Amazon is the world’s largest online shopping forum and if you are planning to start a business on Amazon, it could be one of your best life decisions.
Fulfillment by Amazon (FBA) is continuing to grow in popularity. FBA is an Amazon Business model that gives sellers more than what a traditional e-commerce business offers. In here, Amazon stores your products for you, even picks it up from your place, packs and ships out to your customers. This means 75% of your business worries are reduced by Fulfilment by Amazon. All you have to take care of is producing your goods and marketing them. Hence, Amazon poses a great option for those who are looking to venture in e-commerce.
We have put together a step-by-step guide that covers everything about starting an Amazon business with limited knowledge.
Essential Information You Need Before Starting an Amazon Business
Amazon makes it a lot simpler to build a business from scratch, even for the inexperienced. This guide will help you make your dream come true as it has done for many others.
1. How Does Amazon Works?
First of all, the products you buy from Amazon are not sold by them. Although Amazon does have its own products, like Alexa, Amazon tablets, Amazon Echo Speakers, they also own brands that sell products on Amazon. However, these brands are not directly related to Amazon but they are trademarked by Amazon Services.
The money that Amazon makes usually come from the third-party sellers, i.e. you, and not from their own product sales. Most of the products on Amazon are sold by established brands, such as Pantaloons, Lakme, Maybelline etc. or by people like us, who are in search of the right platform for business growth.
Amazon earns the profit in a very easy way, you put your products up for sales on Amazon and with every sale you make, Amazon will take a certain percentage from the sale as commission.
If you are above 18 years old and have a passion for establishing an e-commerce business, you can make money through Amazon, while they make money through you.
However, no business is easy, even Amazon. And so, you have to do your homework before you start the process.
2. Things You Need to Think About
First of all, you should know what you are getting into. According to Amazon’s statistics, more than 90% of Amazon sellers that are not established brands give up on their business within the first three months.
It is not because Amazon Business is difficult, but it is because they get scared of the uncertainties –where they are, what they are doing and how they can pull themselves up after the first fall.
Like any other business, Amazon also involves risks and you should be aware of the risks above all. You have to be prepared for the falls and risks to gain a successful foot-hold. If a business promises only gains and no risk, you really need to double check, for it may be a scammy trade.
The Process of Selling on Amazon is Easy. Here you go:
- Register your account
- Create an Amazon listing for the product ( This is correct only if your product is not listed on Amazon already)
- Send your products to Amazon for stocking up (only for FBA sellers)
- Fill in your inventory details
- Start marketing and selling
- Ship the products
Note: If you are an FBA seller, your products packing, shipping and storing will be taken care by Amazon.
Okay, now that you are aware of the process, get to know the risks as well.
Risk 1: You have to invest time and research about your product’s current market status, how well it is accepted, customer preferences and how many competitors you need to compete.
Risk 2: If you choose items that people don’t buy, if you don’t price them economically or if you get into an overly saturated market where the competition is already tight, there is a risk of losing money big time.
Risk 3: If you don’t carefully go through and follow Amazon policies, you might face setbacks and fall outs. This factor is very important because many sellers have trusted outside tips more than Amazon rules for making money and have ended up getting their accounts suspended.
Read Amazon policies thoroughly and do as much research as possible on finding profitable products to sell. And most importantly, do not hurry. Take this business one step at a time.
3. Amazon Seller Registration
You have to make a choice between two types of Amazon seller accounts for registration, Professional Seller Account and Individual Seller Account.
The type of account best suitable for you depends on a number of factors, such as your business plan and products. Each account has different features:
- You can sell up to 40 items a month
- Your items must already have a listing on Amazon.
- It is free to register
- You have to pay a fee for every sale ($0.99 per item + referral fee and variable cost)
- You cannot create a new listing
- Cannot list customized products. So, if you plan to sell private labeled products, this is not the account for you.
- You cannot use Amazon Advertising Platform.
Professional Seller Account:
- $ 40 monthly fee but exclusive features
- Free to sell an unlimited number of products
- Can create your own listings
- You can use Amazon Advertising Platform as well as become a ‘Fulfilment by Amazon’ (FBA) seller
- You can register for Prime Account
4. Amazon Business Models
Private Labelled Products:
Private Labelled Products are the best kind of Amazon Business Opportunity. With Private Labelled Products, you will be establishing your own brand, which can be extremely powerful in future.
- Highly profitable with lots of growth opportunities
- Target profit generating product
- Find manufacturers willing to fabricate your product
- Customise the product by increasing the quality of the product
- Brand it under your name and develop a Brand Name.
- You will be getting your own listing
- You won’t have to compete for Buy Box
- Learn more about Amazon Private Labelled Selling
Whole Sale Products
It means buying profit generating products directly from the manufacturers and reselling them. It is a very profitable business model in Amazon as you can buy the item really cheap and sell at a higher price.
- Get a wholesale license
- Purchase the product from the manufacturer
- Don’t alter or fabricate them
- Sell them as third-party seller under manufacturer’s brand name
P.S. Make sure you increase the sales price to get a gross profit of at least 60% so you can cover expenses and yet save a good share.
It is similar to retail arbitrage, but the only difference is instead of purchasing items from the retail store, you buy them from online stores.
This business model is not very profitable for customers can actually buy those items themselves from other stores. However, people choose Amazon for its efficiency and comfort quotient.
Also, note that online arbitrage is a risky and not very sustainable Amazon business. If you want only small returns and are just testing how Amazon works then online arbitrage should be okay. However, for a steady business go for one of the first two business models.
5. What is Fulfilment by Amazon (FBA)
FBA is a special program where Amazon lets professional account sellers to register. In here, you will be sending your products to Amazon warehouse for inventory. Your orders will be fulfilled by Amazon – from packing to shipping the products – in return for a small fee.
This method is convenient and tension free. Rather than handling the shipping and basic returns yourself, rest assured as Amazon will do the duty, faster and precisely.
- You can be anywhere in the world and still get your products shipped right on time
- No more packaging, shipping, and handling muddles
- A very small fee as a token for the fulfillment
- Shipping costs are lower if you sell from foreign countries (except UK and USA) through FBA
- FBA sellers get a prime logo
- Customers with the prime account will enjoy free shipping by purchasing your products
- FBA sold products get better ranking
- Their delivery process is smooth and secured and delivery performance is an important metrics for product search ranking
- Chances of winning Buy Box is more
- Customer trust level increases
You will have to pay two different kinds of fee for FBA; one, fulfillment fee for picking up, packing and delivering your order, and two, monthly storage fee for storing your items in Amazon warehouse.
The cost is determined by the weight and size of the packaging.
Other fees that you may encounter include labeling fee, FBA prep fee, long-term storage fee (+6 months), stock removal fee, return processing fee (excluding basic return fare).
The final part is marketing and generating sales and for that, you have to earn your ranking on Amazon. There are several ways you can do this, such as SEO, Organic Marketing and Paid Marketing.
You will have to familiarise with the marketing techniques. If you follow this guide and are willing to do your research and study, you will be able to build a selling empire in Amazon in no time. If you face any struggles with starting your Amazon business, write to us in comments and we will cover it next time.