July 02, 2020

How to Start Selling on Amazon: A Complete Beginner's Guide

With 300 million active users and over $200 billion in annual revenue generation, Amazon is one of the most powerful tools to help increase your sales and bottom line. At the same time, it is also complex and frustrating. With millions of sellers, billions of products, and sophisticated supply chain management, the Amazon ecosystem is constantly evolving and growing.  

The rules and best practices of the platform can present a steep learning curve for new Amazon sellers. But persistence pays off—third party sellers account for nearly 50% of Amazon’s revenue—that’s a $100 billion e-commerce market on just one platform! Understanding the following key points will help you ensure the health and success of your account.

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How the platform works

As a customer, Amazon looks like one giant site, but for sellers, it is actually broken up into smaller platforms depending on the type of products you sell and the relationship you have with Amazon. Here are the main platforms people utilize to make their products available on Amazon:

Seller Central

For all physical items except books sold directly by the author.

This is the platform where most sellers will start. Anyone can open a Seller Central account, and it provides a lot of flexibility for resellers and brand owners looking to sell on Amazon.

Seller Central guidelines:

  • You set the price.
  • You determine inventory levels.
  • The customer sees your brand as the seller.

Seller Central is the recommended platform for non-print, on-demand physical products for most brands. You can find training videos available on Amazon’s website to help you get started.

Vendor Central

For all physical items, except books.

This platform is invite-only and mainly caters to larger brands. On Vendor Central, you sell your products to Amazon, which resells them for you on Amazon.com.

Vendor central guidelines:

  • Amazon sets the price.
  • Amazon determines inventory levels.
  • The customer sees Amazon as the seller.

Kindle Direct Platform

For e-books and physical books printed within the Kindle Direct Platform program.

This is the platform for authors and writers.

Kindle Direct guidelines:

  • You set the price.
  • Amazon determines inventory levels.
  • The customer sees Amazon as the seller.

Other platforms

Amazon also has other platforms available to sell physical products:

  • Merch by Amazon - A print-on-demand platform for shirts and other merchandise.
  • Amazon Handmade - This platform is similar to Etsy for creatives who sell handmade and unique items

Each platform has its own login. Be sure to research the correct platform before opening your account.

How to be profitable as an Amazon Seller

Becoming a successful seller on Amazon relies heavily on good market research. In simple terms, you identify what you want to sell and how much to sell it for. There are four key things to focus your market research on: Picking the right niche, choosing the right products, maintaining a strong customer focus, and being a proactive marketer who knows their competition. Let’s look at these market research strategies in detail.

Picking the right niche

Amazon organizes the products on the platform into over 25 different umbrella categories called departments. Each department is further divided into multiple subcategories. While there are limited umbrella categories, the subcategories range in thousands. The first step in your research is to find the subcategories or niches you want to sell under.

Some factors to consider when picking a niche include:

Your personality - Your hobbies, interests, and professional experience can inspire the creation of your own unique brand.

Current trends - You can’t sell anything and everything–it has to be something that people actually want and need, something they would buy again and again. Amazon’s best sellers and Google trends can provide useful insights into customer demands

Saturation – You don’t want to start out in niches that already have a large number of competitors and limited opportunities for product differentiation.

A profitable niche is one where there is a high volume of sales, less competition, and opportunities in the existing product range that you can fill through differentiation.

Choosing a product

Even after picking a niche, knowing what products to sell may be difficult. You can research by:

  • Asking potential customers in person what products they buy and how much they pay for them.
  • Searching Amazon and other marketplaces for similar products and compare prices and reviews.
  • Looking for products that sell in your niche but have a large number of negative reviews. These products indicate a gap in the market, and you can sell new items on Amazon to fill this gap.

Free tools like Product Research for Amazon use intelligent software to Uncover low–competition, high–demand products using smart filtering. You can use these tools to find and sell new items on Amazon.

Pricing your product

Consider the pricing of your product carefully. If you sell an item for too high a price, people will not buy it. If you sell it for a lower price than it costs you to supply it, you won’t make any money.

The factors to consider when pricing a product can be broken into three major areas:

  • Demand for your product: The number one thing you should consider when pricing a product is demand. If there is high demand for your product, you can charge more.
  • Competition: What does the competition charge? If they seem to be charging too much, maybe your prices should be higher, or you may need to find a way around their prices. If they seem to charge too little, you could go up in price and try to differentiate on product quality instead.
  • Price Point: This is related to what you think customers will pay for your product. Find out what other sellers are charging for similar products on other marketplaces and in physical stores as a general guide to selling on Amazon. Have a price in mind before you even go looking for suppliers.

There are also a number of expenses that you should factor in when pricing your products. You need to have a strong sense of your profit margins, and not just the revenue, especially if you plan to offer discounts. Some things to consider include:

  • Stock: This is the net purchase cost of a batch of items. It includes purchase price, freight, and duty.
  • Labor: This includes wages or fees for individuals who make or assemble your products or contribute to other aspects of your business.
  • Other overheads: These are expenses over and above stock and labor, from marketing costs through to Amazon fees.

Understanding Amazon Fees

Regardless of the type of products you sell, understanding the fees involved in selling on Amazon is essential. Amazon fees can be substantial, so work on understanding them before you list your first product.

You may hear anecdotally that Amazon takes about one-third of the selling price. While that often is the case, the actual fees can range from 10%-100% depending on the item’s price, category, and size.

Be a proactive marketer and know your competitors

As much as you need to know how to start selling on Amazon, you first need to understand the market, even beyond Amazon, and this includes knowing how brands are using social media or PR to gain attention. Be aware of how they position themselves in the market by reading their reviews and marketing materials.

Some questions to ask could include:

  • What market segment are they targeting?
  • What is their pricing strategy?
  • What is their branding strategy?
  • What is their marketing strategy?
  • What keywords are they targeting?

These insights will help you in your efforts to be a proactive marketer. Even after your business takes away, you need to keep track of competitors who might copy your products or listings. One way to do this is by using Semrush’s Listing Alerts for Amazon that lets you monitor your Amazon brand 24/7.

Be Customer Obsessed

The most important thing to remember when evaluating whether you can be successful on Amazon is your alignment with its core values. Amazon has 14 guiding principles. These principles are the foundation of many of Amazon’s policies.

A primary principle is being “customer-obsessed.” If you focus on engaging for positive customer experiences, it is easier to abide by and understand many of Amazon’s policies. This ranges from shipping promises and returns policies to creating your listings.

Four Steps to Sell on Amazon for beginners

Since most Amazon brands start off on Seller Central, we explain the four steps to start selling on Amazon Seller Central.

Setting Up Your Account

There are two main types of seller accounts: Individual and Professional.

Individual seller account

As an Individual seller, your account can carry no more than 40 items in any one month for sale in the US/Canada Amazon Marketplace and must be registered under your individual name and social security number. There are no fixed monthly fees in this plan, and you also cannot use many of Amazon’s in-built software tools that can help grow your business. Amazon usually charges $1 per sale along with some additional fees.

Professional seller accounts

Professional accounts can carry an unlimited number of items in the Marketplace and are registered under business (legal) names, addresses, and social security numbers. Amazon also allows professional accounts to connect specific tools that can help with ad management, sourcing, inventory management, and feedback to your Seller Central account. This is done with a system called MWS.

In general, if you are anticipating more than 40 sales a month OR you plan to use any third-party tools, you will want to choose the Professional plan.

To access these MWS connected tools, you have to have a professional selling account at the monthly price.

*Important Note: If you have had an Amazon Seller Central account before (at any time) you will want to request permission to open a second account.

Sellers are misinterpreting Amazon’s announcement that it no longer requires permission for you to open a second account.

This is not carte blanche to open accounts. It is, in fact, Amazon abdicating its responsibility or liability for accounts that are set up improperly. We have a rash of suspensions in-house right now because sellers opened second accounts for the wrong reasons, or they were shut down for linked accounts because they did it incorrectly.

Sellers must understand they still need a compelling – defensible – reason for a second account and they have to follow all of Amazon’s rules. This is not a ‘Plan B’ account.

-Cynthia Stine, president of eGrowth Partners.

Opening your account

To register on Amazon Seller Central, you will be asked to provide the following information:

  • Bank account number and bank routing number
  • Chargeable credit card
  • Government-issued national ID
  • Tax information
  • Phone number

Video call verification may be required for new accounts. Once your account is opened, Amazon generally will hold your funds in reserve.

Create product listing

A high-quality Amazon product listing is essential so that shoppers can find and read about your product. There is a lot of detail in the listing process, so keep the following in mind:

Product title

Keep your title short and sweet - it should be easy to identify quickly on Amazon’s search results page.

Product details

Include the manufacturer, model number, and quantity of your product in parentheses and provide a brief description of your product with keywords so shoppers can find it by searching Amazon’s site. Keep your description authentic but appealing. You want your customer to think your product is better than others, but you don’t want to mislead them or set up false expectations.

Product price, condition, and terms

Note the condition of the product (new or used), as well as any other important details like shipping information or warranty offered.

Image

Use high-quality pictures. You can have up to nine images, so there is plenty of room for the main picture, different views of the product, a picture of the packaging, and ideally, the product being used.

Keywords

Include relevant keywords in your copy while keeping it clean and concise. Your most important keywords go in the title and description, except for any others to add to the Search Terms field. And don’t forget relevant, if less important keywords, in the other available fields such as Subject Matter and Intended Use.

Reviews and ratings

Getting good, legitimate reviews and ratings on your listing will help you attract other potential customers. Offer a reliable and prompt service and timely responses to customer questions or concerns. To increase the number of reviews and ratings, you can:

  • Send out special promotions
  • Ask customers to leave reviews
  • Use a review template that customers can fill out quickly
  • Try an automated feedback service to simplify the process.

Just make sure you’re always following Amazon’s rules on collecting legitimate reviews. You can always use a tool like Listing Quality Check to improve the quality of your listings and rank higher.

Manage your items

A great listing should be combined with a sound stocking and monitoring strategy.

How you source, store, and process products will hugely affect how quickly you can fulfill customers’ orders. If a listing has no stock available from any sellers, your competitors continue to get sales while you do not. This will, in turn, lower your organic ranking, which causes a drop in sales. It can be a vicious circle that can destroy months of hard work.

The simplest way to manage inventory is through the Seller Central dashboard on the Amazon marketplace website. You can manually adjust inventory levels for all your products in the dashboard. If you’re a Professional seller, you can also adjust inventory levels with a bulk Excel upload or use an inventory management app that integrates with Amazon (this option requires some additional setup).

To become a profitable Amazon seller, you also need to monitor your sell-through rate and restock popular products quickly. You can aim to:

  • Maintain four weeks of inventory cover
  • Focus on reducing aging stock
  • Avoid excess products to increase your profitability.
  • Watch sales margins by tracking all your costs, from procurement to applicable Amazon fees.

Finally, in addition to the practicalities outlined above, developing respectful and strong relationships with your suppliers will be key to your success.

Fulfill and ship your products

As a seller on Amazon, there are three key methods for fulfilling and shipping orders.

  • Fulfilled by Merchant (FBM) or Fulfilled by Seller allows you to store your products at a warehouse that offers this service, which will handle picking, packing, and shipping customer orders to them.
  • Fulfilled by Amazon (FBA) lets you leave some logistics to Amazon so you can concentrate on growing your business.
  • Seller Fulfilled Prime (SFP) is an option only available to sellers who are able to guarantee that they can deliver products within two days. This program is currently suspended but has a waitlist for when it opens again.

Amazon Prime is Amazon’s paid subscription service for its users. Amazon Prime members pay a monthly subscription fee to Amazon and in return receive several benefits including free, fast shipping for eligible purchases and exclusive shopping deals. Making your item available via Amazon Prime can significantly increase your sales, but you need to be aware of the expectations and demands of working with Prime. While items on Vendor Central and Kindle Direct Platform are always available via Amazon Prime, the other method is to use FBA via Amazon Prime on Seller Central.

FBM (Fulfilled by Merchant)

If you want to start to sell on Amazon as a beginner, you can use Fulfilled by Merchant (FBM). This will involve using a third-party company that handles storage and order fulfillment and managing your relationship with them. It may mean you are picking, packing, and sending items.

This is not an ideal situation for many sellers because they are limited in their ability to interact with customers. Furthermore, there are no set hours of operation; the Marketplace operates 24 hours per day, 365 days per year. That means it is possible to receive an order at 3 am on Christmas morning! However, if you don’t mind dealing with these limitations or find them advantageous, then FBM might be right for you.

FBA (Fulfilled by Amazon)

FBA, or “Fulfilled by Amazon,” is a service that offers sellers the opportunity to send their products to one of Amazon’s fulfillment centers and have them receive, package, ship, and provide customer service for those items. The benefits of FBA include having your items eligible for Prime shipping, as well as greater scalability as you can increase your product line without needing to find more warehouse space.

In order to use the program, you may need to ship your products from your warehouse to an assigned Amazon facility across the country. This affects your logistics and can require coordinating with multiple warehouses. Keep the following in mind:

  • You can use partnered shipping or LTL shipping for reduced rates.
  • You will need to decide how many of each item you wish to ship.
  • The fee structure for FBA might seem high, but keep in mind that this also includes the cost of shipping the product to customers.

SFP (Seller Fulfilled Prime)

Seller Fulfilled Prime is a program from Amazon’s popular Prime program. The program is currently closed to new applicants but has a waitlist.  When registration re-opens, Amazon will notify you at the email address associated with your account.

If you’re interested in the Seller Fulfilled Prime program, you need to be aware that you are expected to send products via expedited shipping and abide by strict shipping deadlines.

How much does it cost to sell on Amazon?

Regardless of the type of products you sell, understanding the fees involved in selling on Amazon is essential. The fees can be substantial, so it is important that you understand how they work before you list your first product.

Your costs for selling on Amazon will depend on the selling plan you choose, the referral fees that apply, fulfillment fees (based on your method of fulfillment), and other costs, some of which are additional and others that relate to optional extras.

Selling plans

Fees on the Individual Seller plan can add up quickly once you cross-sales of more than 40 items per month. It is always better to switch to the Professional plan once your business takes off.

Referral fees

In addition to the selling plan fees, Amazon charges a fee for every item sold. This referral fee generally ranges from 8%-15%. However, some product categories attract a higher rate or a more complicated structure based on the item value. In addition, some products attract a closing fee. For the majority of categories, there is a minimum charge of $0.30.

Fulfillment fees

Whether you are shipping products using Amazon’s services or shipping them yourself (including through a third party), fulfillment fees apply.

Fulfillment by Amazon

Fulfillment by Amazon (FBA) fees include shipping, handling, and customer service. A flat fee is applied based on the length, width, height, and weight of the product and is applied against a series of size tiers.

It is important to review the Amazon size tiers before having packaging created for your products, whenever possible. Being over the size tier by as little as 1/8” can increase your fees by 3-10 dollars per item sold.

You also need to consider storage fees. Storage fees are based on the nature of your product, its dimensions, and how long the item is in Amazon’s warehouses before it sells. There is a small fee for products stored for a short time. Long-term fees, however, can become expensive very quickly.

Fulfillment by Merchant/Seller (FMB)

For both individual and professional sellers, shipping rates are charged on the basis of the product category and the customer’s shipping service selection. Amazon passes on a ‘shipping credit’ to the seller for that amount. Sellers on an individual plan are obliged to use Amazon’s shipping rates. This means that, potentially, the shipping credit is less than the actual shipping costs. You will need to factor this into your pricing if this is the case.

Sellers on a professional plan can set shipping rates, with Amazon providing a shipping credit that matches the set rate. You should be aware that Amazon calculates the referral fee on the total sale price. Take this into account for pricing.

Additional costs

In addition to the costs above, there are some possible extra fees—for example, inventory fees, such as long-term storage fees for FBA sellers. Optional activities like advertising and other premium services also incur additional fees.

Calculating costs

Amazon provides a tool called the FBA Revenue calculator that can help you determine the selling fees for your products. Product Research for Amazon also calculates Amazon fees and will give you a detailed breakdown of Net revenue, Return on Investment and actual profit on your products.

How to find suppliers to start selling on Amazon?

Finding and building relationships with trusted suppliers is one of the important steps to sell on Amazon. The five best sources to find suppliers are:

Search Engines

You can find suppliers on any search engine by searching for the terms wholesale, followed by inventory and niche, as shown below

Wholesale “inventory” “niche name”

This search term will give you results from millions of suppliers in your niche. You can also narrow down the search results by filtering on location, excluding certain items, or searching for specific subcategories.

Social media

You can connect with suppliers on social media platforms like LinkedIn and Facebook. You have to search within groups and also search for terms like distributor, wholesaler, and manufacturer to find relevant supplier profiles.

Trade shows

Attending trade shows gives you an opportunity for in-person meetings and networking with suppliers. You also get to try product samples, gauge them on quality, and lay the groundwork for a strong future relationship. Trade shows give new sellers an opportunity to meet with established suppliers who might not respond to emails and cold-calling from new businesses who have just started selling on Amazon.

Wholesale Directories

Some websites keep a large, public database of wholesalers online. To start selling on Amazon, you can pay these online directories a small fixed monthly fee to access this data. Another option is to use online B2B market places like Ali baba which let you connect with suppliers and order directly via the platform

Improve processes and products

No guide to selling on Amazon would be complete without some advice on improving your performance. When it comes to your listings on Amazon, always keep in mind that customers are primarily finding your products through search. Your aim is to successfully outsell your competition.

Even if you are just beginning, there are certain actions that can make a big difference. Here are some tips to keep in mind:

  • Optimize listings and ensure they have top-quality images, thorough descriptions, and key product features. Use all of the images and videos allowed for your listing. Use the featured bullets to improve indexing and conversion, and make sure titles are keyword-rich, descriptive, and concise.
  • Evaluate pricing and the way you set up your products.
  • Pay close attention to the Buy Box – the little box that pops up on product pages and allows customers to add the product to their cart right away. If multiple sellers sell the same item, Amazon decides which seller features in the box. 82% sales on Amazon come from the Buy Box, so it is worth competing for! Winning the Buy Box relies on competitive pricing, optimized listings as above, a full inventory, fast shipping times, and highly rated customer service.
  • Improve your seller profile and reputation for customer service by monitoring and acting on both your metrics and customer feedback using Seller Central.

Frequently asked questions

What are the evergreen products to sell on Amazon for beginners?

If you want to build a sustainable business, you should avoid jumping on short-term trends. Evergreen products sit within evergreen niches - think about products that relate to health, hobbies and interests, lifestyle, household, children, and pets. Avoid seasonal products. Aim for affordable products that have demand year-round.

What are the cons of selling on Amazon?

There are some potential drawbacks to selling stuff on Amazon. It is easy to get caught up in the hype and forget about any pitfalls. Here are three:

  • Costs – the Amazon fee structure appears complicated, and there are traps for the unwary. If you do not understand the fees, how they apply and when you run the risk of reducing or removing your profitability
  • Competition – there are so many competitors on Amazon, including Amazon. You will need to stay on top of your market research and your competition.
  • Control – selling on Amazon means signing up to conditions, policies, systems and processes, and some limitations. Amazon has excellent facilities, but you may need to design or change your way of working to suit.

How can I sell on Amazon Prime?

The simplest way to sell on Amazon Prime is to use the Fulfillment by Amazon process. Bear in mind, FBA is not a set-and-forget strategy. You still need to manage your inventory, note any specific deadlines and be aware of peak shopping days or risk your profit margin.

The other option, with Seller Fulfilled Prime not running at the moment, is to sell your goods to Amazon (Amazon Vendor Central) as a wholesaler. The disadvantage here is that Amazon has control over your price, and you have no real guarantee on how much Amazon will buy from you in each transaction.

Stockouts: How can that affect my business?

A stockout occurs when you are unable to provide the number of goods or services that your customers expect. There are many reasons why this can happen, but it usually comes down to budgeting and forecasting errors and/or poor organization.

Stock outs lose you purchases and can lower your product ranking. On Amazon, sales beget sales. The fewer the sale, the lower your ranking, and the lower your ranking, the less you can sell in the future. This vicious cycle can destroy an unorganized business.

Conclusion

If you want to sell on Amazon, it is essential that you take the time to do the research and do it correctly. If you have time constraints, consider hiring a partner that can help you with Amazon. It is a time-demanding platform with a lot of structured data that needs to be monitored on the backend.

Check out the A-Z Guide to Amazon Advertising by Prabhat Shah for in-depth advice on mastering Amazon advertising from starting to an advanced level. This book explains how to create Amazon ads, carry out keyword research, do advertising optimization, and scale your sales with your advertising.

I recommend that you also study our online course - How to start selling on Amazon, to get systematic and in-depth knowledge of starting your Amazon e-commerce business. Be aware of all costs and potential pitfalls to protect your profits, monitor, and action your metrics and feedback. Finally, aim to continually improve your processes and products, adjusting as you know more and grow in confidence.

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