Influences to Your Amazon Profitability in 2023
Profitability is commonly the chief concern for any business selling on Amazon, but many businesses fail to understand what factors they can influence, and what factors are outside of their control.
Factors largely outside of the Seller’s (your) control:
Changes to Amazon Policies and Fee Structure – Amazon routinely updates its seller and product policies, as well as the FBA fee structure and associated storage & removal costs. These changes can be devastating to brands – products can suddenly become prohibited for sale, or the fulfillment structure may erode all profits. For example – FBA fees for items weighing 0.75 to 1lb, have risen over 44% since 2019.
Supply Chain Disruptions – If COVID has taught us anything, it is that even global economies can change within days. Natural disasters, political instability, war, raw material shortages, and transportation issues will impact your product availability and the cost of delivering your goods.
Marketplace Competition - Amazon is designed to be a highly competitive platform. As niches grow & mature, more sellers may enter the marketplace and erode prices further - making it difficult for individual sellers to stand out.
Consumer Trends - Consumer tastes change quickly and sometimes without warning. Sellers must adapt to these trends by adjusting marketing strategies, pricing, product quality, or pivot to a new item all together.
Economic Factors - macroeconomic factors like interest rates, inflation, and exchange rates will influence the cost of goods and services, which will impact your bottom line.
In other areas, Sellers have autonomy to improve their profitability:
Packaging Decisions – Consider whether your item should be packaged in custom branded packaging, or if simple un-branded packaging will deliver in the same customer experience.
Product Dimensions – Identify if you can remove excess packaging or change your product to reduce its overall dimensions & weight. Moving to a different product tier may result in significant cost savings for sellers using FBA services.
Explore Amazon Programs – Ensure that you have reviewed all programs you may be eligible for. Programs like Small & Light can give sellers significant cost savings if they meet the requirements.
Consider New Variations - Identify whether new offerings like a multipack, larger size, or product bundle would increase your profits.
To achieve profitable growth in the long-term on Amazon, sellers must understand their influences on profitability, what the costs of doing business on Amazon are, and what expenses they must learn to adapt to and effect change quickly.
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