Amazon - Painfully Expensive for Business

[Porky]

I have recently discovered that selling on Amazon is a total joke - the only winner is Amazon. Their greed now they have killed / damaged retail in the uk is beyond the pain threshold. Also, I have met with other retailers at trade fairs that have similar experience:

For example:

1. Let's ignore the Membership fee for selling on their platform, their absolutely dire customer service and their over complicated platform and assume you have sucked that up.

2. Let's take a £19.95 Retail Price on FBA, the net after commissions and FBA fees is about 50%

3. Here's the rub: to get your product in a spot for buyers to see it you need to pay for advertising with them. In my case the advertising works out at about £6 per sale.

4. So on that £19.95 retail product i net about £4 and that's before my manufacture / packaging costs. I am lucky to net pence out of the deal.

I fully accept Amazon is the juganougt of all things retail but frankly they can stick it - and don't get me started on why Starmer won't tax them properly - they have helped crush high street retail and there is lost tax revenue as a result of that - a price will all pay.

 

[Lucan Unlordly]

I know a couple of people who've written books and sold them through Amazon. A £10 cover price reaps them the total sum of 65p after all costs are taken into account.

I don't buy from Amazon, TEMU, Shein or ETSY unless I really have to, which amounts to twice in the past few years.

Can Starmer be singled out for the failure to tax major corporations for many, many years?

 

[Porky]

No agreed - Starmer is the only one in a position to actually do something about Amazon but the others have been as bad - agree.

Forgot to add another point :

5. Warehouse theft - two consignments 100 units in each- one gets processed at 89 units (loss 11) other one 94 units (loss of 6) - i know for a fact 100 went out as i personally counted them four times to be 100% sure.They are small unit items easy to Nick.

So you need to allow for that as well

 

[scstock]

5. Warehouse theft - two consignments 100 units in each- one gets processed at 89 units (loss 11) other one 94 units (loss of 6) - i know for a fact 100 went out as i personally counted them four times to be 100% sure.They are small unit items easy to Nick.

So you need to allow for that as well

Agree - their "Shortage Claims" are systematic theft.

 

[DontAsk]

So don't sell on Amazon. Sell at £14.99 on your own website. Do you own advertising/marketing.

 

[John Martin]

When I first started selling on Amazon they were a joy to work with. If you had any problems you could pick up the phone, speak to someone in the UK or Ireland, and usually get most issues sorted within minutes.

Products got high rankings on merit, and since I had good products I could achieve a No.1 spot without advertising.

Ten years on, things were so bad I couldn't believe it was even the same company.

Aside from the high fees, extremely poor seller 'support', toleration of scam sellers, ridiculous polices that changed with the wind, and lack of transparency on inventory management, the worst part was the constant gaslighting.

 

[FreddyG]

The answer is to sell on eBay and all the other sales outlets, with a link or tip to your own website. Amazon is not the be-all and end-all of retail.

As a retail customer, I now avoid Amazon. It is more expensive and delivery has deteriorated markedly.

 

[tony84]

Until someone creates something similar they are impossible to beat. I would never buy off amazon again in theory.
But its so easy, its almost impossible not to.

I have ordered things in the morning and had it in the evening. But in most cases I buy it and get it the next day. This can be anything from a 50p item to hundreds of pounds.

I do try to support our local shops but its hard to not just automatically go to amazon in fairness.

It would be great if someone could do something similar but do a profit share with the businesses. But the investment needed would be immense.

 

[Mister B]

I feel your pain but at the end of the day, it's their business and up to them how they run it, just as you have a choice to sell elsewhere.

We used to love selling on there-they made life easy for us to work with them and the fees were affordable. Our experience has now been crippled by the fees and the lack of support. Competition we can cope with as that's healthy and to be expected. What we don;t like though is the amount of tat that's now being peddled on there which in my humble opinion, is now starting to devalue the platform.

We're pushing our own site which in certain categories is now outperforming Amazon. For sure it's harder work, but in the long term it has to be the way to go.

 

[John Martin]

5. Warehouse theft - two consignments 100 units in each- one gets processed at 89 units (loss 11) other one 94 units (loss of 6) - i know for a fact 100 went out as i personally counted them four times to be 100% sure.They are small unit items easy to Nick.

If you think Amazon stealing a few units is bad, how about this one...

Three boxes sent to Amazon (USA), same product 64 units in each box. Amazon only report receiving two boxes and despite me showing proof of receipt, and repeated calls to investigate, they still claim only two received.

A few weeks later, quite by chance I happened notice my product being sold on Amazon.de (Germany). I've never sold in Germany, so I was surprised to see it on sale there and even more surprise to see it was being sold by... AMAZON!

From the number of units on sale it was pretty obvious that the missing box had been stolen by Amazon and shipped to Germany to be sold there. It was my own brand product and I was the sole seller worldwide, so it should never have been there. Even after showing them proof, with a link to their own listing on Amazon.de, they still continued to deny all knowledge.

After pursing them for around a year, it was eventually sorted out. However, due to their very convoluted inventory management system, I think there were still about 9 units that I was never compensated for.

Best decision I ever made was the day I decided to have nothing more to do with them. I felt dirty being involved with such an unethical company, they have no morals.

 

[FreddyG]

Warehouse theft - two consignments 100 units in each- one gets processed at 89 units (loss 11) other one 94 units (loss of 6) - i know for a fact 100 went out as i personally counted them four times to be 100% sure.They are small unit items easy to Nick.

If one crunches the numbers, it seems one would have to be a fool to sell on Amazon -
A business sells 100 items/month, each at £20 and costing in total £10 each, in a 15% referral fee category and using FBA (small parcel ~£3), the rough monthly outlay would be:

• Subscription: £25 + VAT = £30
• Referral: £20 × 100 × 15% = £300
• Fulfilment: £3 × 100 = £300
• Storage: variable (say £50–£80 monthly)
• VAT on fees: reclaimable if registered

So total before VAT reclaim ≈ £650–£700/month, excluding inventory costs, advertising, and returns. That's £700 a month for £2k turnover and £1,000 mark-up, so £300 gross profit, less 10% pilfering - so just £200 gross profit. Now you must subtract advertising and other marketing costs!

Amazon seems to regard its suppliers as its prime, if not sole, source of profit.

 

[AlanJ1]

Storage: variable (say £50–£80 monthly)

If doing right, storage can be £0.

less 10% pilfering

Sold hundreds of thousands of units on Amazon, if not over a million now. Yes this happens, but I have ALWAYS been able to sort this out with them. Had an issue with a missing pallet, but we got there eventually.

I had a warehouse roof collapse once in Amazon and had 3000 CCTV cameras reinbursed at full retail - fees.

Amazon isn't for everyone but if you are starting out / want to do volume it's a place to be.
Have a think about how much it will cost to market a new website.

 

[John Martin]

Yes but a website is yours. You control it and you can sell it as a business.

With Amazon you don't have a proper business. They control pretty much everything and can pull the plug at any time.

The number of good sellers I saw who woke up to find their account suspended over ONE ludicrous customer complaint, or had their business destroyed overnight by some ridiculous change in policy, was frightening.

But if you want to live with a sword of Damocles constantly hanging over your head, then go for it.

 

[AlanJ1]

Yes but a website is yours. You control it and you can sell it as a business.

And you can also include an Amazon account in a sale.

But if you want to live with a sword of Damocles constantly hanging over your head, then go for it.

Think this is rich, there's a reason the majority of major brands sell on Amazon in the UK, The exposure can be huge, there many many tactics in getting customers to buy on Amazon but to come to your website.

Example:

Sell a starter pack on Amazon, but don't sell the addons, so all addons come to your website.

As said, leverage Amazon in your favour and don't put all eggs in one basket.

 

[John Martin]

Think this is rich, there's a reason the majority of major brands sell on Amazon in the UK,

There's also a reason why many major brands over the last decade have pulled out of Amazon or have banned their products from being sold on Amazon.

It was once a great site and Amazon were very picky about who they allowed to sell there. That's no longer the case, and with so many scams that Amazon seem happy to tolerate, many major brands do not wish to be associated with them any more.

 

[FreddyG]

don't get me started on why Starmer won't tax them properly - they have helped crush high street retail and there is lost tax revenue as a result of that - a price will all pay.

All the UK government has to do is to change the law on what constitutes the extraction of profits. We could start by making payments to a holding company in an offshore tax haven (or indeed anywhere outside the UK) for intellectual rights, websites, etc., which would be seen as profit extraction.

 

[Paul Kelly ICHYB]

Yes but a website is yours. You control it and you can sell it as a business.

But can you get the traffic?

Amazon should be part of a distribution plan, not the only part of a distribution plan!

 

[DontAsk]

But can you get the traffic?

That's what marketing is for.

 

[John Martin]

True, and to be honest most people are probably already having to spending a small fortune in Amazon ads to get traffic anyway. The minute you turn the ads off, you're basically back to square one. So you might as well put that money into promoting your own website. It'll probably be a much better investment in the long run.

 

[Paul Kelly ICHYB]

The minute you turn the ads off, you're basically back to square one

Wouldn't that depend on the product?

In a highly competative area, yes, but in a niche, not necessarily?

That's what marketing is for.

Yes, but how much would you have to spend to get a similar reach? If you view the Amazon commission as marketing, maybe it would give an alternative viewpoint?

 

[John Martin]

Wouldn't that depend on the product?

In a highly competative area, yes, but in a niche, not necessarily?

True, but if it's a niche product then you probably don't need to spend much on ads, if anything at all.

If you're in that position, then great, but for most people, Amazon ads are going to make up a significant part of their budget.

For me, it got to the point where a once very profitable Amazon business was making a loss, and that was due to the spiraling cost of ads. In hindsight I wish I'd invested that money in my own website instead.

 

[AlanJ1]

True, but if it's a niche product then you probably don't need to spend much on ads, if anything at all.

If you're in that position, then great, but for most people, Amazon ads are going to make up a significant part of their budget.

For me, it got to the point where a once very profitable Amazon business was making a loss, and that was due to the spiraling cost of ads. In hindsight I wish I'd invested that money in my own website instead.

Do you mind me asking what your ROAS on ads are on Amazon?

 

[DontAsk]

... for most people, Amazon ads are going to make up a significant part of their budget.

If the OP is to be believed, the total cost of selling on Amazon is 80%

That's not a business model, it's suicide.

He makes the product so the RRP is in his control. Find/create a different sales channel with lower overheads and sell a much lower price, or make more profit.

 

[Porky]

Just to add to my OP

I dont find it viable due to the marketing costs on top of the fees they already take. IMO their cut is right on the pain threshold. For my business its not proving viable.

 

[John Martin]

Do you mind me asking what your ROAS on ads are on Amazon?

I stopped selling on Amazon several years ago.

Aside from the fact that ads were eating all my profit, I got fed up of playing whack-a-mole with scam sellers from China, as well as Amazon's constant gaslighting.

My sanity and mental health were far more important to me.

 

[Mister B]

Quite a bit of negativity towards Amazon, which doesn't surprise me at all. However, if you want to sell in volume, then they are potentially, in conjunction with other sales channels, a very important outlet.

For us though, as a strategy, last year we decided to start focusing on products which we could sell in volume on our own site, and which would subsequently allow us to move away from Amazon. So far, although turnover is down, (we're not pushing any products on Amazon,) the outlook is looking very positive.

Quick comment on Amazon ads: two years ago, for fear of missing the boat, we spent a small fortune on Amazon ads, under the guidance of an in house Amazon expert. For sure sales increased, but at best we were breaking even so we ultimately canned the campaigns. What was interesting though is that the Amazon employee let slip what the benchmark target ACOS was for our category. This figure was 18.6% So, add 15% commission, 15% FBA fees and you're pretty much at 50% Add the VAT from the sale and for every product sold at £10, we're left with £3. That's without factoring in Amazon storage, lost goods, dodgy returns. Never mind the cost of the goods themselves and our own expenses. This is why we're moving away at a rate of knots.

 

[AlanJ1]

Quick comment on Amazon ads: two years ago, for fear of missing the boat, we spent a small fortune on Amazon ads, under the guidance of an in house Amazon expert. For sure sales increased, but at best we were breaking even so we ultimately canned the campaigns. What was interesting though is that the Amazon employee let slip what the benchmark target ACOS was for our category. This figure was 18.6% So, add 15% commission, 15% FBA fees and you're pretty much at 50% Add the VAT from the sale and for every product sold at £10, we're left with £3. That's without factoring in Amazon storage, lost goods, dodgy returns. Never mind the cost of the goods themselves and our own expenses. This is why we're moving away at a rate of knots.

Yeah but the biggest mistake people make with Amazon ads is they just factor in what it costs to sell 1 product through ads.

It will increase your ranking so your natural sales will massivley increase so working out what a true cost is based on this.