Final value seller fees represent a significant cost of sale for online marketplace retailers, many of who operate on wafer thin margins to remain competitive. Because of this, Amazon’s recent announcement that they are raising seller fees across a number of categories in the UK and Europe will undoubtedly be a major cause of concern for many online sellers.
When a retailer experiences any rise in the cost of sale there are a number of strategies they can adopt to protect margin and retain.
- Spread Your Risk #1: By diversifying your product range you reduce the risk of failure when the bottom drops out of a particular market. Online retail is a fast moving (disruptive) environment where standing still is a very risky game.
- Spread Your Risk #2: Going multi-channel (i.e. selling across numerous marketplaces as well as on your own site) will help you reach a much wider audience and ultimately sell more. Amazon customers are often very different people to people who shop on eBay. In anideal world you will want to drive the bulk of your sales through your own site and cut out seller fees altogether (although you will need to consider how you drive business to your own store.
- Automate: Software like SellerExpress can help you manage your sales across all the major marketplaces plus a wide range of eCommerce platforms such as BigCommerce, Magento, Volusion and the ekmpowerstore. By automating many of the tasks associated with online seller (listing, re-listing, re-pricing, invoicing, creating packing and picking documents, etc.) you will free up time to concentrate on buying (see #1), developing new channels (see #2) and cutting costs (see point #5).
- Don’t Just Acquire, Retain: When you sell an item on eBay or Amazon you are paying to acquire a new customer every time someone makes a purchase from you (even if they are an existing client). Email marketing services like iContact allow you to target existing customers with targeted campaigns to drive repeat business. Learn how eBay and Amazon sellers can use email marketing to drive repeat business and reduce costs.
- Cut Costs: Are you getting the best possible prices from your suppliers. A small saving per unit on packaging materials or a discounted rate from your delivery service can make a significant saving in the long run. Software like Metapack and Shipworks can help you reduce shipping costs and gain a competitive edge from your delivery services. Remember, it’s not just the price you sell an item for that determines your profit.
- Outsource: By outsourcing some or all of your warehouse operations using services like Fulfilment by Amazon (FBA) you can seamlessly scale up and down your business as the market dictates. This means a business does not have to pay for a facility capable of fulfilling goods at their peak period orders (i.e. Christmas) during slower periods.
- Watch the Market: When costs go up, you may find some of your competitors drop out of specific categories. If this happens there may be an opportunity to raise your prices and protect your margin. Alternatively, your volume sales might increase as competition is reduced.
- Don’t Be a Busy Fool: If you are unable to maintain a profitable margin on specific items you may need to withdraw them from certain marketplaces and focus on the products you can sell profitable (see #1). Remember, Amazon asks you maintain price parity across all ecommerce venues – if this is not possible, remove the item from Amazon and concentrate your efforts for this particular line on other venues.
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