So you want to make money by selling things on Amazon FBA. And we are not talking about dropping a few affiliate links or marketing someone’s else’s product. We are talking about creating an entire storefront on Amazon – real live merchandise, trademarked products, lifelong consumers – all with you in charge.
The question of “how to start Amazon business” is one that we get asked often. In our previous posts, we have explained almost everything about Amazon, from starting the business to selling the products, but never a comprehensive guide to starting an Amazon business, especially for beginners.
In this post, we will go into details from choosing a niche to setting up your account, selling strategies, selling pitfalls, and everything else required to jump-start your Amazon FBA business in the new year.
Starting an Amazon Business – what you need to know
Before knowing how to start selling on Amazon and put together a sustainable and thriving business, you need to make some decisions first.
You need to understand how selling on Amazon works, what you can sell, your available options, and what to expect from each business model.
If you look at the stats, many sellers have failed to develop a good business despite getting the start they needed because they didn’t take the time to understand the process.
So, how selling on Amazon works?
Amazon doesn’t care about relevancy. The only thing they care about is how much money you can make them. Although sales are the number one ranking factor for the Amazon Algorithm, they do care about reviews and on-page optimization.
Amazon sells its own products such as tablets, Echo speakers, Alexa, and all kinds of household items. Amazon also owns brands that sell products on Amazon but aren’t marketed as its own brands.
Even though Amazon sells its own products, it makes most of its profits from the third-party sellers. Anybody can sell on Amazon given that he/she over 18.
When you put your products on Amazon, for every sale you make, Amazon will take a commission. This way, you make money, Amazon makes money, and everybody is happy.
The process of selling on Amazon is easy
- First, you need to register for an account
- Next, create a listing for the products
- If you are an Amazon FBA seller, you send the product to the Amazon warehouse
- Fill in your inventory
- Start selling
- Ship the products (if you sell through Amazon FBA, the marketplace will fulfill and ship the orders for you)
Amazon FBA Business Plan – success/failure
Most of the Amazon sellers don’t know what they are getting into and thus, with the first fall, they surrender. More than 90% of the sellers give up after a first few months of trying. This doesn’t mean that selling on Amazon is not a good business plan. It is all about the temperament and awareness of the risks involved with starting an Amazon FBA business and selling products.
Willingness to take risks is the primary tactic of every successful Amazon FBA seller, and there is no such business that promise assured success with no dangers.
Don’t get the idea that selling on the world’s biggest marketplace is not an ‘overnight get rich kind of business.’ You need to research a lot and invest a right amount of time doing that. Moreover, there is always a high risk of losing money.
So, it is all about taking one step at a time and going through the Amazon’s policies.
Is your Business a Good Fit for Amazon?
Amazon provides with a welcoming environment for newcomers. It only takes a few minutes to set up an account, and a few more minutes to get your product listings live. Irrespective of the Amazon FBA business plan, Amazon wants to make it functionally stress-free for anyone to start listing products on its site.
Is your product a good fit? To answer this, we will review a few basics about the Amazon marketplace.
Things you need to consider when deciding to sell on Amazon
#1 Amazon sets the rules of its own marketplace
Amazon has the benefit of accumulating enormous amounts of buyer purchase and buyer search data, which it shares only in minimum with the sellers. This collection of information gives the marketplace’s first-party business – Private Label, which is Amazon retail – a considerable advantage of picking winners repeatedly when directing products that it should peddle on the marketplace. Moreover, the private label will usually win the Buy Box, which is a feature through which the vendors competing on the same product will get ranked to conclude who gets the deal when the buyer clicks the ‘Add to Cart’ button.
In simple words, competing directly on the same listings offered by amazon is not likely to be an effective long-term Amazon FBA business plan.
#2 Almost anyone can list products for sale on Amazon
If not the brand has strict distribution and regulatory controls over its product, it is not strange to find hundreds of resellers offering the same products for sale on Amazon. This leads to price wars in addition to incentives to overlook Manufacturer’s Suggested Retail Pricing/Minimum Advertised Pricing policies or to divert items at low margins.
#3 Amazon wants its sellers to use “Fulfillment by Amazon” Amazon FBA
The Amazon FBA program is offered to all the third-party sellers. Using Amazon FBA, the sellers can put their products into the marketplace’s network of fulfillment centers. When a buyer places an order, Amazon will look after all the individual order fulfillment procedures, rather than the seller.
Read More About Amazon Selling:
- 15 Things You Should Understand if you are in Amazon FBA Private Label Business
- Top Ten Tips to Compete in a Over Saturated Market on Amazon FBA Space
- How to Find Products to Sell on Amazon for Killer Profit Part 1
- Tips for Boosting your Amazon FBA Business Using Bundles
How to Find a Product to Sell
It is not easy to find a profitable product to sell on Amazon. When you are asking around questions like how to start an Amazon FBA business with little money, it crawls back to only one thing – finding a profitable product. So it is a part that requires proper research and rushing or overlooking this aspect may cost you your Amazon FBA business.
Your Amazon FBA business plan must include a robust way to conduct product research.
It all starts with picking a niche market to sell on. You want your product to be small and productive enough so that it can generate sales the moment you put it on Amazon.
The best way to start searching for a profitable product is to avoid restricted Amazon categories. As mentioned earlier, you will need to apply and gain approval from Amazon for specific categories.
Products that require approval:
- Hoverboard products in any category
- Laser pointers and related products
- Products in the software category
Categories that require approval:
- Streaming media players
- Collectible coins
- Blu-ray, DVD, Video
- Amazon Watch Warranty FAQs
- Holiday Selling Guidelines in Toys & Games
Restricted Products that you can’t Sell on Amazon
- Tobacco & Tobacco-Related Products
- Surveillance Equipment
- Subscriptions and Periodicals
- Sex & Sensuality
- Recycling electronics
- Recalled Products
- Offensive and Controversial Materials
- Lock Picking & Theft Devices
- Jewelry & Precious Gems
- Gambling & Lottery
- Explosives, Weapons, and Related Items
- Drugs & drug paraphernalia
- Currency, Coins, Cash Equivalents, and Gift Cards
- Alcohol, and more
Some of the mentioned products from the list can sold but only after approval from Amazon.
There are certain tools available like Product SPY Pro Product Research Tool that can help you with Amazon product research.
Factors to keep in mind when choosing a product
When picking an e-commerce product, there are certain tactics you need to focus on. Let’s start.
#1 Retail price between $10-$50
Determine your retail price range when picking a product. The ideal minimum retail price of $10 will ensure that you will be able to cover your margins that include manufacturing costs, advertising costs, and shipping to Amazon FBA charges. Do not go too low either.
#2 Decent Sales Volume
A product that sells 300-400 units a month is the indication that it’s a great product to market. Be sure to look at the estimated monthly sales of the product you have chosen.
#3 Low Seasonality
You may not want to sell products that are only seasonal like during holidays. Go for products that sell year around.
#4 Fewer reviews for top sellers
Analyze your competitors and see how many reviews they are generating for the product they are selling. If it is not more than 200 reviews, then there is an opportunity to outsmart the top sellers with your product. Alternatively, if the sellers have thousands of reviews for a product, it will be intelligent of you if you leave that product category.
#5 Ability to upgrade or room for improvement
In order to stand out from the competition, you need to create a product that can be customized regularly so that the customers don’t have to look for other options.
#6 Small and Lightweight
Based on the size of your product, your storage and shipping fees will be determined. That is why it is always advised to go for small and lightweight products. Low costs mean more profit.
#7 Easy to Manufacture
Avoid the use of complex materials and components that not only make manufacturing a difficult task but also increase the manufacturing cost. If possible, try to source a local manufacturer rather than looking internationally like Chinese. People have more trust in products that are locally made.
Manufacturing is another way using which you can outsmart your competition. You can market your products with labels like ‘handcrafted in Wisconsin.’ This will generate a sense of trust for your product.
Read More About Amazon FBA Traffic strategies:
- The Ultimate Guide To Driving Outside Traffic To Your Amazon FBA Listing
- Ultimate Guide to Advanced Marketing Techniques to Sell AMAZON FBA Products Rapidly
Mastering Amazon SEO and Moving your Products up the Search Rankings
When it comes to selling Amazon, remember one thing, Amazon only cares about the customers and selling stuff to those customers. Your successful Amazon business will depend on how easily and quickly you are selling your products.
Amazon uses A9 algorithm that’s different Google Search and other search engines. Buyers rarely hop on the marketplace just for product search, and Amazon knows this. So you need to optimize three factors in order to make profits by selling products. They are:
It stars with product listing optimization.
The best practices, suggested by Amazon itself, start with the title. Your listing’s title plays a critical role, and hence, your title should contain the following elements:
- Product Name
- Key feature or Material used
- Product type
The next in optimization of product listing is the use of bullet points. Make sure to use whatever keywords that weren’t in the title in the product description. And most importantly, create a product description as if it conveys a story. The product description doesn’t impact the rank, but it undoubtedly influences the visibility.
Avoid using duplicate keywords in your listing and utilize the backend search terms properly. Once a word is typed in the description, bullets, or title, avoid repeating it elsewhere.
Sales are dominant in performance optimization. However, sales are not easy to generate especially when you are just starting out. You will see your listing somewhere on page 20, and the bitter truth is it is rare that a customer goes to a second page. So even if your product is better than what your competitor is offering, it will go unnoticed.
So in order to generate sales, you need to drive both external and internal traffic to your product listing.
Other than sales, you need to emphasize on reviews as well. Customer relies heavily on product reviews when making a buying decision. So improving your Amazon reviews should be your top priority.
Reselling on Amazon – what you need to know
The most important thing to remember when you are seeking answers on how to start Amazon business is about reselling. Amazon’s marketplace is aimed to make it easy for virtually anyone to list products on the website, plus the brands themselves. Operational complexities now can be easily handled thanks to the Amazon FBA program that allows fulfilling direct-to-customer orders.
Thus, brands posing as direct-to-customer resellers on the marketplace are better able to cut down on the prices and stay profitable.
This makes it difficult for the resellers to bring significant value to the buyers if:
- The brands that make items available to them are now able to compete side-by-side as resellers
- The resellers don’t understand their all-in cost structures
- The resellers are having to challenge one another to win the Buy Box
- There is no boundation to how many sellers could offer products from the same category
Those resellers who have an exclusive sourcing affiliation with its brands, where the brands also approve not to become resellers, find real success with their Amazon FBA business plan. Nonetheless, as more brands are realizing the opportunity on Amazon, only a few are willing to make such a deal.
Over the past 3-4 years, we have seen two significant shifts among the base of resellers on Amazon:
- The resellers are creating private label brands in order to become exclusive resellers of their own brand
- The resellers are belligerently pursuing brands to become their private resellers on Amazon
So if you want to start a successful Amazon business as a third-party seller, it is crucial to understand what sourcing benefits you will have. Hence, you need to evaluate the success on your own products and try to better them to overshadow the competition. For this, you will need to analyze, update, and upgrade the products you sell at least every six months.
How Amazon makes it profitable for themselves?
There are around 2,000,000 third-party sellers on Amazon and yet the marketplace has all the necessary data including:
- Where they can’t find the brands they are searching for
- How much they buy at what prices
- What they actually buy
- Which items buyers search for
Amazon Seller Account Setup – what you need to Drive Sales
When you sign up for an Amazon seller account, the clock starts ticking. You are required to meet all the required Amazon performance metrics the moment you signup, given there is the first scheduled account charge occurring after 30 days.
Before you formalize your seller account registration process, we encourage to take several steps. This will help with your question of how to start an Amazon store.
Amazon Seller Account Checklist (Necessary Paperwork)
In order to get past the full registration procedures for your Amazon Seller Account, you will require a horde of information readily accessible, which includes:
- Business Information
Your business information will consist of the legal business name, contact information, and address.
- Email Address
You will need an email address specifically for your company account. The email account you set up will be used by Amazon to send important notifications and messages regarding your Amazon business plan and other aspects.
- Credit Card
You will require a universally chargeable credit card that has a legal billing address. Amazon will cancel your registration if your credit card number is not authentic.
- Phone Number
A valid phone number is required during the registration process in order to allow Amazon to reach you during the process. Make sure that you have your mobile phone close during the registration process.
- Tax ID
You will be required to provide your tax identification details including your company’s Federal Tax ID number or your Social Security number. You will be rerouted to a brief “1099-K Tax Document Interview” to proceed the registration process further.
- State Tax ID
You will be required to provide your State Tax ID information for the state you have tax nexus. This is physically impacted by call centers, warehouses/3PLs, and company offices. Earlier this year in June, the United States Supreme Court changed the rule considering the responsibility that e-commerce vendors have to pay sales tax for online purchases.
Now, before you register for your Amazon Seller Account, you need to work through some quick questions. They are as follows:
- Where do you propose to send the Amazon order returns?
This is the crucial aspect of how to start selling on Amazon. It is vital that you think about your return procedures. Do you send them to companies that handle grading/testing and make products available for sale again or are you going to handle the returns all by yourself?
- If you are planning to use Amazon FBA, will you co-mingle (stickerless) your products?
We recommend using Amazon FBA, given its prospective visibility to millions of Amazon Prime customers. However, if you are using Amazon FBA, you need to determine if you plan to co-mingle your items with other sellers’ FBA inventory of the same products. The risk associated with co-mingling is that there is a likelihood of your products mixing up with low-grade versions or counterfeits. If you overlook the co-mingle option, then you need to activate a ‘Stickered’ Amazon FBA account.
- Do you plan to use a “doing business as (DBA)” name to operate your seller account?
Many businesses have genuine reasons for using a different customer-facing name. At Amazon as well, the sellers can conceal their identity. This is done to prevent brands from knowing that they are selling online.
- Are the products you plan to list are in categories that the marketplace has gated?
Amazon has strict rules and guidelines for products that can be sold on its marketplace. Not everything can be sold through Amazon; there are certain limitations. Hence, you need to determine whether Amazon gates your desired categories. If they are gated, then you need to apply to get them ungated. So, it is imperative to review the approval category page of Amazon before registering.
How to start selling on Amazon? Amazon Selling Strategies
Selling on Amazon for the first time can be intimidating. You don’t know whether you will succeed or not. It is true that Amazon can be a lot of work, but if you do it the right way, it is clear sailing.
However, you have to note that if your product is of the usual size, the truth is that some other seller will be selling it on the marketplace anyway.
So the questions for you is not whether you will have an Amazon presence, but what kind of presence will you have to shield your brand.
Time and Cost-Effective Strategies to Start Selling on Amazon
Amazon Selling Downsides
If you have registered with Amazon, created your listing, and are ready to take the marketplace with a storm; hold on, there are a few more things to consider.
If you think you have figured out the marketplace, then you are naïve. But the good news is, if you are able to survive through your first shopping season profitably, it means you can do well and make more profits in the future.
However, there are a string of issues that even the savviest Amazon sellers don’t figure out.
Next, we are going to unveil some pitfalls that you must address in order to implement your Amazon FBA business plan successfully. You need to determine the ways to prevent the common problems that many Amazon sellers come across when they start selling on the marketplace.
#1 Tax Setup
Most sellers overlook the State Tax Collection options on Amazon thinking that the marketplace, by some means, takes care of all the sales tax issues all by itself. However, it turns out; it is up to the sellers to specify in which states they want Amazon to collect taxes along with managing the settlement of the taxes to the suitable tax authorities across the nation.
Set your taxes upright in the first place
When you sign up into your new Amazon Seller account, we advise you to:
- Open Setting > Tax Settings
- Specify in which states you want Amazon to collect sales tax
- Next, set the “Use Default Product Tax Code” to “A_GEB_TAX.” it is a default setting where no tax is being collected
The reality is most sellers concentrate on top line sales numbers instead of the bottom line profits. There aren’t many long-term benefits of top line sales numbers apart from a few volume discounts. Hence, you need to focus on the bottom growth and account for all costs upfront. It is better to improve your bottom line profits deliberately than your top line sales. For this, you need to:
- Stop averaging everything out and only look at your overall sales numbers and margins
- Start concentrating on every SKU (Stock Keeping Unit) you sell on Amazon
#3 The issue with Co-Mingled SKUs
As mentioned earlier, you have the option of sending your product into FBA without requiring to provide your inventory with SKU-level stickers. However, stickerless inventory gets mixed in with the inventory of the other Amazon FBA sellers of the same SKU. When a buyer places an order, Amazon pulls the product from the most suitable inventory, even if the inventory doesn’t belong to you. In case, if other sellers have sent in inferior or counterfeit products, you may get into trouble with the marketplace for selling a defected product to a consumer, even if it technically wasn’t your product.
#4 Repackage Unsellable Customer Returns
You must know that your Amazon Seller account is enabled for “Repackage Unsellable Customer Returns” by Amazon. This means, if a customer returns the order with its packaging damaged, Amazon will put on its own packaging to make your product resellable.
But we advise to turn off this repackaging feature and start handling the repackaging cases yourself. Amazon repackaging has the potential to be seen as an infringed product.
#5 Listing Optimization
Within Seller Central, there are several sources of data available using which you can improve your listing quality.
- Use the Sponsored Product Ad campaign
- Include answer to previous product inquiries on your product page
- Lastly, ask for the category listing report from the Inventory Reports section. This report will help you determine any data gaps including incorrect tax codes, generic keywords, missing bullet point, etc.
The mentioned points might help you answer your question how to start Amazon business. However, starting an Amazon FBA business is easy but what takes the real toll is continuing with the business because you will not get success within the first few months of selling. So, if you are enjoying doing it, stick with it for longer. The best way to remain attached to your business and not give up is to find a product category that excites and interests you.
Slowly increase your product offerings. Having more than one product to offer will reduce the risk of your Amazon FBA business overly dependent on just one product. As you expand your business, build a website for your brand. A website will help you directly communicate with your potential customers.