Did you know that more than 50% of Amazon’s total unit sales come from third-party merchants, people who were once beginners with not a clue on how to sell?
We’ve all heard the rags to riches success stories of countless people who’ve made their fortunes on Amazon, and now it’s your turn to get in on the action. For almost two decades, the world’s largest, most profitable e-commerce platform has been inviting anyone to join their marketplace with the will and energy to make money by selling to millions of customers around the globe. The question is, how hungry are you for a piece of the pie?
How To Sell On Amazon: A Guide For Beginners
As much as everyone says it’s, ‘easy when you know how’, it can be an overwhelming start, especially as a beginner. This is why we’ve put together this introductory guide to help you get to know the very basics of Amazon selling, from the type of seller accounts available to some of the pathways you may want to take in sourcing your products.
Selling on Amazon can be as simple or as complex as you make it. Tried and tested by hundreds of thousands of merchants, the earning opportunities are endless. Yes, it’s a constant learning curve, but once you’ve got to grips with the basics you can start to harness the platform for what it really is - a money-making machine with a global audience of impulsive, eager shoppers.
How To Sell On Amazon For Beginners In 4 Steps
To help you get started on your journey as an Amazon seller, we’ve divided this guide into the following 4 steps:
- Step 1: Get to know Amazon Marketplace
- Step 2: Differences between FBA and FBM
- Step 3: Choose one of 3 paths to sell
- Step 4: Get selling!
Step 1: Get to know Amazon Marketplace
As one of the Big Four technology companies alongside Google, Apple and Facebook, you could say it’s a sure thing that Amazon knows how to rake it in. Amazon Marketplace enables the multinational company to offer customers as many products as they can think of, without actually having to invest in inventory. Clever, right?
The Amazon Marketplace platform allows third-party sellers to sell new or used products next to Amazon’s regular offerings. Gaining access to Amazon’s huge, global customer base and optional warehouse/customer support services, sellers are exposed to a high earning potential and generally lower overheads.
Step 2: Differences Between FBA and FBM
To sell on Amazon, you can either choose to have your products Fulfilled by Amazon (FBA), or yourself - Fulfilled by Merchant (FBM). What this means precisely, is that you can either send your products to an Amazon warehouse where they handle the shipping and customer service, or you can do it on your own. Let’s take a look at the pros and cons of both options:
Pros and Cons of FBA
Taking the FBA route is the more popular choice among third-party sellers and with good reason. To start off with, your products are:
- Automatically eligible for Amazon Prime free shipping and other benefits. Customers will naturally gravitate towards products associated with Amazon to make them feel safe about the purchase.
- Taken care of by Amazon warehouses. You don’t need to worry about fulfilling orders, packing, shipping, or buyer queries. This gives you plenty of time to focus on other aspects of your business, such as maximizing growth. Amazon can also fulfill your orders from your own site or another e-commerce platform as part of its multi-channel fulfillment service.
- More likely to win the Amazon Buy Box. This is a CTA (Call to Action) button that is displayed on the product of a product listing that leads Amazon shoppers to purchase. If there are multiple sellers of the same product, Amazon selects a high-performing seller to win the BuyBox and this is usually determined by factors such as ratings, order defect rates and customer response times.
- Subject to lower shipping rates. Given that Amazon is the largest online retailer in the world and has major partnerships with global shipping firms, FBA sellers enjoy lower shipping costs than they would have to fulfill products themselves.
While these are pretty amazing benefits, especially for beginners, there are some cons to be aware of:
- There can be quite a few additional fees. Yes, FBA affords you hands-off shipping, but there is a price for that. These can include order handling fees, monthly inventory storage fees, closing fees, and depending on the product’s category, high volume listing fees. You’ll also need to pay for your inventory to be shipped to Amazon’s fulfillment centers. Additionally, if you integrate the FBA multi-channel fulfillment service, this will also incur charges.
- Inventory is out of your hands. While this is a great benefit in terms of not worrying about fulfillment, you are not able to track issues with products first hand if they arise. Either Amazon resolves the issue for you or has your inventory shipped back after which you need to spend money again to resend.
- Sales tax isn’t automatically factored in. Amazon sellers have to enable sales tax collection within the Tax Settings in Seller Central, where they control their seller’s account. Each state requires a different state tax registration number that sellers should provide to Amazon in order for tax to be collected on purchases. Sellers are expected to understand their tax obligations with no prompts from Amazon otherwise.
- You need to label your own products. Before sending your inventory to an Amazon fulfillment center, all products need to be labeled with one of two kinds of barcodes; a manufacturer barcode or an Amazon barcode. This can be a bit of a monotonous task, however, Amazon does have an FBA Label Service that can apply barcodes for you for a per-item fee.
Pros and Cons of FBM
If you decide that you’d rather have full control of your inventory, shipping, and customer communication, then as an Amazon FBM seller you can enjoy:
- Full ownership. Although it’s not for everyone, FMB sellers see this as a benefit because there is less reliance on Amazon and having immediate access to inventory means product issues can be addressed before being sent to customers.
- Fewer fees. FBA offers a lot of convenience on storage and fulfillment, but the charges can add up. With FBM you can avoid these, though you’ll still have to pay for referral and closing fees.
- Higher margins. Since you won’t be paying all the fees that FBA sellers do, you’ll make slightly more money on each product you sell.
- The chance to access Seller-Fulfilled Prime, without the FBA fees. You can’t get this right away, but you could earn the opportunity if your account levels up to a premium shipping order volume and has exceptional performance metrics.
With that said, here are some of the cons of going the FBM route:
- You have to stay on top of everything. It can be a never-ending job, especially if you’re committed to answering customer queries 24/7 and solving all manner of issues, from packaging, shipping, and inventory, which you will want to do to maximize your success.
- If you want Prime you have to work for it. Amazon doesn’t automatically give FBM sellers the privilege of accessing Seller-Fulfilled Prime. You’ll have to prove that your seller metrics are in tiptop condition on a consistent basis.
- Amazon Buy Box is more difficult to win. In order to compete with FBA sellers who have the advantages of automated fulfillment and a greater likelihood of winning the buy box, FMB sellers may have to lower their prices to win their place.
- More personal overhead. It’s true that you’ll be avoiding all the fulfillment and storage fees that FBA sellers pay for, but storage and fulfillment outlays are cost you’ll still have to factor in.
- Amazon shoppers prefer Prime. Over half of Amazon customers are enrolled on its Prime, 2-day free shipping service. As an FBM seller, you could be missing out on many sales as a result of this. Of course, you could enroll to be part of Seller-Fulfilled Prime, but as mentioned before, the pre-requisites are pretty extensive.
Is FBA or FBM better for beginners?
It really depends on what your business needs are and what you value most when it comes to the output of time and resources.
FBA is a good option for products that you can sell in high volume with large profit margins. There needs to be plenty of ‘give’ for fees incurred and you must be willing to lower prices to the lowest profit point if competition begins to heat up.
FBM is a more flexible choice if you want to sell products on a smaller scale. Typically these are unique items or those with smaller profit margins. Being in charge of the fulfillment process allows you to decide the terms of sales from start to finish, enabling you to decide the most cost-effective methods for your business.
Step 3: Choose one of 3 paths to sell
Before you decide whether you want to be an FBA or FBM seller, the first thing you need to think about is - product! This is the starting point of your business and without which you won’t be able to strategize or budget. There are three major paths you can take for selling on Amazon; Wholesale, Private Label, and Retail Arbitrage.
Contrary to popular belief, wholesale isn’t the easiest route to take. Going wholesale means that you purchase established-brand products directly from a manufacturer and then resell them on Amazon, directly to consumers. Manufacturers can be very picky about who they work with and generally speaking, tend to form relationships with merchants that have already proven their success.
Selling private-label on Amazon means finding generic products that are already selling well on the platform, then creating your own branded version to include new packaging and marketing. The idea is to duplicate a successful product but stick out from the competition with a better brand and marketing strategy. Of course, you can also target niches - find a specific product and focus on quality to add value for the customer, and dollars in your pocket.
Retail arbitrage is one of the simplest routes to selling on Amazon. Essentially, it is scouring the net and local stores for the best bargain deals and then reselling on the platform. It’s a great option for individuals with minimal starting capital and for those wanting to sell at their own pace and leisure. Since this is one of the more popular paths chosen by sellers, competition can be very high and therefore profit margins tend to be small.
Step 4: Get selling!
So now that you have a basic idea on what you need to consider before starting your journey as an Amazon seller, it’s time to open your Seller Central account!
You can either register as an Individual or Professional. There are no monthly fees for an Individual account, whereas the Professional account charges a $39.99 monthly subscription fee. To get started, it’s recommended to open an Individual account to understand the platform first and then upgrade to Professional once you are ready to put your business plan in action.
If it still seems quite overwhelming, don’t worry - there are thousands of free online resources to help you! Here at Seller’s Choice, you can find extensive information on how to build an Amazon brand, a brilliant seller cheatsheet, as well as solutions for enhancing your brand content, optimizing product listings and storefront design.
Bite the bullet and start today because there’s no time like the present! Amazon is going to be here for a long time yet and it needs your help to remain the world’s number one e-commerce platform. It is in their interest to ensure your success, so grab the opportunity with both hands and create your own inspirational story that others will be looking up to in years to come.