As ChannelGrabber continues its mission to simplify eCommerce, we provide an update on the benefits and challenges facing multichannel eCommerce businesses.
With an increasingly saturated market, full of global marketplaces, global couriers, and payment partners. What opportunities are worth pursuing and which ones are not a priority? How can eCommerce business owners raise their game to appeal to different segments of the market and capture every opportunity? We focus on the three most prominent marketplaces in 2022: the domination of Amazon, the rise of Etsy and the apparent decline of eBay.
The challenges of Ecommerce
According to a study by Marketing Signals, 37% of eCommerce start-up businesses that failed in 2019 attributed the reasons to poor online marketing and 35% attributed it to a lack of visibility online. Global Marketplaces, such as Amazon, eBay and Etsy, provide an opportunity for businesses to gain visibility of their products without the need (and incurred cost) to attract users to an eCommerce platform for transactions to take place. Yet, with different product focuses, cost structures, listing possibilities, targeted audiences, integrations with payment gateways, courier services and shipping partners, understanding the costs and benefits of Amazon, eBay and Etsy can be challenging. That’s why we thought we would help you by simplifying each one in a three part article series. Let us help you to understand the reasons eCommerce businesses operate on each platform.
The benefits of selling on Amazon
Boasting more than 30% of the eCommerce market, Amazon has grown into a $1.37 trillion business. This is a far cry from its humble beginnings as a selection of A to Z books available to order online. Today, Amazon has over 281,000 Amazon Sellers in the UK selling over 600 million products. It has become the go-to marketplace for practically all sellers and buyers. It also has the largest brand recognition and has become one of the most trusted platforms for eCommerce transactions. According to Cybercrew, 86% of people in the United Kingdom shop at Amazon. Despite having its own series of Data Breaches, none has gained as much exposure as those of eBay, which contributes to its higher level of trust. Recent keyword research shows that Amazon has 20.4M searches per month in the UK (SE Ranking, 2022) and in 2020, Amazon received an average customer service score of 87.4%.
As an Amazon Seller, the platform includes a host of necessary and desirable functionality including listing, warehousing and logistic services for sellers. If Amazon Sellers opt to use Fulfilment by Amazon (also referred to as FBA), then products can be stored in Amazon Fulfilment Centres, where products are picked packed and dispatched by Amazon. FBA also includes 24/7 customer service support for the UK and European countries whilst Prime ensures a reliable and efficient delivery service. Those selling on Amazon join over 66.5k SMEs in the UK also selling via the marketplace. Being a present on Amazon also gives you access to Amazon Prime day – find out what benefits this offers to you here.
At the time of writing, Amazon is offering a promotion to help Amazon Sellers get started. The offer includes £40,000 worth of incentives, such as 5% back on your first £800k of branded sales, credits for cost-per-click (CPC) advertising and discounted Prime shipping, storage and returns with FBA (Fulfilment by Amazon).
In 2022, SMB Amazon sellers are:
- 21% 1P sellers – First Party Seller (“1P”): Sells to Amazon as a vendor and use Vendor Central
- 82% 3P sellers – Third-party seller (“3P”): Sells on Amazon’s platform and use Seller Centralٚٚ
- 3% are both 1P & 3P sellers.
- Agency: Works with sellers as a consultant or partner, helping manage their Amazon businesses.
The cost of selling on Amazon
The cost of selling on Amazon very much depends on the selling plan you select, product category, use of FBA and wider variables. With a range of flexible options, Amazon Sellers are encouraged to find the most practical solution for their business. There are two main options available and both include an additional fee based on the product category which is often between 8-15%.
The highest referral fee is for Amazon Device Accessories at 45.9% whilst the lowest fees are for Computers at 7.14% and Video Games, Tyres, Large Appliances, Consumer Electronics and Car & Motorbike electronic devices. For products under £10, there is often a lower referral fee than those above £10.
For its original purpose, selling books, Amazon charges a referral fee of 5.1% for products with a total sales price below £5.00 and 15.3% for products with a total sales price greater than or equal to £5.00. Plus 75p if you sell under 35 items or a subscription of £25 per month (plus VAT).
The first option is an ‘Amazon Individual Plan’ this is for sellers sending fewer than 35 items per month. It includes a cost of £0.75 per unit sold with the addition of a referral fee for each item sold.
For those wanting to sell more than 35 items, utilise Amazon advertising, advanced selling tools and sell products in restricted categories then the ‘Amazon Professional Plan’ is recommended. This excludes an individual unit price but incorporates a blanket monthly subscription fee of £25 (exc. VAT) per month, which has no limits on products sold but does include the addition of the referral fee mentioned above. There are also additional fees included depending on the fulfilment method selected.
Most Frequently Sold items on Amazon
According to Jungle Scout’s 2022 State of the Amazon Seller Report, the top categories are Home & Kitchen (32%), Beauty & Personal Care (23%) and Toys & Games (20%). Fortunately, for most Amazon sellers, average profit margins range between 15-26% depending on the category. The most profitable categories of Amazon are Handmade items (32%), CD & Vinyl (27%) and Apps & Games (25%), Industrial & Scientific, (25%) and Luggage & Travel Gear (25%). Whilst Cell Phones & Accessories (18%) and Computers (16%) had the lowest margins.
Should Amazon be part of Your Multichannel eCommerce Operations?
Although the answer is not prescriptive, Amazon provides some clear advantages to help ecommerce sellers to manage inventory and fulfil orders. However, the cost of selling on the Amazon can eat away at the precious margins. If you decide to list products on Amazon you should ensure to build out A+ content for your product listings, are able to manage your inventory to fulfil orders effectively and have reliable courier services to deliver orders.
The team at ChannelGrabber have extensive knowledge of the different marketplaces and the advantages of being an eCommerce seller. Feel free to contact us to find out more and how we can help you expand your business.