A well-liked method for entrepreneurs to launch their own companies is by selling products on Amazon through the Amazon FBA model. Unfortunately, despite the opportunities, data show that a whopping 95% of Amazon FBA sellers fail. This begs the question: why do so many Amazon sellers have such a hard time succeeding?
This alarmingly high failure rate is caused by a number of things, such as choosing the wrong products, not doing enough research on the market, spending more on advertising, and having a lot of competition. These are just common causes of Amazon fba seller failure. In this blog, we will explore some of the key reasons, based on our experience, behind this high failure rate and provide insights on how to overcome these challenges to improve your chances of success as an Amazon FBA seller.
To help you see the difference between success and failure on amazon more clearly, let’s get into some more nitty-gritty details.
How do you define success in the Amazon business?
The best way to measure success on Amazon is by how many sales you make, how much revenue you make, how healthy your profit margin is, and how often you launch new products to build a great brand.
- Sales: what percentage of your expected sales you are actually achieving
- Profit Margins: how much of a net profit your product is making after all costs have been deducted.
Whether you’re running a bakery or an Amazon FBA business, they are the two metrics that matter most in any business. The other factors just help to maintain control over these two key factors.
Each and every one of Amazon’s sellers have a unique perspective on this amazon business success. Keeping revenue and profit at a high rate is the driving force behind all of the advice they give, from focusing on loyal customers and KPIs to managing stock carefully. Thus, if you don’t want to end up like the other 95% of unsuccessful Amazon FBA sellers, you need to learn as much as possible about what it takes to succeed.
1-Choosing the wrong product
Picture this: you’ve spent the better part of a month, maybe more, looking for the “ideal” product to sell on Amazon. You’ve looked at every indicator, read every review, and even spoken to your psychic aunt for some extra insight. You’ve done your research and decided on a product, say a life-size cardboard cutout of Nicolas Cage (because who wouldn’t want that, am I right?).
You place your inventory order, create your listing, and patiently wait for the sales to begin. However, boom! The number of sales is not rising as rapidly as you had hoped.
What could possibly be the problem?
It always takes time to do research on a product. It’s possible that after investing in research to a product for two months, you’ll realize it wasn’t the ideal choice. When you reach this point, the problem usually arises because you don’t want to switch to a different product but instead want to disprove your intuition by concluding, “It’s the best product I go with.”
When amazon sellers develop strong attachments to products, they are more likely to suffer distress in the long run.
Suggested Solution
When choosing a product using tools like Helium 10 or Jungle Scout, take into account the following criteria
- Avoid sorting products by revenue.
- Seven of the top 20 sellers have less than $400 in reviews
- 7 of the top 20 sellers have annual sales of at least USD $7000.
- Price comparisons should range from $14.99 to $39.99.
- Consistent BSR must be maintained for the top 3 sellers with the most reviews.
- 8000 minimum exact search volume
- Not more than three products per brand
- The product shouldn’t be in trend.
- It should not be a seasonal product
- As a value addition, include a cheap item in the deal.
- The top 20 should have an average rating of at least 4.2.
- No more than 2000 should be used for competing products.
- No product should weigh more than 1.5KG.
- No more than five times should Amazon appear in the top 20.
Choosing the appropriate product is crucial and the first step to success on Amazon. It is preferable to hire a virtual assistant or an Amazon marketing agency with expertise in product research.
2-Neglecting product customization
There is a big difference b/w making a simple product and making a product simple.
Many sellers on Amazon fail to take this crucial step. They view it as a useless next step. If Amazon sellers come across a promising product, they could rush to bring it to market without giving much thought to how they might set themselves apart from competitors. I’ve already covered a lot of product differentiation on Amazon.
Think about which product you could customize better after viewing the image below.
What problem could possibly occur?
So, that question has an obvious answer. Do you really want to risk being overlooked because you blend in with the crowd? Take a look at the Amazon image below and put yourself in the minds of your potential buyers. What is it that you plan to purchase?
If customers find similar products on Amazon that don’t stand out in any way, they might not care about them or be interested in them. But they might think that all products are the same and see no reason to choose one over the other.
In this case, customers may only care about price when deciding what to buy, which can cause a price war between sellers. This might set off a downward slide in which Amazon sellers cut their prices further in an effort to attract customers, resulting in fewer sales and fewer profits.
Suggested Solution
There are various ways to differentiate and customize products.
- by country
- based on functionality and design
- by size differentiation
- Competitive weaknesses
- Using listing optimization and A+ content
- on the basis of bundling
- based on the packaging
But so far, functionality (competitive disadvantages) and packaging account for most of the customization. Differentiating or customizing products based on size, listing optimization, or bundling isn’t worth it anymore because today’s Amazon sellers usually won’t leave enough room for it. Read this detailed explanation about how to differentiate your product on Amazon.
3-Presenting your product poorly
A product’s poor presentation on Amazon might signify a few different things, but usually, it just means that the product listing doesn’t do a good job of selling the products. So, the following are the problems that could occur with poor product listings:
Possible problems with poor listings
(i)-low-quality images
Customers have a hard time making a purchase decision since the product photos don’t display the goods from all perspectives.
(ii)-Products with incorrect or insufficient descriptions
There is either not enough information provided on the product, or the description is unclear or inadequate. Customers sometimes have questions that aren’t answered in the product description, which can lead to confusion and misunderstanding.
(iii)-Listing optimization fail
Because the listing isn’t optimized for relevant keywords and, it may be hard for customers to find the product in amazon result page due to lack of amazon SEO optimization.
Related: Top tips for creating winning amazon product titles with examples
(iv)-Negative comments
Potential buyers may think twice before buying the product after reading the unfavorable feedback they’ve seen online. A seller’s overall rating and reputation can take a hit in the event of multiple negative reviews.
(v)-A poor pricing strategy
It’s tough to bring in buyers when the price is out of line with competitors or doesn’t accurately reflect what the product is worth.
Yet, I describe the poor design of the product page listings. But in this cutthroat environment, Amazon sellers typically make good use of it. Using A+ content is where the largest issue is.
Effective usage of A+ content
In the Amazon FBA model, many sellers choose to register their brand to stop other sellers from attaching their listings to their products and reselling them through Amazon’s wholesale model. However, just as sellers tend to overlook other factors that can lead to failure, they often neglect the importance of brand registry and A+ content. This means that sellers are missing a chance to set themselves apart and stand out in a crowded market.
Look at the image below to see how you can use A+ content by including a size chart, showing how unique the product is, telling the story of the brand, and more.
Overall Suggested Solution
- Enroll in the Amazon brand registry program
- Highlight your product’s unique value proposition with images, videos, graphics, charts, and catchy description
- Be clear and concise in your wording
4-Ignoring quality control standards
No matter how large or small the order, each and every unit must pass inspection before shipment. Before selling your product on Amazon FBA, you must ask yourself if you can deal with the certainty that it is doomed to fail. No, of course not. That’s why cutting corners on inspection and quality control can hurt company sales and reputation.
Take a look at the picture above. The Orbeez gun is really popular at the moment. The presence of defects like crushed bullets shattered parts, and other difficulties with certain units, however, has dampened the generally excellent reviews. Even though 84% of the reviews are good, 19% of the bad reviews are because the quality control standards were not met. Also, potential customers usually look for negative feedback first.
What if this seller spent $100–300 on product inspection?
Suggested Solution
Using third-party inspection companies is essential for maintaining standards. Don’t make the typical mistake of trusting the inspection service provided by the manufacturer. Just remember that a defect is a defect, no matter how big or minor it may seem. Small factories in China often don’t care about even the smallest flaws in their products, but American customers pay a lot of attention to every detail.
Look at the inspection report above and check the standards set by the Amazon seller. Even minor defects are not allowed. And because the inspection company detected 17 minor defects, the inspection failed.
5-Account suspension
Account suspensions for Amazon sellers are now common and a big reason why businesses fail. This is a common thing for new Amazon sellers, and by the time they get their seller account refunded, the “honeymoon” period has passed, and they have lost sales, large investments, and rankings. The inability of a seller to reactivate a suspended account after a large hassle leads to disappointment.
This is what you get when your account is suspended.
For the most part, these are what cause Amazon to temporarily suspend the seller account:
- selling unauthorized or prohibited products
- Policy violation in the sales system (e.g. dropshipping products)
- Possessing and utilizing several seller accounts
- Account hacking and other security flaws
- being flagged for customer complaints
Suggested Solution
Prevention is the best treatment, so focus on that first. You must become familiar with and adhere to Amazon’s policies and procedures. Whenever Amazon sends you a warning or notification, you need to act right away. If you don’t think you can come up with a plan to get your account back, you should contact an Amazon marketing agency for help with Amazon account management.
6-Choose the wrong supplier
The success of your product depends not only on your product itself but also on the relationship you have with your supplier. If you pick the wrong supplier, you’ll have problems with the quality of the products, shipping delays and mistakes, legal problems, communication problems, and not being able to keep track of your inventory.
You won’t know how good a supplier’s service is until you start working with them and get to know their top salespeople. Your product’s quality, on-time delivery, and lack of defects all hinge on your supplier, so it’s important to take the time to choose the best one.
Suggested Solutions
- Always choose your supplier through a proper platform (Alibaba)
- Verify if the company is legitimate and participates in a trade assurance program.
- Suppliers are more likely to conduct business with amazon sellers if they know that the seller is in business in the long run. Thus, learn all the terminology associated with shipment for appearing more like an experienced seller.
- Never be afraid to inquire about the company’s policies, testing procedures, product lineup, top clients, and a number of staff.
7-Overlooking after-sales service
There must be some sort of after-sale service for any company to succeed. The same applies to third-party Amazon sellers. The primary motivation for this is customers’ data collection or having positive review intentions, not a genuine interest in providing after-sale support to clients. But Amazon doesn’t let third-party sellers see information about their customers or actively look for reviews or support tickets. It is against Amazon’s policy for sellers to ask customers directly for 5-star ratings. Amazon forbids this practice.
However, there are many other indirect ways to do so.
Suggested Solutions
- Even if you provide details about your after-sale service or a QR code on the packaging, modern consumers will likely toss it aside without reading it.
- It’s more thoughtful to include a thank you note with your package.
- A method recently adopted by Amazon sellers is to place the nfcs code underneath the label. Customers’ phones automatically open the firm or product’s link when they bring it close to the product. In this way, the consumers are more convenient to reach.
8-Marketing Mishaps: Amazon Advertising Failure
Amazon advertising is a crucial component for sellers and brands to get their products in front of millions of potential customers. It’s the main way to promote and sell products on Amazon. You might see some sellers brag about making a bank without PPC campaigns, but let’s be real, that’s usually only true for non-competitive niches. In highly competitive niches, advertising is necessary to generate enough sales and profits.
Suggested Solutions
Don’t fully ignore Amazon’s advertisement. You should always set aside 20% of your money in advance for this. If your bid is too expensive and your budget can’t handle it, try shifting your advertising approach to focus on different keywords. You could also use Amazon’s Demand-Side Platform (DSP), but for it we recommend working with an advertising agency.
Personally, I recommend running PPC campaigns after the product launch, during the whole honeymoon period, and continuing them for a few months to maintain consistency. After that, it’s important to evaluate the results and decide whether or not to continue advertising. But stopping advertising altogether isn’t a good idea because it can hurt sales and visibility.
If you’re looking for more information on Amazon advertising strategies, I suggest seeking a free consultation on Amazon advertising services to get a better understanding of how it can benefit your business.
9-Poor inventory management leads to catastrophic losses
Inventory management is the biggest issue. Without a reliable system in place to monitor inventory levels, problems like overstocking, understocking, and product loss are expected. It’s like attempting to keep several blazing chainsaws in the air while wearing blindfolds; you could succeed for a time, but eventually, something will fall.
What then are the results of inefficient stock management? For starters, you can have a lot of inventory that doesn’t sell sitting around taking up valuable warehouse space, which is a waste of time and money. And conversely, if you don’t have enough stock to fulfill demand, you’ll miss out on sales and risk losing clients to competitors.
Suggested Solution
If you have a steady flow of cash into your business, you can control your inventory easily. Sometimes you have to order the inventory before Amazon sends you the money from the sales. As a result, proceed cautiously.
- Avoid ordering surplus inventory. This will force you to overpay, which will limit your bottom line. Holding the surplus order at the 3PL leads to further fees.
- You need to have 2.5 times more money than the first inventory cost on Amazon. Keep this money for the second inventory.
- You should keep at least 30 days’ worth of supplies on hand in case of shipment delays or factory shutdowns.
- Do not adhere to the factory’s minimum order quantity (MOQ). There might be a need for less. Keeping to the minimum order quantity (MOQ) set by the factory can hurt your cash flow and inventory
- Have just enough inventory on hand to meet your needs.
10-Accounting management issues
Amazon account management can be a difficult and overwhelming environment. There is a great deal of complexity involved, from the first product listing through the maintenance of inventories and the management of customer evaluations. Nevertheless, slip-ups are possible if you aren’t vigilant.
All it takes is one misstep for it all to fall apart.
Possible Problems and suggested solutions
- If your amazon product listings are incorrect or missing important information, it could cost you sales and make your customers unhappy.
- If you don’t keep track of your inventory, you might end up overstocking or understocking products, which can be expensive and wasteful.
- Always check your Amazon Seller Central account to make sure you don’t miss any important messages or updates that could get your account shut down or cause you to lose customers.
- If you don’t track your financial transactions, you could get into tax or legal issues.
Many experts exist to serve as guides and guarantee your Amazon business’s long-term survival. If you are feeling overwhelmed and need help, don’t keep it to yourself.
11-Insufficient capital leads to business failure
The lower your initial investment, the smaller your potential return, and the greater your exposure to risk.
It’s no secret that starting an Amazon seller business requires a significant financial investment. You’ll need to put money towards things like product sourcing, marketing, and inventory. And you’re in for a difficult ride if you don’t have the money to get started.
To be successful, you need a plan to manage your cash flow, in addition to having sufficient capitalization to get started. It’s like constructing a home without a plan: it might stand for a while, but eventually, everything will fall apart.
So, why is it a good idea to make sure your Amazon seller business has enough capital? To begin with, you’ll have more room in the budget to try out innovative strategies for marketing your products and expanding your business. If you are able to sustain a regular revenue stream in your business, you will be able to ride out any storms that may arise, such as account suspensions or inventory delays.
Capital, in a nutshell, is crucial to the success of any Amazon seller.
12-Insufficient background in Amazon FBA and lack of experience
A lack of experience and knowledge is often one of the biggest problems for Amazon FBA businesses. So, if you want to get into this business, you should do your research, get training or help from professionals or an Amazon FBA agency, and keep up with Amazon’s rules and regulations. It’s like having a map and a guide to help you get through that minefield. It might not be easy, but at least you won’t be flying blind.
13-Having a fixed, “one man can do it all” mindset
Having a “one guy can do it all” attitude is like attempting to climb Mount Everest without any equipment.
It takes a wide variety of abilities and knowledge to successfully run an Amazon FBA business. You require multitasking skills to manage inventories, respond to customer care requests, create and implement marketing strategies, and more. And if you believe you can do all of that on your own, you’re in for a big surprise.
Then, what happens when you refuse to delegate and insist on handling every aspect of your life single-handedly? First of all, you’ll tyre out quickly. It’s impossible to juggle every responsibility in the world without your head spinning. If you don’t delegate work or hire outside help, you’ll waste a lot of time and money.
Why the majority of FBA amazon sellers fail – A recap
I have, up until this point, detailed every potential pitfall for an Amazon FBA business. After all, there may be a wide range of causes for a seller’s failure. It could be due to a number of different things, including the following: picking the wrong product, having an account suspended, choosing the incorrect supplier, forgetting about after-sale services, marketing errors, bad inventory management, seller central management issues, not having enough money, not having enough knowledge, or having a fixed mindset.
Here at eComFist, we’ve helped numerous clients with their Amazon product launches and handled their Amazon-related problems. You may count on us for anything from listing optimization services to Amazon advertising. If you have any questions, feel free to contact us.
