This looks like an excellent way to acquire customers if you already have your own site. 7% of the initial purchase is actually pretty cheap for a recent single buyer. If you purchase a list, rent a list, or use SEO, then junk mail or email blast (for shame), by the time you figure out your conversion rate, you'd be way ahead with WebStore.
Unless I'm reading the docs wrong, your items appear in the search results for amazon.com. This is very powerful because these are active buyers at the world's largest on-line retailer.
The trick is, once you convert a buyer (who is now your buyer), you want to direct them to your site from now on so you only have to pay the 7% once. You also want to put your loss leaders on WebStore and keep your high margin items on your own site. After all, 7% of a lower price is a lower commission.
You can simply multiply your estimated revenue * .07, and see exactly how much you pay in fees. You'd have to be earning quite a lot before it becomes worth building the website in house.
Here is something else to consider: If you make a million/year, you pay 70K/year for the whole shopping website. Now, if I were earning that much, I'd rather spend my time becoming a 2 million/year business than saving 70k.
Perhaps there are equivalent products that take less money, and if the two are really apples to apples, one might pick the lower commission rate. However, if amazon were the only one out there, I think the fees could be justified for a large number of customers.
But what if your markup wasn't all that high to begin with? That's 7 points off your gross margin, which is nothing to sneeze at.
Assuming a 30% gross margin-- to get that $2m, you'd have to spend $1.54m in COGS, for a gross profit of $462k. Add the 70k in amazon fees, and that's starting to seriously affect your balance sheet.
Very good point. The pricing model probably assumes a high (at least 2x) gross margin. I've heard that specialty goods (i.e. made by small shops) tend to have high margins.
Its actually not, if you analyze all the costs. You get a very SEO friendly store, access to Amazon's recommendation engine, review system, and a few more pretty good things. You can sell Amazon products, if you need to fill out some areas of your store, and you don't have to worry about shipping those. You also don't have any hosting fees or bandwidth fees, no matter how many visitors you get or how big you grow. The credit card processing fees are included, and there's no need to get a merchant account either, which for some people with bad credit is hard. And besides that, it saves a person who might not have a lot of programming skills a heck of a lot of time, which I think would also be worth a lot to some people.
Unless I'm reading the docs wrong, your items appear in the search results for amazon.com. This is very powerful because these are active buyers at the world's largest on-line retailer.
The trick is, once you convert a buyer (who is now your buyer), you want to direct them to your site from now on so you only have to pay the 7% once. You also want to put your loss leaders on WebStore and keep your high margin items on your own site. After all, 7% of a lower price is a lower commission.