There are roughly 2.5 million sellers actively selling through the Amazon marketplace. 25,000 of them sell at least $1M a year and more than 250,000 sell more than $100,000. That means there are almost 300,000 unique sellers that manage complex, high-volume businesses with the Amazon marketplace as a gateway to their customers. These companies often rely on a mix of business software to help them handle their operations, ranging from simple accounting or shipping apps to more complex ERP systems.
But wait, what is ERP software?
ERP is Enterprise Resource Planning. It is an umbrella term for a very complex type of business management software, but simply put, it houses an abundance of functions that help run your business from accounting to inventory management and manufacturing to supply chain management.
But I do need software to help me increase my sales…
Regardless of what any salesperson will tell you, the main purpose of ERP is not to drive sales. Within the Amazon marketplace, search result positioning and product photography have far more to do with increasing sales than data management does.
Then what could an Amazon seller need an ERP system for?
1. ERP can help you stop losing sales. How?
Amazon is very rigid about managing product listings, and with good reason: they have at least 120,000,000 of them. Each SKU or ASIN that you list can have dozens if not hundreds of small informational requirements in order to remain valid. If you have more than a few products listed, managing the complexity in Seller Central can lead to errors that could get your product delisted. An ERP system’s product management functionality can prevent errors that would see your products removed from the eyes of Amazon’s 105 million Prime members, not to mention the hundreds of millions of other occasional Amazon buyers around the world.
What’s more, if you are an FBA seller and your product has insufficient stock in the fulfillment warehouses, you will lose sales even if a buyer wants your product. Keeping track of the demand in each of Amazon’s thirteen marketplaces and creating the shipping plans to get your products to each of them is not easy. Inventory management is a core element of ERP, as are the logistics tools needed to manage your shipping to Amazon fulfillment centers
2. ERP can help you figure out if you are actually making money and whether that money is getting to you on time. How?
Determining profitability is hard to do in any business. Calculating per product Gross Profit is usually tough enough, even with the simple formula of ‘Sales Price – (Product Cost + Cost of Delivery)’. Net profit is even harder when you have to take into account rent, utilities, and other things. Accounting systems are supposed to do this for us but are critically limited by what information they have access to.
ERP software is designed to receive and manage all costs and connect them to sales so you can easily figure out your Gross Profit per product. It can also factor in all your other business costs, like wages and overheads.
Amazon produces a Settlement Report to help you know what has been sold, for how much and whether anything has been returned through Seller Central. Unfortunately, it is a bit opaque when trying to connect it to the flow of sales orders coming in though. Reconciliation is extremely time-consuming and tedious but an ERP can store this data and even take care of this process for you.
3. ERP can not only help you plan what to do next but also execute those plans. How?
With all the information an ERP collects, the data can be used to determine what markets and products you should be planning to promote in the future. There are analytics tools that can make great use of everything an ERP collects.
In addition, ERP sometimes includes automation tools. Based on configured sets of criteria, an ERP can be set up to issue purchase orders to your vendors, validate shipping plans with Amazon, and project cash requirements to fulfill orders.
So… do Amazon sellers need ERP systems?
The summarized answer is that if you have enough complexity in your business that you are losing opportunities, then an ERP can help. However, if you are not feeling pressed by operational concerns, then it is not necessary.
We have been watching our customers struggle with all and more of the aforementioned problems. That’s why we built a connection between our software, ParagonERP, and Amazon. Our system seamlessly connects to the Amazon seller’s Seller Central and acts as a powerful but easy to use full-featured back-office tool. It’ll handle tasks such as Amazon inventory management, multi-marketplace needs, and shipping plans, just to name a few. We even decided to make the price accessible to the average Amazon FBA seller. And to make it even easier to access, ParagonERP was recently selected by Amazon to join the Marketplace Appstore. If you are curious, we’d welcome you to try it out.