9 Common and Serious Problems Faced by New Amazon Sellers

Building a solid reputation as an Amazon seller is tough. The market is saturated with fierce competitors, and the business is full of confusing logistics, making it hard for newcomers to break onto the scene. Still, knowing the common new Amazon seller problems can give you an edge and prevent costly issues in the future. 

Setting Up Taxes Correctly

No one enjoys the tax setup upon opening up a new account. Still, it’s critical to securing your earnings and staying out of financial trouble. Before you set up your tax calculation settings, you’ll need to:

  • Obtain a state tax registration number for every state relevant to your sales, to do your tax calculations
  • Review how a product tax code will impact your orders’ tax calculations

Once you’ve done and fulfilled these tasks and reviewed Amazon’s documentation on downgrading or canceling your account, you can configure your settings. Make sure you pay attention when setting this up, as Amazon normally defaults to “A_GEN_NOTAX.” You want to set the Product Tax Code to “A_GEN_TAX.”

Be careful about this as you could wind up accumulating tax liability if you fail to collect state sales tax, even if your inventory is only briefly stored in tax-collecting states. 

Coping with Amazon Fees

If you’re an e-commerce professional, fees are just a part of your reality. No matter what platform you operate on, your sales will almost always be subject to fees by the company that provides your store a “home” online. 

Unfortunately, there really isn’t much you can do to circumvent this if you want access to the massive consumer base granted to you via Amazon’s commercial reach. The best thing you can do is merely prepare for the losses and try your best to minimize the financial impact. 

First, be aware of these Amazon fees to avoid succumbing to new Amazon seller problems:

  • Selling plan: Your two options include the Individual plan, priced at $0.99 per item sold, or the Professional alternative, which costs $39.99 monthly. 
  • Referral fees: Depending on the product, this can range from 6-45% of the total price or a minimum charge of $0.30. There might also be closing fees in addition to this.
  • Fulfillment fees: These fees vary between apparel and non-apparel products and apply to inventory storage as well. Furthermore, this depends on whether you choose to use FBA (Fulfillment by Amazon) or ship products yourself.

Additional charges new Amazon sellers might get overwhelmed with include inventory fees, rental book service fees ($5 per rental), high-volume listing fees ($0.0005 per listing monthly), and a refund administration fee. 

New sellers can easily get overwhelmed by all these charges and may get discouraged. However, with proper budgeting and ample forethought, your income can make up for the losses. 

Keeping a Consistent Cash Flow

In addition to all the fees, you must also reckon with the fact that you can only get paid every two weeks. This isn’t a problem for most people, but consider these two points:

  • Sellers who have had an Amazon seller’s account for a while (commonly known as a “legacy account”) can request a payout every 24 hours. 
  • Just because you introduce a new product or open up a store doesn’t mean you’ll start earning in the next two weeks. 

Referring to the second point: You’ll need to calculate the time necessary to develop, produce, and distribute the product before you can even get your product to the market. Lots of sellers outsource manufacturing operations overseas for cheaper rates, yet the cost is still normally around 25% of the inventory’s total price. 

After that, you have to wait about two months to complete production, then pay and wait for shipping. All this said, you’ll have to front a lot of cash before you even begin to see the fruits of your labor. Still, this is a normal part of business and a critical factor to work into your budget. When done right, you’ll do just fine financially; it’ll just be a bit uncomfortable to get used to.

Misdirected Seller Feedback

A quick surf throughout most Amazon review sections will show you that customers don’t always realize that they’re not quite reviewing the appropriate party when posting their feedback online. Often, buyers will flock to the review section to leave a 1-star rating and gripe about their experience with shipping. 

While they are justified to be upset over losing money and time on the shipping service, posting the feedback on the product’s review section reflects the seller, not the shipping company. Amazon sellers do not control the item once they hand it over for delivery to the customer. 

So, reviews like this end up being misdirected and tarnish a seller’s reputation when they don’t deserve it. This could have lasting consequences on a seller’s appeal and may cost them future sales. 

Although Amazon’s “click to ship” or “click to door” time is consistently half or one-third of their competitors’ speed, customers are frequently unhappy with delivery times. 

This is partially because many fail to understand the difference between shipping and delivery, which is the case with many Prime members; Prime two-day shipping refers to the time it takes for the product to leave the warehouse, not to reach the customer’s home.

Amassing Positive Feedback

Collecting good feedback on Amazon takes a surprisingly long time. Think about the last few times you purchased something online. It’s unlikely that you left reviews for each item. Typically, buyers on any platform, Amazon or otherwise, don’t leave reviews unless they’re very happy with their shopping experience or pretty darn upset. 

Each of your customers has 90 days after their purchase date to leave seller feedback, but it’s rare for people to take advantage of that opportunity. Some sellers report that their overall feedback rate ranges from 10-20%

If only one or two out of every 10 buyers decides to leave a review, you can imagine how long it will take to garner enough positive ratings to build some credibility and authority in your corner of the market. Further, you’ll have to consider the type of feedback they’re leaving of the two options:

  • Product: Your customer will review the quality of the purchased item. This helps other shoppers determine if they want to buy it, too. 
  • Seller: This primarily concerns your shipping and customer service. For this, a customer answers questions related to:
    • On-time product arrival
    • Whether the product matched the advertised description
    • Whether they had a positive customer service experience

Amazon will track your feedback over periods of 30 and 90 days, per year, and over your business’s lifetime. 

Keep in mind that your negative seller feedback plays a significant role, too. If you have less than a 5% Negative Feedback Rate, you’re doing pretty well. 

Unforgiving Competition

It’s no secret that Amazon dominates the online shopping experience. The app is the leading shopping application in the United States. Apart from that, it holds the position of the country’s top e-retailer, having earned $386 billion in the US in 2020 alone. Amazon’s reach and profitability are the main reasons why so many small business owners flock to the platform. 

Now, third-party sellers are responsible for more than half of all items sold in the Amazon store. In the past year, these sales grew faster than Amazon’s own. While this is great for the small business and entrepreneurial community collectively, it can be quite damning for individual sellers. 

This guarantees that you’ll have some fierce, unforgiving competitors who can outprice you on any product available on the platform. Plus, as a new seller, you’re not just concerned about presenting attractive price points but standing up to sellers that have already established a strong reputation. 

Plus, Amazon has a 93% customer retention rate, with 85% of Prime members shopping more than once weekly. Since these shoppers are already set in some patterns, it might be hard to attract them to new sellers and products. 

Fortunately, this isn’t impossible to overcome. When you take the time to identify your niche in a market, you can discover opportunities to establish a unique selling angle, drawing in more customers who can relate to and trust your brand. 

Dealing with Returned Products

Returned items are yet another blemish on the Amazon seller experience that all business owners must face regularly. On the one hand, it’s normal for people to return purchased items, even in-store. The problem is that web purchase returns are massive in comparison to in-store buys. 

Online shoppers return things at a 15-40% rate, compared to only 5-10% for in-person buyers. This problem gets worse if the retailer pays the shipping costs instead of the customer. 

For example, if the buyer doesn’t have to deal with this burden, they might order several sizes or colors to try on when purchasing apparel. What they don’t like, they send back. This is also why clothing and shoes are returned 30-40% of the time.

Now, what happens to those returned products? Twenty-five percent of it gets thrown away. The remaining items are packaged for reselling. 

This sounds good, but the problem is that the process of determining what qualifies as resell condition, per se, is at the discretion of individual Amazon packing employees. Note that you can select the option on your seller account that requests for your items not to be re-packaged or re-sold.

So, you risk selling something that your customer won’t be happy with. Fortunately, you don’t have to go through this. By offering a high-quality product and great customer service, you can drastically reduce your return rate to where it won’t be a significant issue.

Struggling to Optimize Listings

This is one of the most critical aspects to get right in your Amazon selling practices, yet it is where many sellers fail. Listing optimization is closely related to search engine optimization (SEO), which refers to techniques used to make your online content more searchable and visible to web surfers. 

That said, optimizing your product listings ensures that your customers will be able to find your items, which will ultimately increase your sales and boost your revenue. The catch is that it’s not as easy as it sounds. Some of the primary aspects you’ll need to consider incorporating into your product page include:

  • Item description: this should include the name, product line and type, materials, size, color, etc.
  • Product title: ideally, this should be about 60 characters long
  • Keywords in the ASIN (Amazon Standard Identification Number) catalog
  • Search terms

Listing optimization techniques are notoriously difficult to get down, and this is why so many people have made entire careers out of it. It takes a lot of research and trial-and-error until you finally nail the keywords and content that work best for your items. To sharpen your optimizing technique, you can:

  • Study the Sponsored Product ad campaign and category listing reports to see the keywords connected to your customers’ purchases and your current page’s data
  • Incorporate answers to past inquiries in the product description 

You’re Always at Amazon’s Mercy 

As an Amazon Seller, you’re always working at this conglomerate’s mercy. This isn’t usually a problem, but ultimately, it means that Amazon has the power over what you can and cannot sell. Plus, at times, the competitive optimization mentioned above is seemingly rigged in their favor. 

Additionally, since you’re operating on their platform, this company can decide at any moment that you’ve violated their terms of service. A situation like this could get your seller account suspended in mere moments. 

Fortunately, unjustified suspensions don’t happen too often. Still, a simple mistake due to a lack of awareness about Amazon’s terms and conditions could cost you your store. As scary as this may sound, it’s not too difficult to circumvent this problem. 

You only need to ensure that you’re very familiar with the Selling Policies and Seller Code of Conduct and adhere closely to these standards to keep your business running smoothly. 

If for any reason, you’re still worried about getting shut down, then it’s best to consider setting up your store on other platforms. Relying entirely on Amazon to keep your store afloat could become bad for business. 

Conclusion

Making mistakes is a given when you’re entering a new business. Yet, you can still learn from others’ mishaps. Now that you know the most common new Amazon seller problems, you know exactly what to expect and are better prepared than ever to get your products and brand on the market.