Global ecommerce as a whole is growing at an exponential rate, and Amazon is accelerating this growth even further.
- Same day (or two day) shipping.
- Nearly any product imaginable is available on Amazon.
- A high-effective logistics powerhouse and supply chain.
- A company focused on on providing the best customer service possible.
If you want to join this trend and start learning how to sell on Amazon, keep reading.
You can’t fight progress, so it’s a good idea to use Amazon’s growing share of the ecommerce market. No doubt, Amazon is the powerhouse in the US, with 49% of all online sales.
Amazon is the world’s largest online retailer and has built trust, gained customers, and amassed billions of shoppers over 2 decades. Now they’re creating new ways to make money online through their marketplace.
In this article, I will discuss the right ways to make money on Amazon. You'll learn about how to sell on Amazon FBA and the best way to price your products, and how much money you need to get started.
How to Sell on Amazon FBA.
Fulfillment by Amazon: Amazon's FBA service offers you the option of not having to fulfill orders on your own. They handle everything for you including picking, packing, and shipping the product.
Amazon FBA lets you store your inventory in Amazon fulfillment centers, but only pay for it when it's shipped. It's also free with Amazon Prime (Two-Day Shipping)—you only need to pay for the storage space and the orders they fulfill.
Plus, all ecommerce shipping is included within your yearly fees of course.
One great thing about selling on Amazon is that it can be scaled. You can start small and build your way up with time. With the help of sales estimation software, you can predict your earnings beforehand.
In order to get started on Amazon, let’s talk about what you need to do first in regards to getting up and running so that you can start selling on Amazon.
How to Sell on Amazon.
If you're thinking of selling on Amazon, the first thing to do is sign up for an Amazon Marketplace Selling account by going to the Amazon Services page.
Keep scrolling downwards to find the link to get started.
You can choose a plan in the Amazon Seller Central Dashboard “Sell as an Individual” for $0.99 per sale, or opt for the more expensive “Sell as a Professional” for $39.99 per month.
If you start out and have little sales experience, choosing “Sell as an Individual” is the best option for you.
You'll need to input information and enter a credit card which can be processed internationally with Mastercard or Visa.
If you are outside of the US, Amazon may request your local banking information. You might need to provide your bank information if it supports ACH wire transfers.
You'll also need your local phone number (with the appropriate prefix for your region) and your home address for receiving mail, as well.
Lastly, if you are an LLC or sole proprietorship, you would need either a US employer identification number (EIN) or social security number (SSN).
Now that we’ve gotten that information out of the way, let's talk about how exactly Amazon FBA works.
How Does Amazon FBA Work?
Starting as an Amazon seller you need to choose the products you intend to sell. Next, you enter the details of your product into your Amazon store page: title, description, images, and prices.
After that, your listed items are boxed up and sent to an Amazon FBA warehouse.
Once you’ve packed your products and sent them to Amazon, they handle the fulfillment process for you. During the verification process, Amazon inspects each product to make sure it has been delivered correctly and is in good condition.
After completing this verification, Amazon activates your listing. Once activated, your seller name becomes visible and you can now sell these items.
Amazon store your items until they are ordered. When Amazon receive an order, it is fulfilled and shipped to the customer as Prime Two-Day Shipping.
When you sign up for Amazon FBA, your first payment is paid out 14 days after starting. You’ll then be paid every two weeks.
One of the most significant advantages of the Amazon FBA program is that you don't have to worry about all those logistics software, returns and customer service issues. You can focus on generating sales!
Your customers are a big part of the reason why this is such a popular program. With access to Amazon Prime, they can receive free Two-Day Shipping on many items and enjoy other exclusive benefits.
Now that we’ve discussed what Amazon FBA is, how to get started, and the benefits of getting on board, let’s go over the total cost.
How Much Does it Cost to Sell on Amazon FBA?
Sellers on Amazon FBA can take advantage of a pretty cheap option for getting into ecommerce. If you’re a pro and paying the $39.99/month, you also avoid paying the $1.00 per item fee.
If you sell more than 40 items each month, you should consider joining Amazon FBA as a professional seller.
Here's my advice – if you plan to sell more than 40 items a month, the professional seller account might be better. However, if you plan to sell less than 40 items monthly, an individual seller account would be fine.
Anyway, there are Amazon referral fees which depend on what items you're selling. For example, if you're selling books they'll give you 15% commission; but if you're selling consumer electronics (for example), they'll charge 8%.
Amazon should be a part of your business plan from the beginning or you’ll risk paying more than you planned.
One of the benefits of setting up your products on Amazon is that you'll get reach a larger audience of consumers. However, it's important to make sure that you have an ecommerce website where you can sell your products as well.
I recommend using an ecommerce platform that syncs with your Amazon listings so that you can manage both from Amazon and your website.
In addition, these platforms allow you to sell on Instagram, Facebook and other platforms which can help with your omnichannel marketing strategy.
How to Find Products to Sell on Amazon FBA?
Your success on Amazon is largely based on the kind of product you sell and how well you can create a distinctive brand.
If you're selling simple commodities like kitchen utensils or paper products, it's going to take some time to compete with other sellers since these products are pretty generic.
You also need to learn how to optimise your Amazon listings and rank higher when people search for what you offer.
That’s why it’s so important you understand private-label products.
Private label products are goods or services created by one company but redesigned by another company and sold under their name.
Private labels are products that can be created by producers unaffiliated with your brand, that you then have the opportunity to market as your own product.
I would recommend the private label method because it's more efficient. Why will I do that?
What Is Amazon Private Label?
What Are the Benefits of Amazon Private Label Products?
#1. Private label has a better ROI.
Amazon allows you to predict your sales and get a better ROI on their Amazon FBA program with their private label. With more control of the image of your brand, you can dictate price and engage with customers confidently.
#2. Private label eliminates the need to source products.
A lot of sellers source multiple products that are sold in small quantities. By sourcing private label rather than selling someone else's product, you can focus on obtaining more of a product and make it your own.
#3. Private labeling also allows you to control the price.
The private label model means that you are wholly responsible for managing your Amazon listing, and often with little oversight. The more popular arbitrage and wholesale approaches involve undercutting the competition – but in private label, you get to set your own prices.
Now, let’s look at how you can identify what products to sell.
How to Price Items for Amazon Sellers Central?
Choosing the right product can have a big impact on your bottom line. But it isn't as easy to judge as you might think- quality, price, and your expertise with the product are all important factors that impact which one is best for you.
One way to generate product ideas is to see which products are sponsored in targeted areas and think about how you could produce something similar.
In cases like these, you know brands are willing to spend money on products for the potential ROI they could bring.
#1. Consider Your Competition.
If your product is in a common industry, you can sell at the same price or even a little lower than your competitors.
As a new seller on Amazon, storage fees are something you should try to address quickly and effectively. If your prices aren't competitive enough or don't match up with Amazon standards, you may end up getting penalized for it.
Before you adopt any pricing strategy for your inventory, it's important to make sure that you experiment with these new strategies in a beta phase. It's also important to find the right balance between profitability and sustainability.
#2. Use Product Research Tools.
Choosing a good product to sell on Amazon is not easy. It's important to find the right product research tools first, which will help you identify the perfect products for your chosen criteria.
Here are some of the best Amazon product research tools available:
Sellers who sell on Amazon often make the mistake of either pricing their products too low or too high.
If your price is too high, buyers will be turned off and not purchase from you. If the price is too low, your brand’s quality may decrease and you are left with low margins with no ROI.
Instead, it would make sense to find a balance between high prices and a reasonable profit margin that works for you.
#3. Understand Cost of Goods Sold (COGS) and Gross Margin.
Doing the math in order to get a good sense of your margin and cost of goods sold can help you figure out the price point at which you need to position yourself.
The gross profit margin is the amount that you have left over after subtracting COGS from total revenue, then dividing that number by the total income.
Let's clarify what the ‘top number' in the equation is – this is the gross margin (total revenue after subtracting COGS).
When it comes to Amazon, the formula is more or less as follows:
Gross Profit Margin = Total Revenue – Cost of Goods Sold (COGS) – Amazon Referral Fee.
Keep in mind that a 20-30% margin is optimal after accounting for all associated costs and Amazon referral fees. You should also look closely at your COGS to better understand what you can sell your products for.
How Much Money Do You Need to Sell on Amazon?
You can get started selling on Amazon with a very small investment.
One of the great things about Amazon is that you get to decide how much you want to spend on your business. Keep these five areas in mind as you spend your money:
#1. The cost of your Amazon account.
As I've already said, you'll have to sign up for an Amazon account and either choose a professional reseller or an individual seller account.
Professional seller accounts are best suited for businesses that use Amazon to sell over 40 products. With individual seller plans, Amazon takes $0.99 from the sale of each product whereas professional reseller accounts let you take care of that yourself at just $39.99 per month.
So add this $39.99 to your starting budget.
#2. It begins with your inventory.
When I say “beginning inventory”, I'm referring to the items you're going to start selling on Amazon. As I've already mentioned, it's important that you choose the right products from the start, otherwise your Amazon adventure might not have a great outcome.
Starting off as a small business has its own set of challenges, especially when you're on a tight budget. To mitigate this, try investing in an initial inventory that might cost anywhere between $150 and $500. As your business grows over time, you'll have enough to break into new markets with ease.
A good beginning inventory will provide a lot of potential for profit. For instance, the Amazon FBA calculator can be used to see how much you have to pay Amazon, then your products are worth in the long-term even if you don't make any effort.
Another helpful tool you can use to anticipate on profits is the Amazon Seller App.
One good way of hedging your investment is to go with 2-3 copies of about 18 different items. This way you're not putting all your money into one thing that could turn out to be a bad idea.
#3. Product photography.
I can't overestimate the power of high-quality product photos on Amazon. Today, consumers want to view quality images and experience something close as possible to an in-store retail experience.
If you invest in good quality images, then your conversion rates will be improved. Photos are a key part of any business and they're an integral part of selling products.
#4. Logo design, company branding and trademark.
If you’re a private-label Amazon seller, it is highly recommended that you get a registered trademark for your company.
As well as saving time, you should focus on branding your company. If you're starting a new website or business, you still need to get a designer to create an image of your logo and cover images for Amazon in order to give off a professional image.
#5. The cost of UPC Codes.
Anyone who wants to sell on Amazon will need a barcode for their products. In order to do that, they should get the UPC code as this is the only barcode accepted by Amazon.
As a seller, you can customize your FNSKU (Amazon's proprietary barcode) with specific parameters for your product in order to identify it among other SKUs.
All you have to do to get your FNSKU is provide Amazon with a Global Trade Identification Number (GTIN).
Amazon made some changes to their TOS a while ago. One of the changes now stipulates that barcodes can only be obtained from GS1. This means you'll have to pay $250 on initial registration as well as $50 on yearly renewal for ten barcodes.
There is also the option of buying UPCs from other merchants. However, this may not be sustainable given Amazon's recent efforts to combat such merchant activity.
Conclusion: Best Ways How to Sell on Amazon.
If you can’t beat em, join em.
If you're thinking of starting an online business, Amazon FBA can be a safe choice so you can start reaching a global customer base right off the bat.
In particular with Amazon releasing its Q4 2018 earnings showing a 20% year-over-year increase from $72.4B to $87B, this is a great time to get in on the action.
Product research can be tedious, but luckily Amazon FBA makes the process easier for you. You can try out new product ideas without too much risk and sell to loyal customers in your niche.