If you’ve ever thought about starting an eCommerce business, you’ve probably wondered if you should sell on Amazon or use your own website. There are pros and cons to each option, plus ways to do both for a multichannel strategy. To help you make informed decisions that benefit your business, here’s everything you need to know about selling on Amazon vs. your own website.
1. Selling on Amazon
Amazon is the largest eCommerce site globally, sitting on 38% of online sales’ market share. In September 2019, there were 150.6 million people using the Amazon mobile app in the United States, and by December 2019, there were 112 million U.S. Amazon Prime members.
It’s no surprise that millions of online sellers have launched Amazon storefronts. Amazon drives traffic like no one else, and the result is an incredible opportunity to make money. Nearly half of Amazon sellers make between $1,000 – $25,000 per month.
But, there are several considerations to make before you sign up to be a Professional Seller. With that, here are the pros and cons to selling on Amazon:
Pros to Selling on Amazon
Millions of people worldwide shop on Amazon. If you’re an Amazon seller, your listings have the potential to reach—and hopefully convert—many of them.
Buyers trust Amazon and often go there first when looking for something, instead of going to a search engine like Google. Not only is their site synonymous with online shopping, but their stellar customer service keeps buyers coming back.
Built-in buyer intent and seemingly endless demand
Consumers often look for products on Amazon because they intend to buy something specific. They are not necessarily browsing or researching, but comparing product listings and prices.
As an Amazon seller, you’ll have to manage your product pages and run your own promotions. Still, you don’t have to worry about managing an entire eCommerce website or platform when you start selling—Amazon does that for you. With Fulfillment by Amazon or FBA, you can even send your inventory directly to Amazon. For additional fees, they will fulfill your orders for you.
Lower start-up costs
When you sell on a third-party marketplace like Amazon, your start-up costs consist primarily of inventory and promotion. You’ll need to buy bulk orders to stock your shelves and pay for advertising to promote your new listings.
Cons of Selling on Amazon
There are millions of third-party sellers on Amazon. Not only do you have to compete with Amazon FBA (fulfillment by Amazon) sellers, but you must also contend with all 1.9 million active Amazon sellers. To make your listings stand out and rank higher in customer search results, follow our eCommerce SEO tips.
Amazon is 100% focused on the customer. If there’s an order issue, the customer is (almost) always “right,” and the seller has to deal with the consequences. For example, if a customer is dissatisfied with a purchase, you might have to issue a refund without getting the product back.
Lack of control and ownership
Amazon essentially owns your customers; you cannot add your customer’s contact information to your email list or reach out to them outside of Amazon. On top of that, since Amazon owns the platform, they can suspend your account at any time without notice.
Stockout and seller rating consequences
If you run out of stock or have a sudden drop in your seller rating, Amazon can take away your selling privileges or withhold payment for 14 days, or longer.
When you sell on Amazon, you don’t get paid in real-time on your sales (unless, of course, you use a service like Payability Instant Access). Without Payability, or being grandfathered into daily payments (if your Amazon seller’s account is over a decade old), the soonest you can get funds is 14 days after making a sale. Learn more about how Amazon payouts work.
Selling on Amazon isn’t free. Amazon charges various fees, including a seller subscription fee, referral fee, FBA fees (if you use Fulfillment by Amazon), and more. These fees are automatically deducted from the payouts for your Amazon sales.
Amazon sellers big, small, and in between fear the dreaded Amazon suspension. Most of the time, they don’t see it coming, since it can occur for almost any reason. Unfortunately, this risk is part of selling on Amazon, but most sellers do get through the suspensions (like this $250 million seller did) and can sometimes prevent them. Here are 10 Things to Never do After an Amazon Seller Account Suspension.
The Bottom Line
Selling on Amazon means you have millions of potential customers you can reach, so you stand to make a lot of money. You also have to pay seller fees and sacrifice control over your customer data—and you won’t have immediate access to your payouts. To learn more about how to sell on Amazon or to sign up today, visit sell.amazon.com.
Selling on your own website
If you want to sell online, using your own website is a great way to build your brand and maintain control of your business. So what should business owners keep in mind before diving in? Here are some pros and cons to help you make your decision.
Pros of selling on your own site
Control and ownership
When you use your own website, you control your domain, customer data, and customer loyalty for the long term. This means you can build robust email lists to prompt repeat sales, retarget customers, and more. You also won’t have to follow strict seller guidelines or risk losing your selling privileges.
No on-site competition
Every visitor to your website will see your products—and no one else’s. There won’t be competing listings to distract potential buyers. Of course, you’ll still have competitors outside of your website, and will need to find ways to stand out to your target audience.
If you run out of stock or have an issue with a customer, you don’t have to worry about your site getting shut down. You might experience a bad review or two, but you can at least continue running your business and earning money. You can also add a pre-order or waitlist option for out-of-stock items to capture shopper interest and customer information.
Fewer selling fees
Selling on your own website is usually cheaper than selling on Amazon because you don’t have to pay seller fees. Selling from your own site, expect to pay shipping fees, payment processing fees (depending on your point-of-sale system), and any fees associated with the eCommerce platform you use to run your online store. When you run your own site, there’s far less of the “nickel-and-diming” that many Amazon sellers complain about.
Selling on your own website can help establish your legitimacy as an online retail brand. Sure, Amazon is legitimate, but it’s harder to brand yourself on Amazon than on a platform or domain that you own. You can also offer a more seamless brand experience by extending your site to social media, such as by adding selling widgets to your Instagram account.
Cons of selling on your own site
More expensive start-up costs
In addition to buying inventory, you have to pay to get your website up and running. Website development costs can vary depending on how you go about it. If you hire a professional to design and code something for you, expect to pay more than you would for a website template. You also need to budget for marketing and advertising, since you don’t have a built-in audience.
More administrative work
You’ll have to manage and maintain your site, dealing with any issues you face, like a website crashing due to high traffic.
No built-in audience
If you’re just now launching a business, you need to build your customer base from scratch. Unfortunately, there aren’t millions of eager shoppers already browsing your website or searching for your products. So, you’ll need to budget for marketing and advertising and learn how to master eCommerce SEO so you can rank high on search engines like Google.
The Bottom Line
Selling on your own website gives you flexibility and control over your business and brand, but you’ll have to work extra hard to build your customer base. For help getting started, check out NerdWallet’s guide on starting an eCommerce business.
Selling on both Amazon and your own website
In eCommerce, you can have your cake and eat it, too. Meaning, you can sell on both Amazon and your own website.
Depending on what stage of growth your business is in, you could start on Amazon to test your eCommerce chops. Then, as you grow, you can launch your own website. You could also focus on your own eCommerce site and use Amazon on the side to supplement revenue.
The benefit of selling on both is that you get to diversify your business. By not putting all your eggs in one eCommerce basket, you can further expand your reach and be more nimble when unexpected changes occur. For example, if Amazon decides to restrict your product category, you could lose your selling privileges. With another channel—such as your own website or a niche marketplace — you’ll still have an online presence and a source of income.
As you build and diversify your eCommerce business, be sure to prioritize cash flow management. Cash flow is the lifeblood of a business; and when you’re able to reinvest quickly in things like inventory, you can turn profits even faster to grow your successful online brand. To maximize cash flow in your eCommerce business, check out Payability’s daily payment and cash advance solutions today. There are no credit checks associated with applying and both solutions work well in the place of or alongside other financing options including Amazon Lending and Shopify Capital.