Why Growing an E-Commerce Business is So Hard

If you want to be your own boss, like many Americans, then you probably want a sole proprietorship. If you don’t have a business partner, then this is the easiest business structure to maintain.

Many sole proprietorships get into the e-commerce business. While it’s important for a small business to have its own website and online presence, many entrepreneurs use a platform such as Amazon. In fact, more than 60% of sales on Amazon’s e-commerce platform come from small and medium-sized businesses.

Small businesses rely on Amazon for its reach and breadth as the world’s largest retailer. Amazon needs these independent sellers to fill its site with products. However, being an Amazon seller is not an easy task. It’s gotten overly expensive, with costs rising due to Amazon’s “monopoly power.” In fact, a Federal Trade Commission antitrust lawsuit has been filed against Amazon, accusing the retailer of stifling competition, poor customer, and expensive fulfillment and advertising fees.

Regardless of that outcome, it can be expensive to operate on Amazon and other online retail platforms. With significant costs and complexity to succeed on Amazon, small business owners need to know a few things in order to succeed.

First of all, there is huge competition with the pricing. Amazon has an “anti-discounting strategy,” in which it tracks prices online and punishes sellers who sell their product cheaper elsewhere. E-commerce consultants say there is a lot of pressure to keep prices the lowest on Amazon, which makes it challenging for small businesses to sell on other e-commerce platforms.

Also, while the fees are significant, so is the reach. While the costs may be high, traditional brick-and-mortar retailers face the same costs. The difference is that by using Amazon, you get a far wider reach. Business owners don’t have to drive consumers to their own website.

Still, many businesses have been surprised by the amount of work it takes to succeed on Amazon and other third-party marketplaces. Even established brands don’t always understand the economics of their product. Clients often try to negotiate the listing and fulfillment fees, but the only way to lower prices is through tighter supply chain management. Companies need to keep product costs at 30% or less and aim for a profit margin of 10%.

Amazon has now also grown to be one of the internet’s largest advertising platforms, so business owners can’t fight it. Instead, they should embrace the Amazon way, which includes understanding their algorithm. It may even be worth it to pay to sponsor your product and get it to the top of that first page.

Learn More About Sole Proprietorships

Running a business on your own is extremely hard. There are a lot of rules and regulations involved. With e-commerce, there are also a lot of logistics involved and that can make it hard to make money.

Count on an Orlando sole proprietorship lawyer B.F. Godfrey from Godfrey Legal to help you make the right decisions. We’ll give you the advice you need to lead your business to success. To schedule a consultation with our office, fill out the online form or call (407) 890-0023.

Source:

cnbc.com/2023/11/11/building-an-online-sales-success-story-is-getting-complex-and-costly.html