Having a sales channel through Amazon is quite beneficial to our business, and I highly recommend it for small companies with new products like us.
Here are the drawbacks.
- They take a huge chunk of our profits. We have to pay them 15% of the selling price and more from the shipping.
- Plus, there is a $40 monthly fee for the listing.
- They pay us every 2 weeks, so the cash flow can be tight if depending solely on their check.
- We use Fulfillment by Amazon, so we have pay to ship a big box of products to them.
Here are the benefits.
- It is one of the biggest retailers, so many people shop there. Since we have a unique relatively unknown product, having it in a giant retailer is very cool. People browsing through their "virtual shelves" may come upon our product. If they don't buy it through Amazon, they may follow the links to come to our website.
- Amazon has many promotions, gift certificates, free shipping incentives, and other methods that encourage people to buy there. It's marketing that we don't need to do.
- You can get a sense of your competition and collaborations after a while. There is a section of the page for "People who looked at [your product] also looked at...." For example, our biggest competitor would be a pillow that I will describe as little as possible. Our biggest collaborative sale is with the Delta Sleep System, a CD. It's tremendous market research. You just have to figure out how to use that information.
- For us, it's one more sales channel that is relatively hands-off. Using Amazon Fulfillment, we just ship a big box of SleepPhones to Amazon, and they will ship them to customers for us. Any returns also go through them. If we have an emergency and can't be at home to ship out SleepPhones for a few days, they will always be there for customers desperate to get some sleep.
- Customers buying through Amazon are encouraged to write comments about your product and company. Since we sell a great product, our reviews have been very positive. If I saw our ratings, I would be curious about the product because everyone loves it so much. If someone writes a negative or misinformed comment, sometimes other customers will even post a followup comment correcting them.
- Most retail shops request the standard wholesale price, which is 50% of the suggested retail price. 20-25% is a lot less than 50%.
So despite having to give Amazon about 20% of every sale, it is a great retail sales channel for a fledgling company.