Amazon FBA seller mistakes: road signs

10 Most Expensive Mistakes New Amazon Sellers Make

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Both new Amazon sellers and FBA veterans are bound to make a few mistakes here and there throughout their selling journeys. However, some Amazon FBA seller mistakes are minor bumps in the road, while others can end up costing you thousands of dollars — or even your business altogether (and the goal, of course, is to succeed!).

Here, we’ll cover 10 of the most expensive mistakes Amazon sellers make and how to avoid them. 

Amazon Mistake #1 – You break the rules

When you start selling on Amazon, make sure you understand what you can and cannot do. If you break certain rules, or violate Amazon’s Terms of Service, Amazon can and will shut your account down.

While many examples in this article can cost you hundreds or thousands of dollars, getting your account suspended — particularly if you’ve delivered inventory to one of Amazon’s fulfillment centers already — is the most expensive Amazon mistake a new seller can make. 

And know this: if you cheat, eventually you will be caught.

Amazon is nearly a trillion-dollar company. They have hundreds of thousands of employees and some of the most advanced technology in the world. They also have the resources to police Amazon seller behavior, and won’t suffer big financial losses by banning a seller here and there. 

So, when you start selling on Amazon, know and understand their rules. And if you aren’t sure, do your research. We cover what you need to know about Amazon’s Terms of Service in order to protect yourself against these risks.

Potential financial loss

If your Amazon account is shut down, first you’ll lose access to any inventory you have stored in Amazon’s warehouses. That alone could cost you thousands of dollars. Plus, you won’t be able to sell on the platform again. That’s a potential loss of a six-figure income or higher.

Amazon Mistake #2 – You ignore the competition

Make sure that when you do product research, you look at the number of competitors in your space. Focus on the number of reviews, too. If the first 10 sellers in your product search results all have more than 100 reviews, the product is too competitive. 

You can also use a tool like Jungle Scout’s Keyword Scout to predict Amazon PPC’s cost. The higher the pay-per-click for a keyword related to a product, the more competition you will likely face in that product niche.

Potential financial loss

If you can’t sell a product, you’re bound to lose (at minimum) the capital it took to invest in the product in the first place. That’s usually two or three thousand dollars. And if you try to get attention for your product by paying for ads with high-click costs, you’re looking at losing hundreds of dollars more.

Amazon Mistake #3 – You fail to vet your supplier

I wish I could tell you that all global suppliers can be trusted. Unfortunately, I’ve had issues with three out of the four suppliers that I’ve used. Many other sellers have had similar experiences.

For that reason, you should try to work with suppliers that other businesses trust. And the number one way to discover whether or not a supplier is trustworthy is to check their performance history on Jungle Scout’s Supplier Database.

Going a step further, you can even enter the name of your competitor (or the ASIN of one of their products) into the database to see exactly who they use. 

Potential financial loss

Failure to properly vet a supplier could cost you hundreds in overcharges, opportunity costs, and more. Plus, if a supplier pockets your deposit (a worst-case scenario), it could result in the loss of thousands of dollars.

Amazon Mistake #4 – You don’t improve on what’s come before

Back when I started selling, you could create a product on Amazon that was almost an identical copy of what was already on the search page. These days, that is a major waste of time.

Not only does Amazon’s algorithm pick up on copycats, but shoppers are smarter, too. If they have to choose between two identical products, chances are they’re going to choose the one that has the most reviews. And if your product entered the market second, then it’s unlikely to be yours.

Therefore, when you start researching a product or product niche, make sure to review the comments left in the product’s reviews. Look for customers’ pain points. Figure out what’s not working with the current product and look for ways to improve it.

For example, if people complain that the best selling garlic press on Amazon is difficult to clean, perhaps add a removable, washable silicon cover, or a brush to clean it with.

Potential financial loss

A product that lands with a splat on Amazon could end up costing you your entire investment, especially if it fails to get better reviews and ratings than the competitors whose products you copied.

Amazon Mistake #5 – You over-order stock

A lot of sellers feel that they need extra stock in case demand for their product is high (no one wants to run out of inventory!). It’s also common to order more so that the cost-per-unit is lower. 

But over-ordering stock can end up costing sellers a lot of money. Since Amazon FBA sellers pay for Amazon to store their items, when your inventory is just sitting there, you’re spending money — not earning it. 

Not to mention, getting rid of excess stock can be costly and challenging. If you liquidate, chances are you won’t get back your full investment. And if you choose to return the inventory to yourself, you have to pay Amazon $0.50 per unit. That adds up!

So how do you choose the right amount of stock to order?

While sales estimates can help you get a sense of what to expect once your product launches, the best indicator of a product’s success is always going to be its actual sales (even a small amount of them). 

This is why, once you have a feel for what your sales will be, you should use a tool like Jungle Scout’s Inventory Manager. It will create an order plan for you in order to avoid costly overstocking and/or stockouts. 

Note: You can make sure you don’t forget extremely important shipping dates (like the last day to send inventory to Amazon before Chinese New Year) by downloading our Amazon Seller Holiday Calendar.

At the end of the day, I’d rather have too little inventory and run out (creating artificial demand, mind you!) than to order too much and not have enough demand to warrant the excess stock.

Potential Financial Loss

Even if you eventually sell all of your extra stock, Amazon’s storage fees add up. Long-term storage fees are extremely high. In fact, after a product has been at Amazon for more than one year, you’re charged $6.90 per cubic foot of product each month for a minimum of $0.15 per unit.

In addition, the cash you spend on extra inventory could have been used to create new, more-profitable product opportunities.

Amazon Mistake #6 – You don’t use Amazon PPC

Amazon Pay-Per-Click (PPC) is Amazon’s built-in advertising system. Yes, there is an associated cost with it. However, paying that small cost ensures that your product is placed in front of more customers. And more customers means more sales opportunities.

In addition, if you create a sponsored product listing and make a sale, that’s telling Amazon’s algorithm that your product is one that people want to purchase. That helps your product’s organic ranking. 

But, if costs are your concern, use a tool like Jungle Scout’s Sales Analytics to track your PPC expenses. Plus, run plenty of advertising reports for your product. I’d also double down on keywords that convert well and cut those that are too costly.

Potential financial loss

Consider this scenario. You have a product that has a 10% conversion rating, meaning that one out of every 10 people who view your product’s page make a purchase. However, you’re only getting 1,000 impressions per month, resulting in a modest 100 sales. The product also has a gross profit margin of 25%.

Sure, after deducting direct costs, that profit is yours to keep. But what if you took 10% of those profits and invested it into ads instead?

Imagine getting your product 10,000 impressions each month. That’s 1,000 sales at 15% gross profit versus only 100 sales at 25% gross profit. That’s a significant difference in profits, which you would have missed out on if you’d chosen not to advertise.

Amazon Mistake #7 – You lack a review plan

Reviews are crucial to your success on Amazon. A recent study by G2 and Heinz even reported that 92% of shoppers who read a positive review follow through with a purchase.

So, when you launch, you want to get positive reviews on your products as quickly as you are able. Therefore, you need to have a review plan in place. You also need to make sure that your review plan follows the rules. Using unethical, “black hat” practices can end up costing you even more.

For more information on creating a review plan, be sure to read our article How to Get Reviews on Amazon.

Potential financial loss

Imagine that the conversion rate for a product with good reviews is 20%. Using the metric from the G2 research study, that means only 1.6% will convert with no reviews. With 1,000 impressions, that’s a difference between 200 sales and 16 sales. 

Amazon Mistake #8 – You use inaccurate sales data

Amazon does not give away its sales data. If it did, everyone would create the same products. Therefore, Amazon FBA sellers rely on sales estimation tools like Jungle Scout in order to predict product demand.

However, if you use sales estimations that are wildly off, that may result in a loss of capital and/or profits. 

Recently, we performed a data experiment with sellers using their actual products to see just how close our estimates were compared to our competitors. And the results were conclusive. None of our competitors even come close to Jungle Scout when it comes to sales estimation accuracy.

 

 

Potential financial loss

Imagine using a tool that is accurate 83% of the time versus one that’s accurate only 67% of the time. The difference doesn’t seem like a lot, does it?

But let’s say that you scope out a product with the “67% accuracy” tool that’s purported to have an average of 400 units in sales each month. A competitor scopes out the same product with the “83% accuracy” tool and it says the item sells an average of 300 units in sales per month.

Based on those sales numbers, you both decide to sell the item on Amazon. However, you order 1,200 units based on that 400 unit sales estimate, while your competitor orders a more conservative 1,000 units due to the lower sales estimate. 

After a month, you discover that the product sells only 250 units per month. Four months in and your competitor has sold all of their inventory, while you still have 200 units sitting in an Amazon warehouse.

Ultimately, that difference in the sales estimates’ accuracy ends up costing you more in storage fees, ad spend, and more.

Amazon Mistake #9 – You take shortcuts

Not long ago, a new seller lamented that they could not get their product on Amazon because Amazon would not accept their GTINs (barcodes).

I asked the seller if they purchased the barcodes through Amazon’s recommended barcode distributor, GS1, or through a third party. Unsurprisingly, they told me that they purchased the faulty GTINs through a third party in order to save a few bucks.

Those cheap barcodes may have cost the seller a mere $100, but — ultimately — it’s like they threw away that cash.

And that’s just one example of the type of shortcuts new sellers take. Other shortcuts include failure to brand their product properly, poor listing optimization, rushing product research, failure to vet suppliers, and more — basically, everything else I’ve mentioned in this article.

Amazon FBA isn’t a get-rich-quick scheme. It’s a business and an investment. So, the more shortcuts you take, the bigger the gamble you’re making with your own investment.

Potential financial loss

The UPC situation I described above cost the seller $100 for barcodes they couldn’t use. And since they now have to get GS1’s barcodes, they have to pay an additional $250, for a total of $350.

They could have saved 60% of their barcodes costs just by using GS1 to start with. These shortcut costs add up!

Amazon Mistake #10 – Poor listing optimization

If you enter a department store and the place is a mess or you have trouble finding what you’re looking for, chances are you aren’t going to buy, right? You’re going to turn around and walk out.

The same goes for Amazon product listings.

A lot of new sellers fail to recognize that their product listing is like a storefront and an advertisement for your product all in one. For that reason, make sure your product listing is as perfect as it can be. That includes using expert product photographs, effective titles, detailed descriptions, and providing competitive pricing. 

If you aren’t sure how to create a perfect listing, turn to a professional. Jungle Scout has its own marketplace of professional marketers, copywriters, photographers and more who can assist with product optimization.

Check out Jungle Scout Market for details.

Potential financial loss

For this, we’ll use the impressions example again.

Let’s say that a fully optimized product has a conversion rate of 20%. And then a sub-par product listing converts only 15% of the time.

If a product has 10,000 impressions in a month, that’s the difference between 200 sales and 150 sales. At $5 in profit per unit, you’re missing out on $250 in profit.

What Amazon mistakes have you made?

This list offers up plenty of Amazon FBA mistakes, but there’s no shortage of missteps or oversights sellers make when starting a new business. 

Don’t let that stress you out though! Fortunately, nearly every Amazon FBA mistake mentioned here can be eradicated or mitigated by being aware and having the right tools. Check out Jungle Scout for solutions and resources to help your selling journey.

 

Any other Amazon mistakes you’d like to share? Let us know in the comments!

 

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