Selling on Amazon and Etsy can be a hard road — here's what to watch for and how to win

In the digital age, e-commerce platforms like Amazon and Etsy offer small businesses a global marketplace to showcase their products. These platforms boast massive customer bases, advanced logistics systems, and tools for scaling a business that would otherwise be out of reach for small entrepreneurs. However, while the promise of success is alluring, many small business owners encounter significant challenges and pitfalls when selling on these platforms. Below, we explore the primary difficulties and what small businesses should be aware of before diving in.

1. Intense Competition

Both Amazon and Etsy are crowded marketplaces with millions of sellers. This saturation makes it challenging for small businesses to stand out.

• Amazon: Dominated by large-scale sellers and private-label brands, Amazon’s marketplace often prioritizes products with the best price, fastest shipping, and highest reviews. Competing with big sellers can result in razor-thin profit margins.

• Etsy: While Etsy is focused on handmade and unique items, the growing number of sellers means even niche products face stiff competition.

The platforms’ algorithms often favor established sellers with significant sales histories, making it hard for newcomers to gain visibility.

2. High Fees and Hidden Costs

Selling on Amazon and Etsy comes with fees that can eat into profits:

• Amazon Fees: Sellers face referral fees, fulfillment fees for using Amazon’s FBA (Fulfilled by Amazon), and optional advertising costs. Together, these can take a significant portion of revenue, especially for low-margin products.

• Etsy Fees: Etsy charges listing fees, transaction fees, and payment processing fees. Additionally, sellers often feel compelled to participate in Etsy’s Offsite Ads program, where Etsy takes up to 15% of the sale if the ad leads to a purchase.

These fees make it essential for sellers to carefully calculate their pricing strategy to avoid operating at a loss.

3. Algorithm-Driven Visibility

Success on Amazon and Etsy often hinges on algorithms that determine how products rank in search results. These algorithms are opaque and can change without notice.

• Amazon’s A9 Algorithm: Factors like sales velocity, reviews, and advertising impact rankings, often creating a “rich get richer” dynamic.

• Etsy’s Search Engine: Etsy prioritizes products with strong sales history, positive reviews, and consistent activity, which can be challenging for new sellers to achieve.

Sellers often need to invest heavily in paid ads to boost visibility, further cutting into profits.

4. Lack of Control Over Branding

For small businesses, establishing a unique brand identity is crucial for long-term success. However, Amazon and Etsy limit the ability to personalize the shopping experience:

• Amazon: Product listings follow a rigid format, with minimal opportunities for creative branding. Sellers also face the risk of counterfeiters or competitors hijacking their listings.

• Etsy: While Etsy allows more room for personalization, the platform still restricts customization options and enforces strict guidelines on how sellers can present their shops.

This lack of control can dilute a small business’s brand and make it harder to build customer loyalty.

5. Risk of Policy Violations and Account Suspension

Amazon and Etsy enforce strict policies to maintain their platforms’ integrity, but these policies can be unforgiving for small businesses.

• Amazon: Sellers face risks of account suspension due to customer complaints, even if the complaints are unfounded. Resolving issues with Amazon’s support team can be a long and frustrating process.

• Etsy: Etsy’s guidelines for handmade goods, vintage items, and supplies are strict. Missteps, even accidental ones, can lead to deactivation of listings or permanent bans.

Small businesses often lack the resources to navigate these challenges effectively.

6. Inventory and Logistics Challenges

Managing inventory and logistics on these platforms can be a headache:

• Amazon: Using FBA means adhering to Amazon’s strict storage and shipping requirements, which can result in unexpected fees for storage or returns. Sellers not using FBA often struggle to meet Amazon’s stringent delivery expectations.

• Etsy: Etsy sellers typically handle their own shipping, which can be time-consuming and expensive. Missteps in shipping can lead to negative reviews and damaged reputations.

7. Dependence on the Platform

Perhaps the most significant pitfall is the dependence small businesses develop on these platforms. Both Amazon and Etsy control the seller-buyer relationship, leaving businesses vulnerable to platform changes:

• Algorithm updates, fee increases, or policy changes can significantly impact sales overnight.

• Sellers don’t own their customer lists, making it difficult to re-engage past buyers or build direct relationships.

This dependence creates a precarious situation where the success of the business is tied entirely to the platform’s stability and policies.

8. Emotional and Financial Stress

For small business owners, selling on Amazon or Etsy often feels like a relentless grind. The combination of competition, costs, and platform dependency can lead to burnout and financial strain. Many sellers report working long hours to manage their shops, with limited returns on investment.

How to win‍

Nourysh provides you far more tools than the other platforms at a fraction of the price. Plus it gives you your own store which you control. Join us as a merchant and see your business grow.