Amazon is one of the most valuable online marketplaces for any e-commerce store. With a 55% share in all online sales in the USA, Amazon is a huge opportunity and revenue driver that small online sellers often cannot afford to lose. While costs to sell can be high, the sheer volume of sales often means that Amazon can be the highest earning of any marketplace you sell on.
However, Amazon maintains their high sales volume by ensuring customer satisfaction. The company is extremely strict with sellers for even small infractions, which can easily result in losing your seller privileges. And, with high costs, you have to strictly manage your business processes to ensure that you’re turning a profit.
As a result, making any mistake with your business processes, inventory, or customer service can kill your account. Here are some of the most common mistakes made by sellers, and how you can avoid them.
Not Managing Your Account Properly
Amazon strictly manages seller performance and customer satisfaction and they measure you based on account health. If your account health drops below percentages, Amazon sends you a notification and you have to fix it quickly. If your account is consistently below your target mark, Amazon will ban your account. More importantly, you can lose your account for small issues like not responding to customer requests quickly enough.
In most cases, you have to keep all of your performance metrics above 90-95% (and sometimes higher), or your account will be flagged. If you don’t keep your metrics up, your seller privileges will be removed.
The only way to keep your metrics up is to offer a combination of good service, quality products, fast shipping, and good infrastructure. Customers leave bad reviews when they aren’t happy with the product or service, shipping is too slow, or something else goes wrong with the order.
Violating Amazon Policy
An Amazon Policy violation is the fastest way to permanently lose your account, because once you are suspended, it’s extremely difficult to get your account back. The biggest risk for most sellers is being reported for selling counterfeit products, which is a direct policy violation. In some cases, sellers with generic parts and products (as opposed to name-brand) have been reported and suspended for selling counterfeit products.
While you can’t avoid selling generic products, you should double check that you are following Amazon policy for items in every category you sell in. If you do sell generic products, keep strict records, ensure that you represent your products as generic rather than name-brand, and if you are flagged, appeal your case to Amazon.
Not Shipping Fast Enough
Amazon requires you to ship every order within 2 business days. This means you must process the order, pick and pack, and send the product to your shipping provider within 48 hours, typically with a minimum efficiency rate of about 95%. If you’re too slow and even 10% of orders take longer to ship, Amazon will penalize and eventually suspend your account.
Unfortunately, shipping is hard for many sellers to keep up with, especially if you’re starting out small. If it is something you struggle with, upgrading to 3PL or moving high-volume products to Fulfilled by Amazon can help you to reduce the burden on your own warehousing and logistics structure, while improving shipping speed. Similarly, introducing automation to speed up processes and reduce human error will increase your ability to ship quickly from your own warehouse, without requiring you to add on more employees.
Overstocking Inventory (Especially in FBA)
While a suspension is one way to lose your account, mistakes like not adequately keeping up with costs can hurt your account and your ability to sell as well. For example, if you overstock inventory, you’re greatly increasing your costs, especially if you’re overstocking in FBA or a 3PL. Inventory carrying costs typically average between 10% to over 30%, which is considerable.
Using inventory analysis to understand which stock is actually providing a profit (typically about 80% of profits come from 20% of stock), streamlining your stock to cut low performers, and using tools like inventory valuation to determine what’s actually making your money will help you to decrease your overhead.
You can also consider integrating an inventory management program like Just in Time inventory and an inventory lifecycle management to ensure that you never have more stock than you need, that you consistently phase out dead stock, and that you have enough inventory on hand to meet demand.
Failing to use Marketing and Merchandising
Amazon sellers often start out as novices in the world of commerce, and that means many of us don’t understand the value of merchandising and marketing. However, Amazon is very much a pay to play marketplace. For example, the ranking algorithm lists top selling products based on activity, reviews, and account health first. If you don’t have those sales, most buyers won’t ever see your product to buy it. You have to use Amazon’s PPC if you ever want to gain the Sales Velocity to make it to the first page.
Merchandising is also important. Having quality images and quality text (no spelling errors, optimized for SEO, helpful content, etc.) will greatly increase your conversion rate. If you don’t have these things, you will eventually lose sales and lose money. Investing money into quality product listings, and then into marketing, will drive sales which will boost your account.
Not Listening to Customers
The customer isn’t always right, but on Amazon, that doesn’t tend to matter. Customer reviews, messages, and complaints will greatly affect your account, your standing with Amazon, and the willingness of other consumers to buy your products. If you aren’t listening, you will lose your account or your sales.
While it should be obvious that you have to respond to messages and customer complaints, you should also pay attention to what customers are saying and act accordingly. For example, reading negative reviews or negative comments in positive reviews can give you a good idea of what consumers are concerned about and how you can plan your products or improve them for the future. You can also often prevent negative reviews by responding to messages and comments quickly enough and helping people by providing solutions for them.
Managing an Amazon account means strictly managing your business processes, so that Amazon and your customers stay happy, while keeping costs low. Hopefully you can use these examples and tips to avoid the mistakes that hurt your account.
This is a guest post written by Chad Rubin. Chad Rubin builds e-commerce businesses.Fresh out of college and Wall Street, he took his family vacuum business online and built his own direct to consumer e-commerce business called Crucial Vacuum. He grew it from 0 a $20 million dollar valuation in just 7 years. He happens to be a top 250 Amazon seller. He co-founded Skubana with DJ Kunovac and built one of e-commerce’s hottest operational softwares.