I guess it is too low considering that Amazon themselves get close to 10% conversions. Which type of links do you have on your site? For any relevant traffic, a conversion rate of up to 10% can be expected.
Anandsoft, You appear to be missing the crucial points here that have been posted by others. Your math is off. You can't compare the Amazon site conversion rate (~10%) with your conversion rate sending people to Amazon. It doesn't work like that. If you get 1000 people on your site and 100 click through to Amazon, 10 of them will actually buy something once they get there. It's *NOT* send 100 clicks to Amazon you get 100 purchases. A 1% overall conversion ratio for Amazon (or any other Affiliate program) is good. A 2% overall conversion rate (1000 views, 100 clicks, 20 purchases) is great.
Note that while the cookie duration is only 24 hours, the affiliate payout for anything added to cart is infinite. So if someone clicks through then adds something to their cart but doesn't buy it right away, you still get credit. I'm still getting purchases this week for items I promoted around Christmas time.
origimist, the stats are for click throughs to Amazon. For example, if I get 100 click throughs to Amazon, I am getting around 1 sale. (recently it has gone up to 2 for 100 clicks to Amazon).
So lets talk about this some more, see if we can get to the bottom of it. What is your click through rate? Meaning how many page visits does your site get vs clicks to Amazon? Are you getting 5000 view or 50000 to get those ~500 clicks? If it's 50,000, that implies that you're getting more misclicks than targeted clicks. What keywords do you see finding you in your site analytics? Say you're targeting Shakespeare books. If you see keywords like "Buy Shakespeare book report", you'll likely get a terrible conversion rate as people are coming looking for book reports to copy for school, vs "Where to Buy Shakespeare Books" which will likely convert well. Can you list some of your most popular long tail keywords? Maybe replace the niche info if you want to keep it secret. Or feel free to PM me the site if you'd like some free opinion on why you're not converting. I did something similar for Tankard here: http://forums.digitalpoint.com/showthread.php?t=1081377 Don't worry, I won't steal your site idea. With a 1% conversion rate, I think they're safely yours.
Hello origimist: The Amazon section is specifically for books. The site sells widgets, and there is a section for widget books. Visitors that click on the books section may buy wideget related books. Most of the clicks are thru the main site that sells widegets. In widget books section, most of the links are widget related direct links. Direct SE traffic for books is not significant.