10 Common Challenges for New Amazon Sellers

1) Category Restrictions 

You can find almost any product on Amazon. It offers a broad range of categories that sellers can choose from, but not all can be sold immediately. 

Of 33 categories, 23 are open, meaning new sellers with no records can start selling them whenever they want. However, you cant sell from amazon restricted categories (along with some sub-categories and brands), at least in the beginning. This is done to prevent counterfeited or fake products. An example of these restricted – or gated – categories is Collectible Coins, which can be counterfeited easily. People who want to sell gated products must get Amazon’s approval first, which requires them to go through a complex process called “ungating.” 

The easiest way to get ungated on Amazon is to get help from expert companies who offer Amazon ungating services. OABeans is one of the most reliable companies offering these services. Instead of going through the complex ungating process yourself, you can choose your ungating package, provide us with some basic information and relax while you get ungated. 

Click here if you want to know more about ungating on Amazon. 

2) Amazon Fees & Costs

One of the challenges for new Amazon sellers is the high fees and costs of starting a business on Amazon. There are two plans available on Amazon: the Individual and Professional plans. Since the Individual plan has some limitations, you must choose the Professional plan if you are serious about your business. By choosing the Professional plan, you’ll have to pay $39.99 monthly, irrespective of the number of products or sales volume. 

In addition, sellers must pay the referral fee – commonly called the commission – which ranges from 6-45% depending on the retail price and product category. Depending on the category, there is a Minimum Referral Fee of 0-2%. 

But the most significant challenges regarding amazon selling fees, come from the FBA program. In return for handling the picking, packing, and shipping of your products, Amazon will charge you a fee that depends on the size, weight, and category of the product, plus storage fees that are charged per cubic foot of storage space used.

3) Inventory Control

Sellers and companies who want to move their inventory out of Amazon’s warehouses will be subjected to high fees and taxes. This was especially aggravated due to COVID-19 lockdowns and supply chain disruptions worldwide. 

One of the challenges that companies – whether big or small – face is the move from an arrangement like Amazon FBA to insourced fulfillment. They must find a shipping service suitable for their products and target market. They also need a robust Warehouse Management System that provides data-driven actionable insights for improving inventory control, order management, picking and packing, and overall fulfillment. (Want to learn how to sell on Amazon without inventory and expand your business? Read our article)

4) Packaging Restrictions

As with everything else, Amazon has strict guidelines regarding how products are sent to the Fulfillment Centers. For example, Amazon requires sellers to send their products in specific box sizes, and deviating from these guidelines can be quite costly as the seller will have to pay for the product’s return. 

But challenges for new Amazon sellers are not limited to FBA merchants; FBA and FBM merchants must consider specific policies regarding their packaging process. The packaging process consists of two main pillars: labeling and packaging individual products. Sellers must meet international labeling standards for their manufacturing, Amazon, and brand owner labeling. 

In addition to labeling guidelines, sellers must adhere to all the packaging requirements Amazon determines. There are strict guidelines regarding loose products, sets, boxed units, polybagged units, and case-packed products: each box with the same product must have the same number of units and SKUs. 

5) Amazon Feedbacks & Reviews 

Feedback and reviews are among the main influential elements that play a decisive role in a buyer’s journey. Many sellers assume these are the same, but there is a difference. 

Reviews are directly related to the product and its issues without any concern for who the seller is. On the other hand, feedback refers to things like order fulfillment and customer service and should not address issues relating to the product. 

One of the common problems for new Amazon sellers is getting positive feedback and reviews. Amazon does not allow sellers to offer incentives to the customers or ask them directly for reviews, and many customers don’t make an effort to leave a review unless they’ve had a bad experience. So, it’s up to you to learn how to deal with negative reviews on amazon, offer high-quality services, and keep the customers happy to receive positive reviews and feedback. 

6) Cashflow

Amazon pays sellers every two weeks, but one of the challenges for new Amazon sellers is that they need to pay for inventory long before earning any income from it. 

Many sellers – especially private labels – hire manufacturers in China to produce products for them, and these manufacturers usually charge 25% of the inventory cost upfront before beginning the production. Depending on various factors, such as the number of your products, the production process can take 1-2 months. After that, you’ll pay the remaining shipping and customs clearance balance. It can take anywhere between a week and a few months until your products reach Amazon’s warehouses. 

When you add all this up, you’ll see that it can take months to get paid for the inventory you buy. It becomes even more challenging when you’re offering many different products. So, you’ll need to keep cash on hand to be prepared for placing an inventory order.

7) High Competition 

According to statistics, there are 8.6 million Amazon sellers worldwide. It’s not hard to imagine how high the competition is with this many sellers potentially offering the same product as you. This excessive competition makes it extremely hard for new sellers to penetrate the market. However, you can find many tips and tricks to help your listings rank on Amazon’s organic search. 

Try to invest enough time in getting to know the process. Use available Amazon seller tools such as Amazon PPC, Keyword Research, and product research tools to optimize your listings.

In addition, as a new seller, you can’t hop on board and expect to sell any product you want. Some categories are highly competitive, with many experienced and established merchants selling the exact product you want to go for. Therefore, it’s recommended to use an online arbitrage sourcing list to find profitable products without worrying about the competition.

8) Amazon Price Wars 

Price wars refer to the unreasonable price slashing of some Amazon sellers who want to steal customers from competitors or increase their market share easily. Since Amazon is a highly competitive platform, price wars are one of the inevitable challenges for new Amazon sellers. 

This is a risky pricing strategy because it can increase sales, but there is no guarantee that sellers who use it will maintain a healthy profit margin. A great way to avoid this is using Amazon repricers to automate price adjustments while safeguarding your profit margin.

9) Customer Returns 

One of the primary reasons Amazon is so successful is its customer-centric business model. Everything revolves around the customer, so you can guess how Amazon deals with customer returns. 

The return policy varies depending on the product category. For example, some categories offer free returns while you pay for them. In addition, the returned product might be missing pieces or not in a condition to be resold. This can be a frustrating experience for new sellers, especially if they can’t resell the item to make up for at least a part of the money they spent. 

10) Strict Restrictions and Policies

As a customer-centric brand, Amazon has strict policies and guidelines that may sometimes stifle your envisioned business. Amazon prohibits specific products from being sold on its platform, which can be challenging for sellers with limited inventory access. 

The best way to avoid getting into trouble is to do thorough research before selling products, read Amazon’s guidelines, and use product research tools or services to help you find profitable products. 

Final Thoughts 

Starting a business on Amazon seems relatively easy at first glance, but you can spot many challenges for new Amazon sellers if you look more closely. However, any line of business comes with a unique set of challenges that we need to be prepared for. With a little bit of tenacity and the right tools, you can successfully launch your Amazon business and enjoy profits in no time.