Businesses of all sizes today use Amazon to market and sell their products. For many entrepreneurs who are just starting their businesses, Amazon is seen as the natural way to jump-start and be successful. Amazon has revolutionized the online retail market by offering businesses exposure to large audiences.
Many entrepreneurs aspire to join in on the success. The good news is that it is fairly easy to get started on Amazon. Amazon has opened its doors to online sellers to use the platform to get customers and increase their business exposure.
However, most online sellers think of the possible success but fail when it comes to selling to make a profit. This article will cover all you need to know about how to sell on Amazon and make a profit from your online sales.
By the reading this article, you should be able to understand the basics of selling on Amazon and get started on your profit-making. You will Learn how to sell on Amazon
How Selling On Amazon Works
Basically, you get to list and sell your product on the platform for a small fee. Take an example where you are selling a used Play Station. We will use the screenshot below to study what your product display will look like when it is listed.
- The red arrow on the right points to the seller. If you’re the one selling, your name or business name will appear there. The arrow points to a 3rd party seller. (You will be categorized as a 3rd party seller once you list your products ion amazon.
- The PlayStation above is displayed in what is called The Buy Box. This means that once a customer clicks on Add to Cart, your item will be added to their online purchasing cart. For the above image, the seller displayed in the Buy Box is Worldwide Distributors.
- You also note that the seller’s title is followed by Fulfilled by Amazon. This means that Amazon handles the shipping of the product.
- Look to the bottom right and note the red box. It highlights Other Sellers on Amazon. Once a customer clicks on it, they will be redirected to other 3rd party sellers selling the same product. However, those sellers are not yet in the Buy Box as their product is yet to be selected.
- You may note that Amazon.com has not featured either in the Buy Box or the other 3rd party seller’s section. You will come across products where Amazon has been listed in either of the lists. As a 3rd party seller, you will have better chances of making a sale when Amazon has not been listed in either lists.
Your product can either fall in the Buy Box or the other sellers section. The Other Sellers on Amazon section displays the number of different sellers capable of fulfilling the order. In the case above there are 168 other sellers. Amazon displays the same item from different suppliers on the same product page.
The more products there are, the more the product pages.
How Do I Get To The Buy Box?
You have more chances of making a sale when a client views your product on the Buy Box. Getting to the Buy Box first depends on your rank on the product list. There are four simple actions you can take to improve your ranking on the product list.
- Make your price as friendly as possible
- Ensure you get good feedback from the sales you make
- Use Fulfillment by Amazon as your fulfillment method. The PlayStation in the screenshot above is fulfilled by Amazon; thus it ranks high in the product list.
How To Sell On Amazon Using Fulfillment By Amazon (FBA)
Using Fulfillment by amazon improves your rank on the product list. How does Fulfillment by amazon work?
- Identify a product you wish to sell on Amazon.
- List the product on Amazon for sale. You will need to set your price during this time. We will discuss how to set your product price on Amazon later in the text.
- Get your items ready for shipping to FBA warehouse.
- Amazon will assign you a warehouse. Box up your product(s) and ship them to this point. FBA lets you pack different items together. They will handle repackaging and shipping to individual customers. For example, you can package ten board games in one box. FBA will repackage them and ship them to customers as the orders requests are placed.
What happens when Amazon receives your package in a Fulfillment by Amazon Warehouse?
- You will need to verify that the products were in good condition when you sent them.
- Amazon activates your product listings once you verify the state of the products. Your item will be available for sale once it is listed and your name will appear on the product details page or the Buy box.
- Amazon will stock your product(s) in their warehouse as they await purchase and shipping.
- Once a customer places an order for your item, Amazon will ship it to them.
- Amazon notifies you via email every time an order is shipped on your behalf. After the product has been shipped, you will receive a payment deposit on your seller account. The payment includes your selling price with the Amazon fees already deducted.
- Your sales will be deposited to your bank account every two weeks. The deposit includes the total sales you have made within the two weeks.
Note that your job is to identify items to sell, list them, and ship them to an Amazon warehouse. Amazon handles the rest of the process up to delivery.
Related: What Is Amazon Dropshipping?
Benefits Of Selling With The FBA Program
When you choose to ship with Amazon, you attain better customer satisfaction through the various benefits a customer will receive. On your end, you will build a quick delivery reputation, and Amazon will handle the heavy lifting of your products. Your customers will need to be members of Amazon Prime to enjoy some of these perks.
They can expedite their deliveries, and this leads to greater user satisfaction. There are three main benefits you will reap as a seller using the FBA.
Quick Shipping times
Your customer will be satisfied in the quick shipping times when you have your product available on Amazon Prime. You will have a competitive advantage over sellers who have failed to enlist their products on Amazon Prime. The following are the shipping time options of using Fulfillment by Amazon and Amazon Prime.
1. Two Day Shipping: Two-day shipping is usually free. This option is available to customers within the United States and bordering countries.
2. Same Day deliveries: your customer will see a countdown timer as they purchase the products. The timer is titled ‘Order Within’ and the timer ensues. Your delivery capacity and inventory impacts the same day delivery option. You will not be able to fulfill same-day deliveries if you lack the capacity or your inventory is low. Your customer must be within the eligible zip codes to enjoy same-day deliveries.
3. 2-Hour Deliveries: Amazon can also fulfill your deliveries within two hours. This option is available on Prime Now. However, the same conditions on same day deliveries apply. Your customer should be within the eligible zip codes or cities to enjoy two-hour deliveries. You also need to have the inventory capacity to fulfill 2-hour deliveries.
4. Free Release Date Deliveries: are you launching a new product in the near future? Is it available for pre-order? The free release date shipping option lets your customers have the products on the same day you release it. This is the case mostly for electronics like cell phones, PlayStations, games, among others.
5. No-Rush Shipping: This option is also free for the customer. They will pick this option when they have the patience for waiting for their order. Thus the name No-Rush shipping. This shipping option will earn customer rewards for future purchases. Hence they will be motivated to make more purchases, and you will increase your chance to make more sales.
6. Amazon Day: Are you selling products that a customer can buy recurrently? They will be able to choose this shipping option and select a delivery day. All the products they will have purchased during the week will be delivered on this day.
Customer Confidence In The Return Policy
Amazon has a return policy for products that arrive damaged or items that fail to meet customer expectations. They are confident when they see your product is Fulfilled by Amazon. The return policy states that they have to return the product within 30 days of delivery.
Amazon will take 2-5 days to process a refund and for a refund to reflect on the customer’s Amazon account. You need to provide a return address and be ready to give refunds to build a good image for the customer. You can also be ready to exchange for products that are delivered damaged.
Amazon Does The Heavy Lifting
Amazon will handle the heavy lifting part of your online business when you subscribe to the Fulfilment by Amazon program. You can ship the products in bulk to the Amazon warehouse, and they will repackage them to be able to sell them as individual retail items.
The only heavy lifting part you will handle is packing up the products and shipping them to the Amazon warehouse the program advices.
Alternatives To Selling With Amazon FBA
The Fulfillment by Amazon shipping program makes sense 99% of the time? So how about the other 1%? You may opt to ship the items directly to the customer yourself. This option is known as Merchant Fulfil. You are in charge of storage, packaging, and shipping.
However, we strongly advise that you use the FBA program unless you are influenced by a particular circumstance.
Now that you are familiar with the selling logistics of the Amazon business model, let us dive into how you can get started and set up a successful store.
How To Start Selling on Amazon
The first step you take is to register and set up your seller account on Amazon. You can do a quick search for sellercentral.amazon.com. You will see a register now button. Click on it to get started. You will be redirected to the registration process, and you will need to fill out your details.
You will need to provide information such as your name, your address, your phone number, among other information. The process will only take a few minutes, and your store will be ready to sell. The screenshot below highlights the stages you will go through to set up your store.
Once you have set up a seller’s account, it is better to download the Amazon Seller’s App than to rely on the website.
Decide What To Sell
The general idea of profits when it comes to choosing an item to sell. It would be best if you found something at a low or no cost and then resell them at a higher but reasonable price on Amazon. You can look around your home to find items at no cost or go to the local retail store to find items at a low cost.
a. Products From Home
From your home, you can use books or gifts you have not opened, used, or used a lot. You can also resell electronics like the PlayStation. If you look at the PlayStation screenshot, we used earlier, and you will see that the red box also highlights new and used.
b. Retail Arbitrage
The other option is retail arbitrage. Retail arbitrage is the process of buying products from a retail store at a low price and selling them for a higher price on Amazon. It is a great method to start your online business on Amazon.
Why Use Retail Arbitrage?
First, it requires a low initial investment. A low initial investment could widen your profit margin. You could even start with a single product. Thus, as you progress, you get more products, and your earnings increase as well. This also provides a chance to learn the Amazon selling process better especially when you start with only a few items.
You could also use the knowledge to source for more products as you will also note which products have better chances of generating sales.
How Do I Go About Retail Arbitrage?
Start with the clearance section on your local stores such as Target, Walmart, K Mart, Home Depot, or any other store that looks to quickly clear stock. For example, you may find a book clearance section you could use to your advantage.
Scan the book or item’s barcode with your phone’s camera using the Amazon seller’s app. Your scan will showcase a screen that brings out the book's details. The screenshot below is an example of such details.
What To Look For In An Amazon Item Scan
You need to watch out for two important details that will come up on your scan.
a. Eligibility To Sell The Product: You need to confirm that you are eligible to list the product for sale on Amazon. You will see a green tick on the eligibility once your scan is complete.
b. The Sales Rank Of The Product: you can denote your products rank by looking at the top left of your scan. The rank tells you how fast your item could sell on the platform. The lower the number, the faster your product could get sold. For your first few items you could limit your product rank to 250,000. As you grow your business, aim to sell products with a lower rank number.
What Will Be My Product’s Gross Proceeds?
Before you list the product, you will need to assess the gross proceeds of the product. The gross proceeds section is on your app’s far-right. You will input some digits to find out what your gross proceeds will be.
- The Inputs You Should Look Out For
- Selling price
- Shipping cost per pound to get the product to Amazon
- Cost of Purchase.
Let’s use the picture below to guide us in understanding how you can tweak the inputs and outputs to better your profits.
Return On Investment Percentage
Let us do a little simple math. You derive your return on investment percentage using the profit you make and the cost of purchase. In the example image above, the item was bought for $10, and the profit made was $7.13.
To get your percentage ROI, you will divide the profit (which is $7.13) by the cost of purchase (which is $10) and multiply the result by 100%. The percentage ROI will be 71.3%. As a beginner, you need to maintain this percentage above 50%.
If your product passes all the requirements, you should invest in more of the item. For example, buy at least 5 of these items. Make sure you repeat the above procedure for the items you wish to list on Amazon. Also scan as many products as you can. With time, you will be able to know which products to list and which one to drop just by the look of them.
Calculate Profit With The FBA Revenue Calculator
The procedure above calculates your profit if you are a registered seller on Amazon. However, those who are yet to join Amazon can look up an item on the FBA revenue calculator and still calculate the expected profit. You are required to input the price, the cost of shipping to Amazon, and the product cost.
The results of these inputs are the profit the product is expected to generate. If you are yet to become a seller, run all your products through this calculator to estimate your expected profits.
3. Price Your Item
The price range of your items should be on a similar level with other sellers on the list that use Fulfillment by Amazon. Click on the Other sellers on Amazon option. Look to your left, and you will see two criteria for filtering the list.
For the Shipping filter, select Prime. The condition filter will depend on the state of your product whether it is New or Collectible. The prices of the sellers within the criteria you have filtered will be displayed alongside their products.
We recommend you match the lowest price, or you go 1% or $0.01 higher.
If you set your price lower than the price gap, you will find your competition pricing theirs lower. As the pricing decreases, so do your profit margins.
What Can I Gain By Selling on Amazon?
You should know that anyone with 18 years and above can buy and sell on Amazon. Here are the perks that await you once you have set up an online store on Amazon.
1. A Huge Sales Potential
Amazon has a very wide global customer base. As of today, Amazon has over one hundred million registered users with the figure growing each year. The sales from independent sellers amount to 40% of all Amazon sales. You will have access to hundreds of millions of potential customers once you list your product on Amazon.
2. Access To Repeat Sales With No Marketing
The wide customer base makes Amazon Stand out in comparison with Standalone sites. Sites like Shopify have to spend much money on advertisements and marketing. You will not need to layout marketing strategies when selling on Amazon.
3. Your Orders Can Be Repackaged And Shipped On Your Behalf
Do you find packaging and Shipping tedious? The Fulfillment By Amazon (FBA) program will save you both time and money. Amazon will take care of packing, storage, and shipping of your products. Moreover, the program simplifies returns, international shipping, and customer service.
A 2014 study reveals that 71 percent of sellers using FBA registered at least a 20 percent increase in sales since they joined the program.
4. Unsolicited Referrals
Amazon’s algorithm lists your products for customers to see without supplier biasness. This means that your product has equal chances of drawing your customer’s attention. Moreover, you could tap into amazon’s network of affiliates to help potential customers to identify your products.
The affiliates post amazon ads on their websites and your products have a chance of featuring on these ads.
5. Competent Back-end Support
Amazon offers back-end support that creates a seamless business process. The support includes credit card processing, inventory tracking, and collection of sales tax. You will need to pay various sales tax rates cross various jurisdictions as Amazon is a global company.
However, you should not that they only help with the sales tax collection and NOT filing of the taxes. Filing taxes is your responsibility.
We have discussed how you get started on your Amazon account. There are some strategies you can pinpoint to help you run a successful online business through Amazon. First, start by committing to selling on Amazon as an investment. It may take some time, but in the long run it is worth it.
You can even start with a single product. Secondly, adopt retail arbitrage as your initial and core sales strategy. This strategy involves purchasing goods from a retail store and selling them for a higher price on Amazon. The best place to start in the clearing section of your retail store. It would be best if you also looked around your home to find stuff that you may resell.
Make sure your product is eligible to sell on Amazon. You can rely on the Amazon Seller’s app to know if your product is eligible. Next, calculate your expected profit. You can use your Amazon App if you have already enrolled as a seller.
If you are yet to register, you may rely on Fulfillment by Amazon revenue calculator to search for products and calculate your anticipated profits. Make sure you have a minimum threshold profit. You also need to pay keen attention to how you price your products.
Use the lowest price on Amazon and charge slightly higher say by 1%. If you go lower, you could tamper with the profit margins and create more competition among the sellers. Remember to always rely on Fulfillment by Amazon for your means of shipping fulfillment.
If you want to know how to sell on Amazon make sure you read this entire article!