Amazon continues to be the #1 eCommerce marketplace, yet sellers face many setbacks when it comes to selling on the platform. In this article, you will find out the top issues that Amazon sellers encounter and how to address them.
Top Amazon FBA Challenges
- Cashflow Restrictions
Amazon payouts happen every 2 weeks. However, the payout has already deducted the Amazon fees, refunds, and promo rebates. Reimbursements are also included on the payout.
The challenge here is that sellers would have to fund 25% of the manufacturing costs, especially if the supplier is in China. Add to that the shipping fees, custom fees, warehouse fees and FBA fees, it can take up to 4 months before the seller experiences the profits.
The solution is to have some items use the FBM process. It would also be best to have an eCommerce site where you can have all the profits to your self without having to pay exorbitant Amazon fees; unless of course you also use Amazon FBA.
Tracking your inventory and managing PPC ads wisely also helps build profits and move slow-selling inventory to make way for other items. This helps ease the FBA and warehouse fees.
- Too Many Competitors
Amazon does not restrict the number of sellers that sell a similar product. Thus, you will find hundreds or thousands of seller with basically the same product. Who knows? They may even have the same supplier.
Unless a seller has a unique product, the competition is tough with 900,000 Amazon sellers in the United States alone. With this number, 38% of them are based in China where the goods are sold cheaper because of lower manufacturing costs. Most Amazon FBA sellers expressed concern that their goods aren’t selling because of Chinese manufacturers invading the Amazon US marketplace.
What should merchants do then? Have an exclusive eCommerce platform and marketing strategy outside of Amazon. This way, you can create marketing campaigns without restrictions and have an effective SEO strategy to extend your brand’s reach without being restricted by Amazon’s policies.
- Restrictions in Packaging
Amazon has strict regulations when it comes to packaging, especially now that they have declared that all packaging must be environment-friendly and recyclable. There are also specific box sizes, international labelling standards, and proper bar codes for each item sold. If the packaging conditions are not met, Amazon returns the items to the seller and the delivery and return fees are shouldered by the merchant. Other reasons why Amazon rejects shipments are failure to meet Amazon’s pallet requirements, unaffiliated shipping partners, or cancellations due to delay in shipping.
Most merchants use FBA due to its labelling service. However, this proves costly for low-profit products because Amazon charges $0.55 for each labelled unit. Plus, merchants also need to pay an extra $0.7 for a polybag and $0.8 for bubble wrap.
To ensure that you adhere to Amazon’s strict packaging and labelling policies, make sure to read the Packaging and Prep Requirements article.
- Strict Inventory Regulations
All sellers are expected to strictly monitor their inventory levels because Amazon has prescribed inventory levels. Not meeting the expectations could affect your account health and sales. Sending too much inventory could result to long term storage fees and penalties.
Merchants should also be wary of the Inventory Performance Index which assesses how a seller manages their inventory. Lower IPI scores result to items showing up in the lower search results. They may even lose the Buy Box so consumers won’t be able to see their stocks. Sellers may also lose their Prime status and make their listings appear less appealing as consumers tend to favor expedited Prime deliveries.
As an Amazon seller, make sure you have an effective tool for effectively managing your inventory and forecasting surges or drops in sales.
- Increasing Amazon Fees
Based on a previous blog post, you have learned that there have been an increase in Amazon FBA fees effective January 17, 2023. The only good thing is that the Fuel and Inflation Charges are removed, but have been applied to standard FBA fees. Amazon sellers reported that 53% of the total revenue goes to Amazon. This includes the different fees and charges as discussed in the previous blog.
The largest contributor to these fees is the Amazon FBA program which includes picking, packing, and shipping. The fees range from $2 to $6.80 depending on the size, weight, and category of the products. Storag fees are another factor to these exorbitant fees, especially if merchants did not forecast their inventory movement well. In addition, Amazon increases its storage fees during the 4th quarter where most sales happen due to the holidays.
Additionally, sellers have to shell out money for paid advertising if they want their products to appear higher in search results.
What to do? Monitor PPC costs and make sure that your ACos is lower. Spending much on PPC costs does not guarantee profits.
Amazon is still by far the largest eCommerce platform globally. Even though competition is high and fees are skyrocketing, this does not prevent small business owners and retailers from selling on the marketplace. Since Amazon is everyone’s go to online shopping platform, having your products show up on the platform makes it appealing to consumers.
To address these challenges, sellers must monitor their inventory, account health and PPC ads effectively to avoid costs in overstocking, running out of stock, and customer returns. Merchants and brand owners should also check the quality of their products and packaging to ensure that consumers will buy your products. Since Amazon is a customer-centric platform, product quality, packaging, and shipping times are the top focus.
Need help in managing your inventory or your PPC campaigns? Give us a call and we’d be glad to lend you a hand!
“Always give your best effort even when the odds are against you.”— Arnold Palmer, American Professional Golfer