Are you wondering whether it makes sense for your business to sell on Amazon? The giant platform now comprises 45% of the ecommerce marketplace. But, does it make sense for your business to sell on Amazon? The answer is not a clear yes.
You have probably seen YouTube videos from sellers who are making a fortune on Amazon, while your friends are barely breaking even (if that). Why the discrepancy?
In this article we have a list of questions to help you evaluate the profitability of listing your products for sale on Amazon. We will also share examples from our own customers, and how selling on Amazon fits into their specific business strategy.
Top three questions to help you decide whether you should sell on Amazon
Question #1: Why do you want to sell on Amazon?
Is your primary goal to 1) increased revenue or 2) increased exposure to more customers?
One of our customers, Joseph Policastri, sells personal care products on his website, Amazon, and eBay, with most of his sales coming from Amazon. “It’s difficult to beat the prices on Amazon. If you want to sell on your website, you need to have your own brand, a private label,” he said.
For Policastri, the reason for selling on Amazon was to increase profits. However, knowing his numbers has been key to staying profitable. Before he lists any product for sale on Amazon, Joseph uses a software that spiders through similar product listings to find out which ones would be the most profitable. “For each product I sell, I look at how many people are selling it, and whether Amazon is selling it. The software is an additional cost, but it helps me eliminate listings that wouldn’t be profitable.”
Another one of our customers, Bare Bones Broth, sells bone broth on Amazon. However, they have additional products on their website that are not sold on Amazon. In their case, Amazon gives them exposure to a wider audience. Even if their profits on Amazon are modest, the additional sales they can get from their own website as a result of the exposure through Amazon could lead to higher profits overall.
Question #2: Do you have the tools to calculate whether it will profitable?
With different merchant fees and shipping costs on different platform it’s a challenge to calculate your true profits. Our customer, Joseph Petruziello, sells hand-made candles on his website through WooCommerce, as well as on Shopify and Amazon.
According to Joseph, keeping track of the different merchant fees on the different channels was one of the biggest challenges of expanding to multiple sales channels: “When making business decisions, I had to keep in mind that my cost of goods sold (COGS) was different on different sales channels.”
As Petruziello added new selling channels to his business, he had to find a way to automate the process of getting his orders from his online store to QuickBooks using Connex. “Keeping the books up-to-date was challenging enough with just one site. It would be impossible to do all the data entry manually for multiple sites.”
By keeping track of his fees on different channels, automating data entry into QuickBooks, and responding to all customers in a timely manner, Joseph has been able to grow a profitable e-commerce business and expand to new product lines and selling channels.
Question #3: How will you fulfill and ship orders?
Our customer, Rafael Bildirici sells a variety of physical goods – from electronics to beauty products – on Amazon, eBay, and Walmart. While growing his business, Rafael’s main challenge was order management and making sure all his orders from the different channels were fulfilled on time.
“Syncing orders into QuickBooks, and setting up customers the right way, was challenging at the beginning, as we scaled. Things got much easier once we automated these processes with Connex.”
Rafael also noticed that profits were different from different channels. “I had to keep track of all my fees from different channels, so that I knew how much money I had to buy inventory. If I wasn’t confident in my reporting, I wouldn’t be able to stay in business.”
Overselling and inventory management present another challenge for merchants who sell the same items on multiple channels. Rafael uses ShipStation to not only consolidate all of his shipping into one platform, but also keep track of shipping fees and inventory. “Putting all orders from all of the marketplace into one shipping tool has really simplified things for us.”
Rafael has been in business for more than five years now, and the keys to his success included having the right tools to automate as he scaled, keeping QuickBooks up-to-date so he could track cash flow, and managing his online inventory to prevent overselling and refunds.
Some of our customers use fulfillment by Amazon, instead of their own warehouse. Whichever method you choose, be sure to make a financial informed decision and use the method that will results in the best profits for you business.
Before you decide to sell on Amazon, discuss the following factors with your team:
- How does selling on Amazon fit into your overall business strategy?
- How will you market your products? If you use ads on Amazon, you need to take those costs into consideration.
- Which products are likely to have the highest profit margins on Amazon?
- What tool will you use to calculate profitability on Amazon?
- How will you automate data entry into QuickBooks, including orders, stock changes, merchant fees, refunds, etc.?
- How will you ship and fulfill your orders from Amazon?
Why Our Customers Choose Sync with Connex to Automatically Integrate Amazon with QuickBooks
Recommended by Intuit itself, Connex for QuickBooks uses the most up-to-date automation technology to integrate Amazon with QuickBooks Online and Desktop editions (Pro, Premier, Enterprise).
With Connex, you have peace of mind that your orders sync automatically to QuickBooks, eliminating manual data entry. We are compatible with Amazon North America, Europe, and the Far East.
Connex integrates QuickBooks with all major e-commerce platforms, such as Amazon, Woocommerce, Shopify, Magento, and the most popular shipping solution, ShipStation.
Wondering if Connex is a good fit for your business?