response isn’t received quickly, potential buyers will move on to another seller who is more responsive.
Failing to resolve issues in a timely manner can lead to unhappy customers who will leave bad feedback or take their business elsewhere. Potential issues can include anything from refund requests due to damaged goods, incorrect items being sent, or shipping delays. It’s important to address these issues promptly, so customer satisfaction levels remain high and trust is maintained, which can lead to future purchases.
Poor customer service can lead to negative reviews and a drop in sales, which is why it’s essential for Amazon sellers to promptly address their customers’ needs.
Key Takeaway: Amazon sellers must prioritize customer service in order to succeed. This includes responding quickly and appropriately to customer reviews, feedback, and inquiries; resolving issues promptly; and providing a high level of support overall. Failing to do so can lead to unhappy customers who will take their business elsewhere.
Poor Inventory Management
When it comes to managing your inventory, there are several key factors that you need to pay attention to in order to be successful.
Sending Too Much Stock to Amazon: The first inventory management issue to avoid is sending too much stock to Amazon. This can be a costly mistake for any seller, because Amazon charges storage fees to warehouse your products, and if they don’t sell fast enough, you’ll lose much of your profit to storage costs. To avoid this, send only enough product to cover a few weeks of sales at first, just in case they don’t sell as well as you planned. If your product is new and you have no idea how much to send, I recommend 50 to 100 units to start. If it sells out quickly, great, send in more units! However, if it doesn’t sell quickly, you won’t have to worry about storage costs or placing an inventory removal order (which Amazon also charges a fee for) to remove units that will never sell.
Sending Too Little Stock to Amazon: The other major inventory management issue to avoid is under-stocking popular products. If customers can’t find what they want when they search for it, they will move onto another seller who does have what they need in stock. Therefore, it’s essential to monitor demand levels closely so that you always have enough stock available at all times, without overstocking or running out completely. Amazon tracks exactly how many units your product sells over any given time period, so forecasting how many units you should stock is easy. I recommend having about 3 months of stock at Amazon at any given time. That’s enough to cover any surges in demand while not being so much that if demand falls, you won’t be overstocked.
Failing to Monitor Inventory Levels: Finally, failing to monitor inventory levels can lead to supply problems if left unchecked for too long. It’s important that you regularly check your on-hand stock levels against expected demand, so that you know how much product needs ordering each month or quarter. Make sure to adjust if needed due to seasonal changes or unexpected spikes in demand from promotions or other marketing activities.
In conclusion, poor inventory management can quickly become a major issue for Amazon sellers if not managed properly from the start. To avoid this, don’t overstock products, don’t under-stock products, and monitor inventory levels closely throughout the year and adjust orders with your supplier according to seasonal trends or promotional activity.
Key Takeaway: Amazon sellers need to carefully manage their inventory in order to be successful. This includes not overstocking or under-stocking their products and monitoring demand levels and adjusting orders accordingly. Poor inventory management can lead to costly mistakes if not managed properly from the start.
FAQs in Relation to “Why Amazon Sellers Fail”
Why do people fail selling on Amazon?
People fail selling on Amazon for a variety of reasons. One common reason is that they don’t have the right product or pricing strategy to be competitive in the marketplace. Additionally, many sellers lack an understanding of how to optimize their listings and take advantage of Amazon’s marketing tools such as Sponsored Ads and other promotions. Finally, some sellers simply don’t understand the complexities associated with Fulfilled by Amazon (FBA) and may make costly mistakes, like sending too many or too few units of their product to Amazon. With proper planning, research, and execution, however, it is possible to succeed at selling on Amazon with FBA.
Why do most Amazon FBA sellers fail?
Most Amazon FBA sellers fail because they lack the necessary knowledge and resources to be successful. They may not have a thorough understanding of how the platform works, what it takes to get their products listed, or how to market them effectively. Additionally, they may not have planned to reserve some capital to purchase inventory in bulk or cover other costs such as shipping, storage, or advertising fees. Without knowledge of these essential components, sellers are unable to generate enough sales volume or profit margin needed for success on Amazon FBA.
What percentage of Amazon sellers are successful?
The exact percentage of successful Amazon sellers is difficult to determine. However, according to the Amazon software provider Jungle Scout, 63% of Amazon sellers are profitable within 1 year of starting to sell on Amazon. *** As an aside, I recommend reading the full “State of the Seller” report from Jungle Scout. It’s got lots more interesting information about how Amazon sellers report the state of their businesses. ***
Is selling on Amazon still worth it?
Yes, selling on Amazon with Fulfilled by Amazon (FBA) is still worth it. Amazon offers a wide range of benefits that make it an attractive option for sellers. With FBA, you can save time and money on shipping costs, benefit from Amazon’s customer service and returns policy, gain access to millions of customers worldwide, and take advantage of the company’s marketing tools. Additionally, Amazon has invested heavily in its logistics infrastructure over the past few years, which makes it easier than ever to store and ship products quickly. All these factors make selling on Amazon with FBA a great choice for entrepreneurs looking to start, or expand, their business.
Conclusion
There are many potential pitfalls for Amazon sellers, and understanding the reasons why Amazon sellers fail can help you avoid making the same mistakes. While it may seem daunting to navigate all of these issues, taking the time to properly research and implement your product selection, pricing strategy, listing optimization, customer service practices, and inventory management will go a long way in helping you succeed as an Amazon seller. By being aware of what could lead to failure, and taking steps to prevent it from happening, you can ensure your business doesn’t become another example of why Amazon sellers fail.
Want to read about the failures and successes I’ve experienced in my Amazon business? See this post.
Want to see what tools I recommend for successfully selling on Amazon? Check out this page.