E-commerce has been on an upward trend since 2014. Long before lockdowns and quarantines charged up the online shopping industry, people have been purchasing a wide variety of products from the comfort of their homes and offices. From electronics and books to clothes, furniture, groceries, and pet food, online customers worldwide elevated e-retail sales to $2.86 trillion in 2018. This number is projected to reach $4.88 trillion in 2021.
In June 2020, Amazon had close to 5.22 billion unique visitors worldwide, while eBay had 1.52 billion. Other online marketplaces that are frequently visited are Walmart (622 million), Etsy (578 million), AliExpress (539 million), Ikea (450 million) and Home Depot (417 million).
EARNING A STABLE MONTHLY INCOME FROM ONLINE SELLING HAS HUGE POTENTIAL
What is the Most Seller-Friendly Online Retail Marketplace?
The National Retail Federation (NRF) listed Walmart as the top global retailer in 2020. Doesn’t it then make sense for third party sellers to flock to this marketplace? Sadly no, for 2 reasons: Walmart controls product prices, and they do not take care of storage and fulfillment.
To date, Amazon and eBay are still the best options for third party retail sellers to make money. If you are poised to leap into the online selling game, we recommend these two platforms. Another option you could consider is building your own e-commerce website.
To help you to determine which platform best fits your seller profile, here are the pros and cons of these three options.
Selling on Amazon: Pros and Cons
In 2019, Amazon’s total revenue reached $232.88 billion. In 2020, the company generated almost $96 billion total net sales in the third quarter alone. What do these numbers mean for you as a third-party seller? Everything. They indicate the potential profits up for grabs for those willing to put in the work.
Now, let’s see if this platform is compatible with your personal business model.
Pros of Selling on Amazon
Hundreds of Millions of Captured Market
Amazon Prime members in 2020 totaled 142.5 million people. These are the most regular shoppers and their numbers are expected to hit 148.6 million in 2021. That’s roughly 82% of all households in the US. Each Prime member spends an average of $1,400 per year, while non-Prime members shell out $600 each annually.
The above listed figures are only for the US. Amazon has marketplaces in Europe as well, and everyone is welcome to sell there. While this entails tariffs and additional fees, sellers can market their products internationally. Plus, each country Amazon caters to also has their own group of Prime members.
The Magic Acronym – FBA
Fulfillment By Amazon is what sets it millions of miles apart from the competition. For a small fee, the company will store, package and ship your products for you. They will also handle customer service, returns and replacements. You can easily calculate what your costs on a product will be by using the Amazon FBA Calculator. This means that you can focus on product development, advertising, and marketing.
Third party sellers can run ads within the Amazon platform. It’s a win-win situation: buyers will view product ads specific to what they’re looking for at any given moment, while sellers can maximize their ad spend by targeting customers with the highest potential to purchase their product.
Numerous Third-Party Apps and Tools
Many startups provide every support imaginable to Amazon sellers: product research, copywriting and image design for listings, advertising and customer service.
Not all of these providers can guarantee your success, so make sure to do your due diligence in vetting them before hiring.
Cons of Selling on Amazon
Compared to other online markets, particularly eBay and Walmart, Amazon charges a higher referral fee of 15% on most purchases. To ensure profitable margins, make sure that you use the FBA Fee Calculator, which gives you an estimate of your potential earnings.
When it comes to selling on Amazon, product selection is a balancing act. It involves finding the right category where competition is low, buyers are many, and your product is in demand. This process can be long and tedious, but you can shorten it by using AMZScout tools.
Amazon implements very strict terms and conditions, and they change quite often. The company is also famous for flagging, suspending and deleting accounts for the smallest violations.
Customer is King
The return and reimbursement policies of Amazon are very lenient for customers. As a seller, you need to be on top of your inventory to ensure that returns are tracked and actually returned to your stock.
Selling on eBay: Pros and Cons
eBay boasts 182 million users and 1.3 billion listings worldwide. In the third quarter of 2020, it saw a sales growth of 33% in the US, with a net revenue of $2.6 billion. While this may seem like a staggering amount, it doesn’t come close to Amazon’s $96 billion for the same period.
However, it’s not a negligible number, either. If you’re considering signing up as a seller on eBay, here’s what you need to factor in.
Pros of Selling on eBay
eBay charges within the range of 2% to 12% depending on the product. Compared to Amazon’s 15% fee, this is definitely much lower and gives you a higher profit margin.
There are more than one billion active listings in this marketplace, but only about
1.3 million sellers do it full time. Also, 20% of the products sold there are used, so your new products are essentially competing with only 80% of the products listed.
More Relaxed Return Policy
eBay allows sellers to set their own rules regarding shipping and returns as well as the corresponding fees, but they do impose certain limits.
Better Listing Pages
You can experiment with images and product description on an eBay listing more than on an Amazon listing.
Cons of Selling on eBay
You don’t need to be an economist to understand the law of supply and demand. The reason for lower competition on eBay compared to Amazon is that there are fewer buyers there. You could therefore still make more money as an average seller on Amazon than as a bestseller on eBay.
No Storage and Fulfillment Services
If you decide to be an eBay seller, you must be prepared to do your own storage, packaging, and shipping. This may require renting a space and hiring extra hands.
Multiple Insertion Fees
While eBay referral fees are lower than Amazon’s, their insertion fee is on a per category basis. Thus, if you list the same item in multiple categories, you will be charged the fee multiple times. This fee is non-refundable even if your products don’t sell.
Selling on Your Own Website: Pros and Cons
While you can rely on either Amazon or eBay (or both) to allow you to support a decent lifestyle, having your own website has its own merits. It can establish your brand name, build your brand’s image, and showcase all of your products in one place.
Pros of Selling on Your Own Website
In addition to giving credibility to your brand, a website also makes it possible for you to launch a wider range of products while capitalizing on the brand’s established reputation.
Your products can promote each other, especially when each has its own following. Some site visitors may be unaware of all of the merchandise available under the same brand name, and a website can provide that information.
Lowest Fees, No Penalties
Cash outflow is mostly on infrastructure expenses, such as for the platform, host, and credit card processing but none of them are outrageous or high risk.
Your Site, Your Rules
Since you have no one to answer to but yourself, you get free rein on design, pricing, and policies on shipping, returns, and replacements.
Cons of Selling on Your Own Website
Bringing people to your website is just half of the challenge. The other half is getting them to stay long enough to actually buy. This takes time, and you might need to invest in advertising with search engines like Google.
Building a Team
Behind an online store is a group of people providing customer service, managing inventory, maintaining the site, and fulfilling products. It’s impossible to do all of this all by yourself.
Now is the best time to start an online retail business. The market is primed for buying, and you have a host of options to suit your business model. Whether you choose Amazon, or eBay, or have a go at your own website, online is where the world is now coming to shop and it makes good sense for you to be there.