Many people ask is it still worth selling on Amazon? Statistics reveal that 89% of online shoppers like to shop on Amazon better than any other marketplace. Also, SMBs registered on Amazon sell more than 4,000 items per minute. Thus, selling your products on Amazon can be a great option to make money come your way.
Amazon makes entering its marketplace easier for small businesses, thanks to the fulfillment by Amazon FBA. With this program, your e-commerce business can take advantage of Amazon’s giant warehouses and be a third-party seller.
If you’ve been wanting to be a seller on Amazon but still wondering if it’s worth all your time and energy, keep reading. In this article, we’ll unveil all you need to know regarding Amazon FBA. Also, if you like to dig deeper to find a perfect eCommerce platform for your store, check out this comprehensive Shopify vs Amazon comparison.
What Is Amazon FBA?
Fulfillment by Amazon or Amazon FBA is a service that allows small and medium-sized businesses to become third-party sellers on the Amazon marketplace. With this fulfillment plan, you can store your items in Amazon’s warehouses and let the company handle your orders.
Meaning, Amazon will dispatch your order, pack and ship it, and communicate with your customers as well. Here’s how Amazon FBA works in the grand scheme:
- You deliver your products to Amazon FBA warehouses.
- Amazon FBA stores your products.
- Customers place orders on Amazon.
- They pack and ship the products.
- Amazon FBA takes care of returns and refunds when needed.
- The profits you made through Amazon are paid out on a bi-monthly basis.
How to Start Selling on Amazon
Now that you know the basics, we can cover how you can start working with Amazon FBA.
1. Choose a Niche
Finding a niche that aligns with the business owner’s passion and interest is the dream of any entrepreneur. But, it may lead you to react more emotionally than logically.
When choosing a business niche, think about the products that are competitive and relevant to the present day. However, stay away from any viral and seasonal items, as they tend to come and go in a split second.
The good rule of thumb for choosing a product to sell on Amazon is finding products that aren’t on the marketplace or finding a better alternative.
Nonetheless, conduct keyword research to find the best product to sell. Or, you can check the top-selling pages on Amazon for inspiration.
If you’re still having difficulties choosing the items, check out these best Amazon seller tools. While they won’t directly tell you which products to sell, it helps you sort your ideas and narrow down the options. Thus, you can choose from the good ones.
2. Conduct Market Research
Market research is about finding out if your chosen item can actually attract consumers. Also, it helps figure out who your potential customers are and where they live.
One of the best ways to conduct your market research is to keep track of your competitors’ sales. Therefore, getting to know your competitors can actually help you with your business plan.
3. Choose a Supplier and Place Your First Order
Suppose your chosen product is doing well in the market. In this case, you need to find a supplier to source private label products from.
Before deciding on the supplier, compare one supplier to the other to make sure the product’s quality is excellent. If you don’t know any supplier, you can find them on B2B platforms or at trade shows. When you’ve had a shortlist of suppliers, visit them for better research.
Here’s a checklist for better supplier research:
- Ask for product samples.
- Find out about the price.
- Inquire about the Minimum Order Quantity (MOQ).
- Learn about the order limit.
- Calculate the shipping rates.
If the information meets your expectation, you can safely place your first order. The aims of the first order are to test the market and get feedback from your customers. Thus, your first order should be worth six months run of inventory to make sure you cover your lead time.
4. Register Your Amazon Seller Account
While you’re waiting for your orders to come, you can sign up for an Amazon seller account. In this stage, you should decide which plan that’ll work best for your business.
Amazon offers two plans: An individual plan and a Professional plan. The Individual plan will charge you $0.99 for every time you sell a product. On the other hand, Amazon comprises a flat monthly-basis subscription fee of $39.99 with the Professional plan.
Here are the things you have to prepare for the registration:
- A business email address.
- Bank account and credit card information.
- ID card and phone number.
- Tax information.
5. Create and Optimize Product Listings
You need to have product listings to showcase your products on Amazon. They include the product title, product description, product images, and bullet key points.
To attract potential customers, always try to provide high-quality product pictures. To get more Amazon search results, use relevant keywords in your product description and bullet points. You can try to use keyword research tools, like Ahrefs, to help you get the perfect ones.
With such tools, all you need to do is enter your product name onto the browsers, and they will give you a list of great keywords to use. Or, you can go to Amazon’s Seller Central to acquire examples to improve your listing quality.
6. Promote Your Business
People won’t find out about your business if you don’t share a word about it. You can optimize your product launch notices, offer free shipping promos, and include product discounts to boost your sales.
Or, you can participate in PPC marketing. Team up with publishers to include your Amazon product links to gain traffic.
7. Monitor Your Inventory
Amazon FBA automatically reduces your inventory when an order is placed. Thus, you should track your inventory level to make sure you don’t lose your momentum. Should an item be running out of stock, call your supplier to have it restocked immediately.
8. Track and Follow Up Your Amazon Reviews
Apart from giving you insights into how your business is doing in the market, all these reviews are your business’s social proof. On top of that, following up on your customer reviews is one of the best ways to increase customer satisfaction and retention.
You can start a forum or make a social media account to communicate with your customers. Responding to your customers’ feedback will leave them feeling heard and appreciated. Thus, allowing you to build stronger relationships with your customers.
6 Benefits of Selling on Amazon with Amazon FBA
Amazon FBA also comprises a lot of perks for its sellers. Here are the six impactful benefits of using the Amazon FBA:
Extensive Storage Space
This is the most obvious advantage of Amazon FBA. When signing up for the service, you needn’t worry about where to store your goods. Amazon FBA will take care of your product logistics and storage in its numerous huge warehouses.
Win the Amazon Buy Box
Getting the Amazon buy box is the key to your e-commerce success in the Amazon marketplace. As the Amazon buy box has been generating more than 80% of all Amazon sales, it’s now become a feature that all Amazon sellers try to win.
While it’s still vague how Amazon picks a store and rewards it with the buy box, it’s clear that Amazon includes free shipping as one of the determining factors. That’s why Amazon sellers using Fulfillment by Amazon are more eligible for the buy box.
On top of that, you can improve your bottom line, as you won’t need to allocate much money to market your business. The buy box will help people find your products.
Automatic Amazon Prime Qualified
Partnering with Amazon FBA means automatic qualification for Amazon Prime. Meaning your items will be available for the two-day free shipping for Prime members.
A study shows that 75% of consumers tend to look for free shipping when shopping online. Therefore, being an Amazon Prime seller can also make you stand out from the competition.
Low Shipping Rates
As Amazon teams up with numerous shipping companies, it obtains lots of perks, including subsidized shipping rates. Therefore, you can offer low to zero shipping fees for your customers.
Stress-Free Shipping and Returns
Managing item shipping and returns can be tricky and time-consuming. From selling the product to getting the item back and handling a refund or replacement, the process is quite draining.
Registered as an Amazon seller means you only need to send your goods, monitor your sales, and wait for Amazon to deposit your payback. With all the convenience Amazon FBA gives you, you can focus on refining your business plan to increase your profit margins.
Excellent Customer Service
Dealing with customer inquiries can be daunting. Primarily when you’ve successfully driven a significant amount of traffic to your store.
With Amazon FBA, you don’t need to worry about building a customer service team. The company comprises its FBA partners with 24/7 customer service over phone calls, emails, and live chat.
Things to Consider When Selling on Amazon
All those benefits are great for the success of your Amazon business. However, you get your work right to acquire all of them. From thorough financial planning to handling the Amazon fulfillment process, here are some things you need to prepare before starting selling on Amazon:
- Amazon FBA fees. Fulfillment by Amazon is a paid service. It will charge you subscription fees to store your items in Amazon warehouses and referral fees for the sales made on the Amazon marketplace.
- Delivery process. Amazon requires you to barcode all your products. Otherwise, Amazon will charge you additional service fees. Also, you need to make sure that your products are not oversized or fragile to ease the fulfillment process.
- Additional fees. Suppose your products sit in the warehouse for more than a year. In that case, Amazon may charge you extra money. Thus, start small with your Amazon selling strategy to prevent your bottom-line cost to explode.
6 Tips to Successfully Sell on Amazon
No business guarantees zero risks. That applies to signing up for the Amazon FBA as well.
Commonly, sellers will try to beat a platform’s algorithm to boost their sales. While it’s well-known that Amazon’s algorithm remains a secret, don’t fret. Here are the six tips Amazon sellers need to know to have their business stand out from the competition:
Have a Great Inventory Management System
Losing track of your inventory is a big problem and a hindrance to your Amazon business’ success. Therefore, you need to shoot your best calculation regarding this matter.
Storing your products in Amazon’s warehouses for a long-term period gets you to pay the extra money. On the other hand, running out of stocks means you voluntarily generate sales for your competitors. If you have an extensive inventory, hiring people to get the work done is a big help.
Research Market Restrictions
One of the mistakes sellers often make is not researching for restrictions thoroughly. Some product categories require you to submit formal documentation and request for approval.
On top of that, ensure you have taken your time to understand the Amazon Terms of Services. Therefore, rushing to upload all of your products to Amazon to quickly acquire net sales is not recommended.
Check if the Private Label Product Is Patented
Sourcing a patented product can get you trapped in legal issues. Also, stealing someone’s patent can get your Amazon seller account deleted. Therefore, always check the product patents first before you decide to sell it.
If it’s your manufacturer having the patent, then you’ll be free to sell the item. Otherwise, it’s too risky to invest your money in it.
Review Your Supplier Regularly
While you’ve built years and years of strong relationships with your supplier, it never hurts to open opportunities for others.
As a good seller, ensure your products are high-quality and in the price range that makes sense for your potential prospects. Therefore, should you find a manufacturer that holds the same value as you, have a go at it.
Maximize Your Profit Margin
To increase sales and profit, a seller should always analyze his overall gross margin. This is because prices change from time to time. If you don’t own the updated data on your financials, it’ll be hard to increase your profit.
Without compromising your products’ quality, try to stick out with the 3x rule. So, whatever your supplier charges you for your items, sell them three times the price. One-third goes to your supplier, one-third goes to Amazon, and the rest goes to your bank account.
Encourage Your Team to Never Stop Learning
While it’s OK to do all the work yourself, sooner or later, you’ll see that having someone to help you is a breath of fresh air. To keep them motivated, you can hold a workshop or bring in skilled trainers. That way, you’ll be able to prepare for the future.
Is It Worth Selling on Amazon in 2021?
Small businesses can sell on the Amazon marketplace and be third party sellers. Being an Amazon seller using Amazon FBA is one of the best ways to make money and win the sales competition.
To recap, here are some of the best benefits of signing up for Amazon FBA:
- Unlimited storage space.
- The Amazon Buy Box priority.
- Automatic Prime qualified.
- Subsidized shipping fees.
- Excellent customer service.
And here are some of the Amazon FBA cons:
- Amazon FBA is a paid service.
- Difficulty delivering your product to the fulfillment centers.
- Additional fees for extended storage time.
So, is it still worth selling on Amazon? Yes and no. As a matter of fact, every online selling platform isn’t one-size-fits-all. With mature preparation and precise planning, every seller can take advantage of the Amazon FBA service and sell their products on Amazon.