Jungle Scout recently released their 2023 Amazon seller report. With insights from over 2000 respondents, it’s a comprehensive study of how small and medium businesses (SMBs) respond to ecommerce trends and what strategies will power their decisions in 2023 and beyond.
We’ve combed through the report to distill key insights and suggestions on applying them to your business. We’ll answer these questions:
- Are there other platforms that align with your goals as a seller?
- How should you approach factors like global expansion and financial structure to be profitable?
Key insights from the 2023 Jungle Scout report
Again, there was a lot of information in the Amazon Seller report. However, remember that Jungle Scout focuses on Amazon sellers with under $2 million in revenue. That said, the core trends are still worth noting for businesses of all sizes. Let’s get into it.
Amazon sellers are on multiple platforms.
61% of Amazon sellers reported selling on at least one other platform in 2022 (up from 58% in 2021), and more than half are planning to explore other ecommerce marketplaces in 2023.
Selling across channels has been on the uptick for several years now. Why?
For one, the huge fees. Depending on product price and strategy, Amazon charges anywhere between 20% and 45% for seller fees. These percentages are exceedingly high – even for big sellers with big budgets – especially when other marketplaces like Shopify allow you to sell to a large audience for a much smaller fee.
Another motivation is diversifying platform risk. That’s partly to reach a bigger audience but mainly for security. If Amazon shuts down a seller for some reason, they don’t have to start all over.
If we look at the data on alternative ecommerce platforms for Amazon sellers, eBay comes out on top. That’s because many ecommerce sellers use it to eliminate their obsolete inventory and make some cash in the process. Shopify comes next, followed closely by Walmart.
Takeaway: Amazon sellers understand the Amazon game – they bring the traffic, you get the products, they keep the data, and you pay the fees. But, as Amazon increases costs, sellers continue to become more omnichannel.
Many Amazon sellers have alternate income.
Interestingly, most Amazon sellers have another source of income. 50% of sellers reported having a full-time or part-time job. Another 35% are self-employed or run their own business, and only about 5% are exclusively working on their ecommerce store. (For reference, our clients at ecomCFO are all full-time ecommerce business owners.)
Takeaway: Having a stable source of income makes sense when you’re still learning the ropes – you want a fallback in case things go wrong. Remember that there’s only so much you can achieve on Amazon (or any other ecommerce platform) when it’s a side hustle. You’ll want to go all in to take it to the next level.
Many Amazon sellers diversify globally.
Amazon has marketplaces in 19 countries apart from the US, and 45% of Amazon sellers reported operating in at least one. It’s one way to expand your reach as a seller if your product strategy and operational competence align with markets like Canada and the UK.
Of course, there’s a lot more to it than just listing your products on Amazon Canada. Different tax laws, for instance. And different production standards and financial reporting requirements for your sales abroad. Plus, not everyone can afford the staffing and manufacturing capacity to support multi-country demand – many sellers underestimate this and struggle.
Takeaway: Selling abroad can be a great way to tap another significant market, but expect it to take work.
The report doesn’t mention the revenue mix for sellers across international marketplaces. Our estimate? Other countries account for 20% at best. If you decide to go global, have a professional guide you through the financial side. You want to avoid paying more taxes and fees than you earn from the extra sales.
More SKUs = more complexity.
Most Amazon sellers (75%) have fewer than 50 SKUs. This number doesn’t surprise me – more SKUs equals more production effort and higher costs, not to mention the logistical headache of tracking hundreds or even thousands of SKUs. Especially if you’re a small business, focusing on a few SKUs and selling them well makes sense.
Takeaway: If you’re planning a significant inventory expansion, you’ll want to make sure you have the budget, financing, and tech stack in place to manage it.
Growing consistently pays off.
How much money are sellers making off Amazon?
The short answer is that if you’re a small seller, not a million dollars. On average monthly revenue, less than 1% of SMBs report making more than $500,000 monthly. 14% earn between $50,000 and $500,000, while the majority (57%) earn between $1,000 and $50,000.
Jungle Scout also includes data from Enterprise sellers (those earning over $2 million in revenue) – 21% report sales of over $1 million per month, while 58% make over $250,000 monthly. The message is that Amazon can still be highly lucrative for those who grow and scale consistently. Many of those big Enterprise sellers started as solo operators too.
Takeaway: Selling on Amazon might not turn you into Jeff Bezos, but you can still make a substantial monthly income if you know what you’re doing. Also, the more revenue you earn, the more likely you’ll need accounting and tech support, which you’ll want to budget for.
Our clients at ECOM CFO fall into the top 10% of Amazon sellers by revenue. They need sophisticated systems to manage their finances, which we give them.
Being an Amazon seller can be quite profitable.
Profit margin is the other considerable number to pay attention to when studying Amazon seller data.
89% of sellers are profitable, and 37% saw their profits increase in 2022 from 2021. Also, 73% of sellers have a profit margin above 10%, while over half have a profit margin above 15%.
Despite what people might say about ecommerce being too saturated, plenty of sellers are still making a profit. However, what stands out for me here is that there needs to be a clear definition of what to include in that profit margin.
The report mentions that it’s pretax margin – but does that include owners’ compensation? What about interest on financing? Do the sellers follow the cash or the accrual system of accounting? The answers to those questions can significantly alter your reported profit. (For reference, our top clients consistently achieve a 10-15% profit margin – including owners’ pay and interest.)
Takeaway: Don’t just look at the reported figures at face value when looking at the profit margin. Go deeper – ask yourself how that metric is defined. An excellent place to find answers is in the financial reports of public companies (available for public access on their websites).
Top challenges for Amazon sellers: ranked.
Jungle Scout asked its survey participants to rank the main challenges they face as Amazon sellers. Number five is managing finances – higher than managing inventory or optimizing product listings.
This challenge doesn’t surprise me – I even expected it to be higher on the list. Many ecommerce sellers underestimate the effort to maintain their books of accounts, especially when they aren’t accounting experts themselves (as is usually the case). And when they launch new SKUs or enter an international marketplace, the accounting burden only increases.
That’s not all. Jungle Scout also asked these sellers to rate their top external concerns about growing their business in 2023. At the top of the list, you have rising costs – raw materials, advertising, shipping – followed by inflation. And those costs aren’t going down anytime soon.
What does that mean for you as a seller? You’ll have to budget for higher costs. And what that means is you need clear visibility into where your money is coming from and where it’s going – which can only happen when you have structured financial processes.
Takeaway: Which of these common seller challenges resonate most with you? Which of those will you prioritize in your growth plans for the rest of the year? Most importantly – how would you rate your business regarding financial clarity?
If the answer is anything less than “good,” I recommend investing in some guidance. Because if your goal is long-term profit, solid accounting, and financial processes are non-negotiable – no matter what else you’re getting right.
Bottom line
A lot of data in the Jungle Scout report is worth noting. One thing is clear – you can make plenty of money on Amazon. Sellers know this and continue investing in their presence on the platform, even while exploring other options on other marketplaces.
Now that you know what trends are in play for other sellers, you can make better decisions about what to focus on going forward, including what financial metrics to track.
Regardless – the more money you make, the better you’ll need to manage it. Investing in professional support for that will help you grow faster and more innovative in the future.
