Why Only Selling On EBay, Amazon And Etsy Is Like Gambling

I’ve been getting a lot of questions lately about why you should start your own store from complete scratch when there are marketplaces out there like Amazon, Etsy and EBay that can offer you instant sales.

fragile

And it’s true. If you choose to sell a popular item on Ebay for example, chances are that you will be able to generate some revenue. And it’s also true that many people are making pretty decent money on platforms like Amazon and Etsy as well.

So with that being said, why the heck would you ever want to own your own store? Why bother trying to establish your own customer base when you can leverage someone else’s and make a profit?

The answer isn’t always obvious and it’s often very tempting to go straight for where the money is and make some short term profits. Heck, my wife and I sold on EBay before we started our online store, but here’s why we transitioned away.

When you sell on Amazon, EBay and Etsy, you don’t own your own store. They reserve the right to manage your shop listings however they want.

Now that’s not to say that you shouldn’t sell on these platforms but in the long run, you should not put all of your eggs in the hands of someone else.

Today, I’m going to highlight some of the trends that I’ve been seeing with Amazon, EBay and Etsy in terms of their account management practices.

Selling On EBay

ebay
In the most recent report provided by the American Customer Satisfaction Index, EBay’s customer satisfaction index dropped over 4% year over year while competitors like Amazon rose to the top of the list.

Because it is in Ebay’s best interests to offer the best possible shopping experience for its customers, EBay has been really trying to improve their image by throwing down the hammer on “bad” sellers.

Today, if you sell on EBay and you receive a small flurry of negative feedback in a short period of time, there’s a high probability that you could get banned for life.

For example on the Ecommerce Fuel forums the other day, there was a shop owner who recently got his account banned. While this user did not sell on EBay in volume, he was making consistent sales from month to month.

However last year, his business underwent an operations management change, shipped a few orders late, got some negative feedback and his business account was instantly suspended.

But here’s the kicker. This user then tried to use his own personal account that had been in good standing for over 15 years. But because his account was linked to his business account, his personal account got banned as well.

All of his sales on EBay instantly vanished. And he could not create a new account because of EBay’s multi-account detection mechanisms.

Sometimes bad feedback can result from circumstances beyond your control or due to a simple mistake. How would you feel about getting your account banned if USPS lost several of your packages?

Moral of the story: Because EBay is really cracking down on sellers, your entire EBay business could go down in flames if you slip up with even a small string of negative feedback.

Selling On Etsy

Etsy
I routinely browse the Etsy forums and there are often complaints about people selling “mass produced” goods on the Etsy marketplace.

As a result, Etsy has been transitioning to a much more strict policy in regards to what is being considered “handmade” which has led to a lot of “collateral” damage.

One Etsy user, who blogs at Handmadeology.com, wrote an article about how his account got banned completely out of the blue.

He did not break any of the rules. He depends on Etsy for a large part of his livelihood. And he was really taken aback when his account was suspended.

But here’s the thing. When your account gets suspended, it’s not that easy to contest and it can easily take weeks of lost business until you get your account properly reinstated.

There is no phone number to call and the only way to contact Etsy is through email.

Anyway, you can read his post in its entirety here but after a long session of back and forth emailing, he finally found out that Etsy was accusing him of “drop shipping” because his shop announcement stated, “Handmade in New Zealand, shipping out of Pittsburgh.”

While this seller eventually got his account reinstated, he shared this priceless quote on his blog.

I thought I owned my small business, but by having my only presence on Etsy, it turns out that I didn’t. Etsy owns the shops they host, and they reserve the right to manage them however they choose.

Moral of the story: When you put all of your eggs in Etsy’s basket, a simple misunderstanding could put you out of business.

Selling On Amazon

Amazon
Every other month, I always get at least one email from a reader who has gotten his/her Amazon seller’s account banned. Now I can not confirm or verify the exact accounts of all of these cases, but I can tell you that it happens very often.

And unless all of these people are lying through their teeth (possible, but I like to give people the benefit of the doubt), it seems as though Amazon will ban sellers if there’s any remote suspicion of bad activity whether they are valid or not.

Amazon is also notorious for stopping sellers from selling in a certain category when they can make more of a profit selling the same goods themselves.

Here are some legitimate reasons for why a seller might get banned by Amazon according to their policies.

  • Seller experiences a string of negative feedback (sometimes as few as 2-3 negative comments in a row)
  • Seller opens more than one account under the same person’s name
  • Seller’s name is associated somehow with another banned account whether it be from a friend or relative
  • Seller is accused of selling counterfeit goods.

You don’t have to look very hard to find depressing tales of Amazon sellers getting banned. For example, this particular story on the Amazon forums caught my eye the other day.

I have what I feel is a fairly large seller account. We are always at 95% feedback rating or higher, we get maybe 3 A-Z claims per week, almost 2k feedback per week, metrics are awesome, our seller health rating is at 100%, our ODR is at .14. We generate revenue north of 1 million dollars per month on Amazon alone.

We ship approximately 5000 orders per week from our warehouse and even more via FBA. We have only started focusing on amazon 2.5 years ago and have grossed over 19 million dollars in revenue total selling on Amazon.

We have generated over 3 million dollars in fees for amazon. According to my seller central account, I have shipped 793,783 orders in a 2 year period and because of 1 or 2 lousy “complaints of selling counterfeit or fake items” my account gets suspended. (Seller claims goods were legit)

I am now on day 4 of waiting for my review to come back. I have offered up all the usual proof and numbers but it is still just a waiting game.

Today was pretty hard as I laid off 14 employees, never a easy thing to do. I have also begun to call my vendors and let them know payments will be coming much slower than usual. I owe over 500,000 in my payables right now.

Recently, my friend Ryan Moran got hit by an Amazon competitor who started leaving fake negative reviews on his products. Based on his account, it’s very obvious that these reviews are false but Amazon has refused to do anything about it.

As a result, one of his products is down about 30% and he has started focusing his efforts toward developing his own sales channel.

In other news, a company named MediaBridge got their Amazon selling privileges revoked when they tried to sue a buyer who left negative feedback. Millions of dollars in revenue vanished overnight!

Perhaps MediaBridge is a bad example, but the point is that Amazon can and will ban your account at any time under their discretion. And just like Ebay and Etsy, there will always be “collateral” damage associated with their crack down policies.

Moral of the story: Even if you are a very successful seller, a few unfortunate incidents can cut off your revenue stream in an instant. And getting your account reinstated is not a straightforward process.

Creating Your Own Sales Channel

Hopefully, my examples above have illustrated that when you sell on EBay, Etsy or Amazon, you do not truly own your own business. At a moments notice, you could have your account banned at any time even though you might be following all of the rules.

When you own your own business, you can not get banned. When you own your own business, you don’t have to fight for and beg to have your account reinstated.

When you own your own business, you get to decide when and how you sell your own goods.

Creating your own customer base sounds like the harder path to take and it often is. But it is the best way to ensure the long term viability of your business.

And who says you can’t own your own site and sell on all of these other platforms? Because you can…Amazon, Ebay and Etsy are just marketplaces and you should diversify.

Click here to learn how to establish your own selling channel.

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15 thoughts on “Why Only Selling On EBay, Amazon And Etsy Is Like Gambling”

  1. Lars H says:

    Amazon.com is MY GREATEST FRENEMY!!!!!

    I love them as a customer and use my Prime account all the time.

    I DETEST them as a competitor and wish I could punch Jeff Bezos in the neck. (Not really, Jeff. Please don’t send a drone to kill me or turn off my account.)

    I like them as a seller because I successfully sell products there.

    But I also hate them as a seller because it is a constant race to the bottom to keep the buy button on any product that isn’t exclusive for you.

    Your cash cow product might be someone else’s warehouse dud. So you’ll suddenly see someone selling something you sell at BELOW your own cost for it!

    I used Amazon to liquidate all of our dead merchandise, so I know that it happens.

    The worst part to me is that they are such a giant sales channel that it’s hard to ignore them and just not sell there. And once you do sell there, you get used to making those sales.

    But you are hitching yourself to someone else’s wagon, and they might decide to UNhitch you at any point in the future if they change their strategy.

    It’s sort of like a bad relationship that you don’t want to let go of.

    1. Hey Lars,

      I’m eager to hear more about the latest Amazon experiments that you are doing with your products. Maybe I’ll bring you on again to talk about it!

  2. I’m selling on Amazon to start but will soon be using card inserts to drive traffic back to my own websites etc.

    It makes sense to sell on a variety of different platforms but I think for starting to drive revenue this works well.

    MediaBridge is selling again on Amazon though FYI

    1. Cool. I figured that Mediabridge would be back after some negotiations since there was a lot of money at stake. But I bet they lost quite a bit of revenue during the downtime.

  3. Why eBay, Amazon, etc. Instant traffic! No waiting years to build traffic to your own store.

    1. Years? With PPC and PLAs, you can get instant traffic to your own site as well.

  4. Nice article!! Thanks for the info.

  5. Danny says:

    eBay, Etsy, and Amazon have the traffic. When you build your own website it is extremely difficult to get traffic. After selling on eBay for last 13 years, full time, there is nothing I would love more than to have my website; where I do not have to feel like at any moment my business can get shut down for things that are beyond my control.

    1. What I’ve learned over time is that the more difficult something is, the more valuable it is in the long term:)

  6. Hi Steve,

    First, it was great to meet you at the FinCon meetup at the WDS conference.

    This article supports all the research I did w/r/t Amazon selling. I’m running an Income Lab on my site where I’m going to try a variety of methods to generate location-independent income and document what I find.

    My first lab involves being an Amazon FBA seller (that means fulfilled by amazon). I’ve been working at it for three months now and still haven’t recouped my costs (inventory, tools/supplies, packaging, shipping, Amazon fees, etc.).

    I do see the potential, but all the reasons you mention above make me reluctant to build this to a place where the revenue is a significant portion of my income. I don’t like Amazon’s ability to shut me down. While I haven’t had negative feedback, I have had a couple of returns. I’ve messed up a couple labels, etc. What does it take to get them hacked off I wonder?

    Thanks for continuing to bring great content.

    Ree

    1. Hi Ree,

      It was a pleasure to meet you too. The point of the article was not to prevent you from selling on Amazon. There’s definitely money to made there. But you should be simultaneously establishing your own site and brand.

      1. Oops, didn’t mean to imply that. Rather to say I see the value in diversifying. Thanks!

  7. I’m a firm believer in owning your own ‘gigs’. I am not a seller in these areas, but I am working on getting my web site templates and logos shop up and running. While there are a gazillion of ‘stores’ I could sell my stuff in, I’d rather make the effort and have my own. I control everything and my business will depend only on MYSELF.

  8. I totally agree that selling on online stores like ebay, amazon and Etsy are really like gambling. You can win or lose, you can win if you can find a legit buyer and not a bogus buyer who would only waste your time.

  9. Great post, Steve.

    I have a friend who states that 60% of his revenues comes from Amazon and 20% comes from eBay. He does have a website so I think he should focus most of his efforts on building that platform. I’ll be sure to send this reading to him.

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