Amazon business owners understand the risks associated with selling on the marketplace. It is ripe with opportunity, but seller account issues or external factors can smother your sales momentum without warning. Counterfeit products, account suspensions, and new supplier partnerships all pose substantial risks to Amazon sellers. In this blog post, we will discuss seven ways that you can reduce risk for your Amazon business. By following these tips, you can protect yourself from Amazon FBA risks and ensure that short term obstacles don’t put your business in a hole.
Diversify your product offerings
One way to reduce risk for your Amazon business is to diversify your product offerings. If you sell a single product or brand, you are putting all of your eggs in one basket. If that product is discontinued, or delayed by supply chain issues, or sees an influx in competition, your entire business is at risk.
When you sell several different products, your exposure is spread across a diversity of offerings. Now, your Amazon business is prepared to navigate a short term issue with your primary product. Your other products can maintain momentum for your store, and you can also use the other products to cross-promote and make up for any lost sales.
Use multiple suppliers
Anyone in the retail space (ecommerce or otherwise) has experienced frustrations with the supply chain in recent years. Amazon sellers depend heavily on their suppliers, especially during busy seasons. Delays in product inventory can lead to stockouts, which can cripple sales in the short term, and can also have long lasting impacts on your product listings.
Finding multiple suppliers can offset all of those risks. If one supplier has an issue with their inventory or quality, you can still source your products from another supplier. This will help to ensure that you always have a steady supply of products and that your customers are never left waiting.
Sell on multiple platforms
Let’s say your Amazon account is suspended for any number of reasons. Supply chain issues caused late shipments. A rogue review did not paint the experience accurately. A shipment issue caused dissatisfied customers. Sometimes, an Amazon seller’s account can be suspended due to a misunderstanding that’s no fault of the seller.
In any case, it would be wise to have multiple revenue streams so that your business continues to generate revenue as you resolve the issue with Amazon. You can also sell on other platforms like eBay, WalMart+, or your own website. This will help to diversify your income and reduce the risk of relying on a single platform. Additionally, it can give you more flexibility to adapt as marketplace conditions evolve.
Diversify your traffic sources
Driving traffic to your Amazon store is an inexact science, but successful sellers have figured out a general formula. Ideally, you have optimized your listing and pricing, generated positive reviews, and maintained inventory to avoid stockouts. Over time, you’ll see more and more traffic, especially with a bit of marketing spend behind it.
Even as your sales on Amazon grow, it also makes sense to start driving traffic to your products from other sources. Email marketing, paid advertising outside of Amazon, and social media marketing can all bring new customers to your store.
Why invest in these channels if you have a winning formula on Amazon? Well, you might run into competition spending aggressively for placement on the marketplace. Amazon could also adjust its algorithm, or an unforeseen business hurdle (such as supply chain issues) could hurt your rankings within the platform. By diversifying your traffic, you’ll reach customers and drive revenue.
Manage your cash flow
If you rely on daily sales to fund your operations, you’re not alone. Amazon businesses often use their sales revenue to pay invoices or operational costs as soon as it hits their bank account. Waiting two weeks at a time for sales revenue is not a good formula to fund growth opportunities, and it poses a serious risk to the business.
Without any spare cash for operations, the business has no flexibility to react to sudden inventory needs, unexpected expenses, or sales that fall short of projections. Here are three things you can do to better manage that cash flow:
- Connect your accounts to an app that tracks and forecasts your cash flow.
- Build a relationship with a funding provider in the event you need a cash advance or another form of credit.
- If possible, start setting aside a small percentage of sales to build a cash reserve.
This way, if there is an opportunity or an unforeseen obstacle, you have the resources necessary to keep your business afloat until demand picks back up.
Have a strong return policy
A strong return policy provides your business insurance for unhappy customers. Despite your best efforts, sometimes your product may not be exactly what the customer expected. Your return policy can reduce negative reviews, keep your customers happy, and keep your product listings on page one of search results.
Take action if your account is suspended
If Amazon suspends your account, it is important to take action immediately. The sooner you take action, the better chance you have of getting your account reinstated. While an account suspension is harmful to any Amazon seller, it doesn’t need to cripple your business. By following the tips above, you’ll be prepared to weather the storm on the business side while you resolve the issue with Amazon.
Wherever you are in your business growth, it’s wise to reduce your Amazon business risks. The more ways you have to find customers, supply inventory, and access cash, the better prepared you’ll be for obstacles. For a deeper dive on managing cash flow, check out the Definitive Guide to Small Business Cash Flow.