Amazon Marketplace Risks
Although quantitative data on the actual impact of various risks associated with selling on Amazon identified in the previous report is unavailable, we found quantitative data on perceived risks based on surveys of businesses selling on Amazon. Our research shows that about 66% of businesses selling on Amazon are most concerned about the risk of their account getting suspended. Below, you will find more data.
Amazon Risk for Businesses
- The biggest risk for businesses that rely exclusively or heavily on Amazon is getting their Amazon seller account suspended or revoked, which Amazon reserves the right to do. About 24% — 66% of Amazon seller stated it was their biggest concern.
- Another significant risk businesses that rely exclusively on Amazon face is the risk that Amazon may start competing with them, with 38% of sellers saying it is their major concern. This is a significant risk because Amazon is heavily investing in its own private label and it would be difficult to compete with Amazon on Amazon's platform.
- The barrier to entry in terms of selling on Amazon is low. While this means businesses can easily start selling on Amazon, it also means that the competition will also be fierce as more businesses join. Businesses that rely exclusively or heavily on Amazon may be forced to start offering huge discount and take a hit on their profit just to make significant sales in a crowded platform. About 22% of businesses on Amazon state that competition from other sellers is a major concern.
- Another significant risk is that Amazon makes it easy for competitors to spy on your businesses and even target your potential customer with Amazon adverts. This is a significant risk, especially in a competitive industry.
- There is also the risk that unscrupulous sellers may hijack the listing of a business on Amazon, and this is a significant risk for 19% of Amazon businesses surveyed.
- Some sellers could also sell inferior products with the brand name of a business selling the original product and this can be detrimental to sales because negative review from customers who bought the fake product will also appear on the businesses' product listing even though they weren't the one that sold the product. In general, 32% of businesses on Amazon are concerned about negative reviews from customers, and 11% are concerned about negative reviews from other sellers.
- Even when a negative review is unwarranted or due to product listing hijacking from unscrupulous sellers, getting negative reviews removed can be difficult.
- Amazon charges 15-20% of the product price and the pressure to offer free shipping further eats into the profit margin. This may become difficult for businesses selling exclusively on Amazon to cope with, especially if they are forced to reduce the price of their product due to the competition on the platform. In fact, a business that was doing over $3 million annually in sales on Amazon had to leave the platform because of the marketplace fees on Amazon. In general, about 33% of Amazon sellers are concerned about the high Amazon fees.
To quantify the risks associated with running a sustainable business on Amazon, we started by searching Amazon's reports and press releases for any relevant data such as data related to the number of accounts suspended. However, we didn't find any such data and it seems that Amazon doesn't provide the data publicly.
Next, we reviewed media and industry reports such as those from Forbes, Business Insider, Technews, Webretailer, among others. Although we found several articles related to the risks associated with selling on Amazon, most of the data were non-quantitative. However, we have provided relevant qualitative data that may provide additional context above, especially data that was not highlighted in the previous analysis.
Further searches on statistics databases and market research databases such as Statista, Grandview Research, IBIS World, and Feedvisor didn't provide relevant data either. However, we did find some research that provided some quantitative data on the various fears and risks associated with selling on Amazon. The quantitative data provided is based on surveys of businesses selling on Amazon and as such deals mostly with perceived risk by businesses that rely on Amazon, rather than actual risk. Given the limited data available, we have provided quantitative data from these sources above as a way to quantify the risks.