Amazon is the biggest online retailer in the world, with an extensive product range that allows customers to buy anything from books, clothing, electronics, and garden supplies, to furniture and home essentials.
As a retail giant valued at over $900 billion, people keep coming up with ingenious ways to get their own slice of the e-commerce pie. If you are struggling to find your way in this market, keep reading to find out how you can succeed when it comes to selling on Amazon.
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Decide How to Sell
One interesting fact about starting an Amazon business is that the barrier to entry is low. There are also many different ways to start a profitable Amazon business. For third-party sellers, there are five widely used Amazon business models.
Retail Arbitrage
The retail arbitrage business model involves scouting products from offline platforms at a good bargain and listing these products on Amazon at marked-up prices. This model allows you to profit from sales of high-demand products that you can buy in bulk elsewhere and resell on Amazon. Each profit is calculated as the difference between the original price plus Amazon fees and your reselling price. A variation of this model is online arbitrage, where you purchase goods from online stores and resell them via Amazon. This model allows you to work remotely and enjoy flexibility.
Wholesale
The wholesale model involves buying products in large quantities from a supplier at a reduced price and selling them on Amazon for a higher price. This model results in a high-profit margin because you are sourcing goods for the lowest possible prices. However, you will need to do diligent research to ensure that the products you plan to sell are in demand. This model also requires a huge initial investment in order to become successful.
Private Label
This Amazon business model involves getting products from a third-party producer and branding them in your name. With this model, you can buy unbranded products at a low price, affix your personal brand name and logo on them, and resell them at a higher price for profit. This model requires solid branding, marketing, and optimization to succeed. In order to ensure that your private label business is successful and yields high profits, you need to choose a good product idea for your brand.
Dropshipping
This is a popular business model for those seeking passive income. Dropshipping allows you to build a reputation and rake in profits as a seller, without actually owning any products. Instead, you are selling products on behalf of a supplier. All you have to do is list a product, and when a buyer places an order, it is handled by your supplier who dropships the item to the customer on your behalf. Dropshipping eliminates the stress of inventory management, packaging, and logistics. However, if the products are low-quality, it puts your reputation as a seller on the line, instead of the supplier.
Handmade
This model involves designing and creating products of your own that are listed on the Amazon marketplace and gives you complete control over both the quality of your items and the profits you make. This model also requires adequate product knowledge, a suitable workspace, time, and coming up with ideas that will sell well on Amazon. If you are creative and have enough time on your hands, with the right guidance, the Handmade business model can become a money-maker for you on Amazon. However, if you do not know your way around, you may end up not making any money for a long time.
To choose the best Amazon business model for you, you have to consider your budget, risk appetite, and how much time and flexibility you have.
Now that you know the different business models on Amazon, let’s discuss how you can get started and make money with your seller account.
How to Start a Business on Amazon
Starting a business on Amazon can be a daunting experience because there are so many available resources and a lot to figure out to ensure that you invest wisely. However, the platform has put together a structure that can help you achieve success. After all, Amazon succeeds as a business only when you succeed on its platform. In order to further break down this structure into bite-sized chunks, here are a few essential steps you should take to help you start a highly-profitable Amazon business.
1. Find a product
Let’s assume you have already decided which business model works best for you. As we stated earlier, Amazon is home to a multitude of products in several categories. If you want to make good money, you will need to do your research and decide what you want to sell. There are a lot of methods to do that, including manual searching, analytics tools, or other special services. The last one is the most effective approach if you don’t have enough knowledge and time to devote.
2. Open a seller account
After deciding where you want to pitch your tent, you can create your Amazon seller account. There are two types of seller accounts on Amazon: Individual seller and Professional seller accounts.
The individual seller account is open to sellers who plan to sell less than 40 items/per month. The fee for every item sold is $0.99, among other transaction charges. With the professional seller plan, you can sell over 40 items/per month. This plan includes a monthly flat rate of $39.99, regardless of the number of items you sell.
3. Source the product
This step will vary depending on which business model you choose. If you want to do arbitrage, you can visit physical or online stores that carry your desired product, compare prices, and decide which works best for you. For other models, you should visit B2B marketplaces like eWorldTrade to get an overview of potential manufacturers, suppliers, and wholesalers that can provide you with high-quality products.
4. Decide between FBA and FBM
When it comes to fulfilling your customers’ orders on Amazon, you have two options: FBA and FBM. Fulfilled by Amazon (FBA) is the preferred method for new sellers on Amazon. Through this method, Amazon provides the warehouse where your products are stored. They also pick, pack, and ship the orders for you. In addition, Amazon handles all returns and processes refunds for you. FBA is preferred because it is the only fulfillment method for Amazon Prime members.
Fulfilled by Merchant (FBM) gives you more control over your inventory, labeling, and logistics with individual customers. It costs more, but also allows you more flexibility and control. You should consider FBM if you have enough time to attend to all the processes of running your Amazon business.
5. List and Promote
Once your seller account is ready and you have sourced your product, the real show begins. Listing your product is the only way to showcase it to the millions of buyers who shop daily on Amazon. Write a detailed product description to reach your target audience, showing them what you can offer and why they should shop from you. The steps for listing your items are as follows:
- Sign in to your Amazon seller account.
- Add a new product (if you want to sell something that does not already exist on Amazon) or select an existing product.
- Select your product category (or subcategory, where applicable).
- Fill out the product detail page with sufficient information.
The final step is to optimize your listing. Use relevant keywords and attractive product images to capture the attention of prospective buyers. You can promote your listing through sponsored ads on Amazon, or via social media and Google ads.
Conclusion
The beauty of selling on Amazon is that it is largely free. However, you will incur some costs, such as selling plan fees, referral fees, shipping costs, and fulfillment costs, among others. When you consider the pros and cons, Amazon is a wonderful place to launch your online business. With the right tools and strategy, you can make your Amazon business a success.
