How to Start Selling on Amazon in 4 Steps: Complete Guide for Beginners
As the coronavirus pandemic keeps shoppers away from brick-and-mortar stores, those same customers are looking for shopping alternatives online. That, combined with the general increase in e-commerce popularity, makes this an opportune time to expand your online retail presence — including opening up shop on the Moby Dick of all e-commerce marketplaces, Amazon.
Amazon is by far the largest e-commerce hub in existence: According to eMarketer, in 2020 Amazon sold over $260 billion in merchandise and accounted for almost half (38.7%) of all online sales in the U.S.
Not only is it the most profitable online sales channel, but it’s also the go-to choice for the majority of e-commerce shoppers. As of 2018, more shoppers started their product searches on Amazon than any other site — including Google. Specifically, 46.7% of all shoppers started product searches in Amazon, compared to the 34.6% who started with the runner-up, Google.
But with all the promise on Amazon, you can expect some healthy competition. The Amazon marketplace attracts sellers of all sizes and business models, which means if you want to break in, you need a plan.
Whether it’s your first time selling online or just on Amazon, we’ll show you how to spear this white whale of retail with the confidence of a planned approach.
Find your market
One of the biggest follies of first-time Amazon sellers is assuming there’s room for them. With all the competition, you have to make sure your products and prices can stand up against what’s already available. So the first step is research.
In general, there are two routes to success: selling products that aren’t listed yet, or, if they are already listed, selling them with better deals. Both routes start with conducting the relevant product searches on Amazon and seeing what’s available.
If you have original products that aren’t listed yet, that’s a good start, but it doesn’t necessarily guarantee success. For one thing, you still have to market and promote those products so people know they’re there.
Moreover, you have to double-check that your particular customers shop on Amazon — not every demographic or shopper type uses Amazon regularly. In this case, you want to research related or similar products to gauge:
- price expectations
- marketing strategies (like search ads or Buy Box wins)
- the popularity of that customer group
If your products are already listed on Amazon, consider areas for improvement among other sellers. For example, if you can’t undercut competitors’ prices, maybe you can offer new color variants.
Before getting serious about your Amazon campaign, we recommend “playing around” on the site to get familiar with how more experienced sellers use it. At this stage, your fiercest rivals can be your greatest teachers.
How you handle online fulfillment is an early and significant decision all e-commerce brands have to make. For Amazon, you can either handle fulfillment yourself or partner with FBA (Fulfillment By Amazon).
In a nutshell, FBA is a paid service where you send your inventory to an Amazon storage center and they handle the packing and shipping for you. The alternative is doing it yourself — storing your own goods and shipping them out yourself or using another paid service like a third-party logistics (3PL) company.
There are a lot of factors to consider here, not the least of which is the cost of using FBA versus the cost of storing and shipping items yourself. There’s a lot of small fees with FBA as well, including a per-sale cut, a fee for each cubic foot of storage space you take up, and a penalty for slow-moving products.
Although it’s best to look at the exact numbers, in general, FBA works best if you sell small or medium-sized products with a quick turnaround. Conversely, if you sell large items, heavy items, or seasonal items that “sit around” most of the year, you’re better off handling fulfillment yourself.
Crunch the numbers
There’s no foolproof plan for absolute Amazon success, but accurate estimates are the next best thing. Before investing in a risky Amazon expansion, it’s smart to plan out your budget to see just how viable it could be.
If you’ve been following along our steps, by now, you should know your target price for remaining competitive and the costs of your inventory acquisition, storage, and fulfillment. But you also need to consider other costs, namely marketing and advertising.
On top of everything else, you also have to calculate how much it costs to sell on Amazon. Retailers have a choice of two different selling plans:
- Individual: no flat rate; $0.99 per item sold
- Professional: $39.99 per month; no per-item fee
As you can tell, the individual plan is meant for new sellers or sellers who want to experiment, while the professional plan is for those who expect regular sales from the start.
The exact numbers of your budget change based on your model — for example, drop-shippers don’t have to worry about storage or shipping fees but need to invest more in advertising and marketing. Plan your budget beforehand and calculate how many sales you’d have to make to turn a profit.
When you’re officially registered as an Amazon seller, the real experience can begin. Selling on Amazon is an ongoing process — if you’re not fulfilling orders, you should be promoting your products or scouting new offerings. Social media, advertising, and online marketing are going to be some of your greatest assets, so don’t be afraid to lean on them.
A top priority should be standing out from other competitors in your niche. Why should shoppers buy from you instead of your rival who’s just a click away? Although you’re free to be creative about what makes you different, we can narrow down your options into four general areas:
- Price — Your products are cheaper than those from other sellers; price-conscientious shoppers will buy from you automatically.
- Quality — Your products are better quality than those from other sellers; people who care about quality will choose you even if it means paying a little extra.
- Speed — Your products ship faster than those from other sellers; people who need it yesterday will choose you for the quickest delivery possible.
- User Reviews — Your products have the best user reviews. Don’t underestimate peer reviews: 76% of shoppers trust reviews as much as personal recommendations from friends and family.
When it comes to e-commerce, there’s no bigger name than Amazon. These four steps can help you conceptualize your position in the Amazon marketplace and etch out a place for yourself. Becoming a part of the world’s biggest marketplace could be the best investment you ever make.
Nick Maglosky is VP, General Manager, at Endurance International Group.