Amazon has rapidly become one of the largest online marketplaces — in fact, it’s one of the biggest marketplaces of any kind. The site sells everything from paper towels to luxury TVs to jewelry and has grown rapidly from its humble beginnings as a simple bookseller. With a business model that prioritizes consumer convenience and features like two-day shipping and free returns, it’s little wonder how this online retail behemoth has grown so substantially. While almost everyone is familiar with Amazon’s function as an online market, not everyone realizes it can be a great money-making opportunity for small business owners as well.
If you’ve got a great product to sell, or you want to expand your existing sales to a vast online market, selling on Amazon might be one of the simplest and most effective ways to grow your online retail presence. In this post, we’ll go over the basics of what you need to know before you start uploading your products to Amazon. We’ll cover the startup process, how being an Amazon seller actually works, and the pros and cons of becoming an Amazon seller. For a start-to-finish guide to starting an Amazon business, read through this whole post. If you only need a refresher on some areas, simply click on one of the links below to jump straight to the section you need.
- What is an Amazon business?
- How to sell on Amazon
- How do Amazon businesses work?
- Pros and cons of selling on Amazon
- Making your Amazon business profitable
What is an Amazon business?
Most people are familiar with Amazon as an online store. You log on and search for nearly anything your heart desires, and you’ll quickly be met with dozens of options at varying price levels — and usually a few at a serious bargain. Amazon does actually have its own brands (Amazon Essentials and Goodthreads, for instance), but the site mainly exists as a marketplace for other brands.
These other brands are able to sell through Amazon by building a partnership with them; they become Amazon sellers. This is why you can purchase Levis and KitchenAid products from Amazon. However, it’s not just nationwide corporations that can have a selling agreement. Small businesses can, too. If you have a small business, it may be worth considering registering with Amazon and listing your products on their site. This expansive inventory is part of why Amazon has over 150 million unique monthly visitors in the US alone. Let’s go over how you can get started.
How to sell on Amazon
If you’re wondering how to become an Amazon seller, getting started may seem like an impossible task. Luckily, Amazon makes it pretty easy to get started. The first thing you’ll have to do is register with them as a seller. The process is pretty simple.
Getting started as an Amazon seller
- First, you’ll pick a category that your product falls into. There are over 30 total, but only 20 for individual sellers. The other 10+ are reserved for professional sellers. If your business is large enough to qualify, however, this option may be available to you.
- Next, you’ll pick your selling plan. Amazon doesn’t let you list your products on their site for free. They charge for the service and convenience, but the pricing can be pretty reasonable. There are two selling plans to pick from: Professional plans, which cost $39.99 per month, and Individual plans, which charge $0.99 per transaction but do not cost a monthly fee.
- Once you’ve established your product category and picked the right selling plan for you, you’ll register with Seller Central. This is where you’ll be able to manage your seller account, view sales, and communicate with Amazon.
It’s also up to you whether you use Fulfillment by Amazon (FBA), which is their proprietary shipping, delivery, and customer service (including returns) option. You can choose to manage this aspect yourself or pay a per-package fee to have Amazon handle it for you.
Note: In order to be eligible for a Prime badge (those that appear next to products that qualify for free 2-day shipping), you must sign up for FBA.
Assessing startup costs
You gotta spend money to make money, as the old saying goes. If you already run a small business, you may already be familiar with startup costs. While the day-to-day management of your business — like managing inventory, paying for accounting services, and maintaining a healthy advertising budget — are things you’ll want to take into account, startup costs are an additional one-time expense that tends to be more than your average monthly budget. If you’re trying to start an Amazon business and be your own boss, there are some startup costs you may want to consider:
- Initial purchase of inventory: Before you’re ready to build a profitable Amazon business, you’ve first got to have a stock of product you intend to sell. Your inventory cost can vary a lot based on the kind of product you’re selling. Rubber bands and paperclips might not set you back that much, but if you’re selling hardwood furniture, your inventory costs may be more substantial. Be sure to calculate how much you can invest in this.
- Amazon seller plan: Those looking for a little cash on the side to boost their side hustle can probably get by with an Individual plan — that’s the one that charges $0.99 per transaction — but those who are hoping to build a more robust Amazon business may want to invest in the Professional plan for $39.99. That’s not necessarily a huge cost, depending on your business volume, but it’s something to keep in mind as you plan out your finances.
- Fulfillment by Amazon: If you choose to have Amazon handle all aspects of shipping, packing, and customer service, you’ll be charged a per-package fee. Be sure to factor these costs into your startup, as these fees are added when you ship out your first batch of inventory. The rates can vary from just over $2 to almost $140 for oversized, heavy packages.
Startup advertising: We’ll cover advertising in more detail below, but be sure that you add costs like product photography, logo development, branding, and possible web advertisements to your total startup budget.
Now that you have a clearer picture of how to start an Amazon business and some of the costs you should expect, you’re probably wondering how selling on Amazon actually works. Let’s dive into that now.
How do Amazon businesses work?
The way your Amazon business works will depend in large part on your products and your own business plan. However, there are some general themes that are true for sellers regardless of their specific situation. Amazon outlines four steps that go into transactions through Amazon.
Step-by-step guide to transactions through Amazon
- Create your product listing: Once you’re registered and have chosen your pricing plan, decided whether you’ll use FBA (Fulfillment by Amazon shipping), and completed your other account details, you’ll have to create your product listing. This involves uploading appealing and informative photos of your products, writing the descriptions that will accompany those photos, and including details like specifications, features, and any warranty you may offer. Making an Amazon product listing is tricky, and the content and quality of your listing will largely affect how likely customers are to buy. This is something you’ll want to spend some time on.
Note: Those with Professional seller accounts can upload products in bulk, but those with Individual accounts cannot, and must post them one at a time.
- Amazon notifies you of sales: When you make a sale on Amazon, they’ll notify you through Seller Central or via email. This way, you’ll be able to keep tabs on how often your products sell, so you have a better idea of your business’s performance.
- Your product is shipped: If you’ve decided against using FBA, you’ll need to ship the item yourself at this point. However, if you have you have decided to use FBA, your product will be picked up and shipped to your customer. A per-item fee will apply based on the size and weight of the items you’ve shipped.
- Amazon deposits your portion of payment: Once your seller fee, per-item shipping fees, and other FBA fees have been assessed (more on those in the next section), the remaining revenue from the sale of your product will be deposited in your bank account. Once all other operating expenses are accounted for, the remaining balance is your net income.
The process is relatively simple, which is why so many sellers — both from big brands and small businesses — have decided to add Amazon to their portfolio of revenue streams. However, before you jump in and rush to make an Amazon sellers account, it’s a good idea to get a thorough idea of what you’re getting into when you start an Amazon business.
Pros and cons of selling on Amazon
As with any business venture, there are pros and cons to consider before listing your products on Amazon. If the relatively low price, ease of shipment, and access to a huge market all sound a little too good to be true, that’s because there is a catch — or two or three. While running an Amazon business can definitely be a wise move for your company, part of knowing how to sell on Amazon is knowing what the potential disadvantages are. We’ll cover the pros and cons, then move on to describe some savvy tricks you can use to make your Amazon business more profitable.
First, let’s list the biggest advantages to listing your products on Amazon.
- Amazon has one of the largest customer bases in the world. With more than 150 million unique monthly visitors in the US, you can be sure that your products will receive maximum exposure. While having your inventory on your small business’s website is a great way to draw in a loyal following, it may be hard for first-time users to find your site to begin with. Having a clickable Amazon listing mitigates this problem and can increase your earning potential.
- Shipping, logistics, returns, and customer service can be a massive headache when you’re trying to grow your business. By allowing Amazon to handle these aspects of your business, you can focus on scalable growth models, investor outreach, marketing, and whatever else you need more time for.
- Having Amazon handle customer service and returns is not only a huge benefit to your personal schedule, but it also increases your chances of making sales. That’s because when customers see the Prime badge under your product listing, they will feel much more secure knowing they can expect free shipping, easy customer service, and free returns. That peace of mind is all many buyers need to pull the trigger.
- Because Amazon already has a massive infrastructure in place for product listing and fulfillment, you won’t have to worry about that as you grow your business. The only limit is how quickly you can produce more product — no worry of a warehouse full of supply that’s been purchased but is stuck because of lagging logistics providers. Focus on your own supply chains and marketing strategies while Amazon handles the B2C side of your brand.
Now, let’s think seriously about the disadvantages you may face if you decide to work with Amazon.
- All that ease of use, next-level fulfillment, and simple customer service does come with a hefty price tag. The 40 bucks a month you’ll spend on your seller account does sound pretty cheap — and certainly much cheaper than rent for a storefront. Sadly, though, that’s not the end of the price. If you decide to use Fulfillment by Amazon, there’s an entire list of potential FBA fees. You won’t necessarily be responsible for all of them, but depending on what aspects of FBA you use, there are quite a few: everything from barcode labeling to warehouse storage comes with a per-item fee attached.
- The next thing you may want to worry about is that you give up a lot of control to Amazon when you decide to sell on their site. Specifically, they have been known to force sellers to raise or lower prices on their home sites to match the price found on Amazon. Amazon thrives due to its pricing model that beats out most competition, so they don’t want their sellers offering a better bargain If your prices have been specifically calculated to make sure your business keeps turning a reasonable profit, this may be something to think about before giving pricing control up to Amazon.
- Amazon has recently been under scrutiny for its problematic and sometimes predatory labor practices. Fulfillment center workers — the people who package items, move them, and prepare them for shipment — are often overworked and expected to keep up with unrealistic and demanding schedules, leading to burnout and even serious injury. The convenience of two-day shipping, rapidly stocked inventory, and quickly-processed returns comes at a serious human cost. By using FBA, many of your products will be processed at fulfillment centers making use of these questionable practices.
- Because of the problems just described, some people have decided to boycott Amazon. It depends on your likely customer base, but that could potentially hurt your profits. Those selling something like electronics or bathroom supplies probably won’t suffer from an affiliation with Amazon. However, lifestyle brands promoting reduced consumption or social justice — as well as producers of goods that are associated with progressive values, like certain books or clothing brands — may lose customers by having a relationship with the tech giant. It’s good to be aware of your customer base’s values before going all-in on an Amazon business strategy.
If you do decide that an Amazon business is right for you, you’ll want to make sure that you run it well. We’ll offer some tips on how to make sure that your Amazon business is profitable in this next section.
Making your Amazon business profitable
Disadvantages aside, there’s no question that with the right strategy an Amazon business can be a huge revenue stream. According to a 2018 survey, 40% of Amazon sellers made over $250,000 in yearly revenue. Bear in mind, however, that this figure does not state the average profit these businesses made, which is revenue minus the amount the seller invested. Still, that’s a sizeable percentage making a lot of money.
What else can you do to make your Amazon business profitable?
Understand your market and competition
The first step in having a successful business of any kind is knowing what niche you’ll market your product to. Are you making strollers for new moms? Do you buy toothpaste wholesale and distribute it via FBA? Are you an artisan who hand-makes vegan leather bags and shoes? While any of these business owners can operate an Amazon business successfully, each will have its own strategy. In general, however, it’s a good idea to follow these steps:
- Assess competition: Before hopping into the market, check out what similar sellers are up to. How do they photograph their products? What features do they name in the product description? Do they include customer testimonials? Take extensive notes on what the most successful sellers (the ones that rank high on keyword searches on Amazon and also have good reviews) do with their product listings.
- Survey customers: There’s nothing quite as useful to businesses as data. If you’ve already got a reasonably sized customer base, send out a survey to find out how satisfied they are with your products, what they’re favorite things about your brand are, and what they would like to see improved. Plus, getting customer feedback has two benefits: you find out what parts of your business work and which ones don’t, and you show customers that you’re invested in their satisfaction; that can seriously boost retention.
- Make a good product: This one should go without saying, but in today’s heyday of viral marketing strategies and data-based business solutions, this core business principle often gets tossed out the window. Nevertheless, people value a product that does what it’s supposed to, lasts a long time, and comes backed with solid customer service. If you’re unsure where to start, making something useful that people actually want to buy is probably the best place.
Market your Amazon business
Another important thing to consider is how exactly you will market your products on Amazon. The first thing to keep in mind is your product’s niche. That’s basically the group of people who are likely to find your products appealing. Finding your niche is necessary for building the right kind of marketing campaign and branding to accompany your product. Do you make bomb board shorts that are perfect for relaxed Gen Z beach bums? — Or custom engraved fountain pens often purchased as gifts for lawyers and executives? Your marketing strategy is going to be very different for each of these markets, so be sure your brand development matches the people who are likely to buy your goods.
One of the most important ways to market your Amazon business is with web marketing. The days of bus banners and billboards are slowly fading away. If you want to keep up with competition and market your products to younger generations of web-savvy consumers, you’ll need a web marketing strategy. Here are a few web marketing basics to get you started:
- Market on social media either by using paid ads that are data-directed toward likely consumers, or by purchasing partnerships with influencers that potential customers in your demographic follow.
- Start an email newsletter that keeps loyal customers informed of your brand’s upcoming promotions. This is a great way to retain existing customers and grow your base of loyal buyers.
- Start a blog that provides readers with reliable information about your area of expertise. If you make shoes, your blog should provide fashion advice; if you make home goods, it should be about interior design and lifestyle; kitchenware companies can post blogs about seasonal food and recipes, etc.
- Invest in search engine optimization. When people Google keywords that relate to your brand, you want your website or Amazon listing to come up on the first page of results. Tactics like keyword research, user experience improvement, and developing a healthy number of links to your site can all help boost your ranking on results pages.
On all your social media, email, and blog content, it’s a good idea to have well-placed links to your Amazon listing. Users love convenience: pointing them to an easy way to buy a promoted product makes it much more likely that they will follow through. Having a well-developed web presence is essential for any brand that hopes to succeed in the 2020s, so no matter what your small business sells, be sure you invest in online strategy.
Stay on top of best practices
Lastly, Amazon has a list of best practices that its sellers should follow. Complying with these means you avoid running into trouble with Amazon’s admins, but it also makes it more likely that customers will find your product listing trustworthy and desirable.
Some best practice guidelines may seem so simple that they don’t need a second thought, but it’s a good idea to check back in periodically and make sure you’re following all the rules. You wouldn’t want your business to suffer from a silly mistake like an ambiguous description or pixelated product image.
Key Takeaways: How To Sell on Amazon
Expanding your small business by learning how to become an Amazon seller can be a fruitful decision. The important thing to know is how best to create and post a listing that brings in consistent revenue. If you do decide to start an Amazon business, remember these key takeaways:
- Make an account with Seller Central to get started.
- Choose the right plan for your business: either Individual or Professional.
- Create an eye-catching and informative product description.
- Manage your sales and keep records of your revenue.
- Invest in advertising and web marketing strategies.
- Be mindful of the pros and cons of using Amazon business.
Getting started may seem daunting, but if you carefully follow each step and cover your bases, you’ll be well on your way to starting a successful Amazon business.
Sources: Amazon.com, Start Selling Online, Seller Central | Feedvisor, The State of the Amazon Marketplace, | ProMarket.org, How Amazon’s Pricing Policies Squeez Sellers and Result in Higher Prices for Consumers | Gibbs Law Group, Amazon Employee Class Action Lawsuit Investigation