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What Amazon FBA Sellers Need to Know About Excessive Competition and Price Wars?

Posted by Leo Decker in Resources

It goes without saying that selling on Amazon FBA is harder than ever before. While the opportunity is still there to generate a significant profit, you have to smart about selling on Amazon FBA because more people around the world have realized the potential to buy products that are manufactured in China and to sell them in US markets.

There are incredible opportunities available for Amazon FBA sellers and as a result, even from a few years ago, millions of sellers have jumped on the Amazon FBA platform. The competition can be significant since there are many sellers looking for exposure in search results. Typically, the process of deciding what to sell on Amazon FBA begins by looking at low competition products. However, low competition products have shrunk in value and are, in fact, very hard to find. This is the most common approach used by private label sellers so it’s one that might require some tweaking on your end.

It is harder than ever for new sellers to break in because of the successive competition. Buyers today tend to be much savvier as far as looking for information and will look for products with name recognition or hundreds of customer reviews already in place before looking at new products from those sellers who have few reviews. It goes without saying that this is easily connected to price wars. Prices are driven down because of the excessive competition on the Amazon FBA platform. This means that many sellers who see this are trying to account for it by lowering their own price.

Unfortunately, competing only based on price puts you in a very difficult position business wise because there is only so low that you can go before you will start to see the impacts in your own business. There is always someone who is willing to sell for less, which means you will eventually hit a floor. This leads to cost fee cut in the manufacturing process, lower quality products, a decrease in sales volume for Amazon FBA sellers, and negative reviews from customers.

Unfortunately, these razor thin profit margins combined with the cash flow problems detailed in another post, make it very difficult to survive. Some sellers are even willing to go one step further and move their products at a loss with the primary goal of getting customer reviews and putting together sales velocity that boosts their search engine rankings.

The goal of these sellers attempting to compete only on prices to boost their price later, but usually they find themselves in the position where they cannot do this because the sellers are still facing other competitors who are willing to sell at extremely low prices.

To learn more about keeping your business on the cutting edge on the Amazon FBA, schedule a consultation with our knowledgeable business brokers if you are in the process of thinking about getting ready to sell your company. We can assist you with taking a look at some of the details and factors in your business that you might be able to tweak in the coming weeks to be more successful.