We’re stating the obvious when we say Amazon is big. Incredibly big. With 1.9 million active sellers serving a customer base of more than 300 million, Amazon is by far the largest online retailer.
The earnings potential on the platform is also huge. According to data from JungleScout, about one in every four Amazon sellers makes over $25,000 per month (or $300,000 per year) in sales.
For some companies, the large earnings potential and vast global customer base make Amazon a critical part of multichannel selling. For others, it’s an entire online business model.
However, most Amazon sellers fail because they don’t have the resources to be successful. In this article, we’ll discuss all the basics of selling on Amazon so you can become a successful seller who makes a living off it.
Why Sell on Amazon?
When you join Amazon as a seller, you join a global marketplace. You can reach customers all over the world, or you can focus on your local market.
The sheer size of Amazon’s customer base means you’ll have access to more potential buyers than you would selling through other online platforms like eBay or your own website. It has some of the most robust tools and systems to help you manage the sales process. According to data directly from Amazon:
- Over 50% of multichannel sellers using Amazon prefer it over their other customer acquisition channels.
- Almost 60% of sellers say Amazon is their fastest-growing channel.
- Independent sellers comprise more than half of the units sold on Amazon.
Amazon also provides extensive marketing support through Seller Central—their platform that includes tools like sponsored product ads, a suite of analytics to track sales and optimize your performance, and market insights that can highlight macro trends you leverage on your other sales channels.
Setting Up an Amazon Seller Account
The first step to becoming an Amazon seller is to set up your account. To do this, head over to Seller Central and create an account that includes the following information:
- Your name and address
- Credit card information (for registering with Amazon Payments)
- Tax information
- A government-issued ID
- Bank account information
Amazon offers Individual and Professional selling plans. The Individual plan ($0.99 per sale) is standard and the Professional plan ($39.99 per month) is their premium subscription. You can change plans at any time, so it’s best to start out with the Individual plan — if you have a few months without sales, you’ll benefit from saving the monthly cost while navigating the learning curve. Once you start making more than 40 sales per month (enough to justify the Professional plan’s fee structure), you can upgrade.
Amazon FBA vs. Amazon FBM
Broadly, there are two types of Amazon sellers: FBA and FBM.
- FBA (fulfilled by Amazon) is the process of sending an inventory of products to Amazon, which then stores them in its fulfillment centers. When a customer orders your product, Amazon will pick, pack and ship it for you.
- FBM (fulfilled by merchant) means that when customers order your products, they’ll be shipped directly from you or a third-party supplier.
Amazon FBA is the most popular method of selling on Amazon, especially among those who prefer the dropshipping business model, because it’s faster, and customers love the convenience of Amazon Prime. It also offers protection from customer complaints in case something goes wrong with their order.
However, FBA sellers also incur higher per-sale fees for using Amazon’s infrastructure. While it’s easier to manage an FBA account, it’s harder to achieve profitability when you factor in the additional costs.
FBM sellers have more control over their profits, but they must also manage customer service and fulfillment in-house. They often benefit from a better profit margin, but it takes more time and effort to package and ship orders correctly. To navigate some of these difficulties, FBM sellers typically use a 3PL (third-party logistics) for inventory management and order processing.
As a general rule, FBA is ideal for products with high sales volume and higher profit margins, where the seller prefers not to handle the storage and shipping of products. FBM is more suitable for products with lower sales volume, lower profit margins, or unique items where the seller is willing to handle the storage and shipping of products.
Choosing the Right Amazon Product to Sell
If you aren’t already selling a product on a Shopify store or eBay, your next step to selling on Amazon is choosing the right product. There are many factors to consider when selecting a product:
- Manufacturing cost
- Availability of suppliers
- Market demand
- Shipping costs
- Profit margin
- Advertising costs
- Use Helium 10 or JungleScout to search for product ideas and filter by potential demand, competition, margins, sale price, product type, and other criteria. Ideally, you want to sell a product that costs at least $25, otherwise, you won’t make a profit once you factor in Amazon’s fees and the cost of advertising. You can also install a Chrome plugin that lets you do this from Amazon’s website.
- Talk with suppliers once you’ve found products you’re interested in. Usually, this is as simple as sending emails to suppliers listed on Alibaba or a similar site. You want to ask them about MOQ (minimum order quantity), pricing, lead times, and terms of service.
- Figure out how much it costs to advertise your product. Amazon market intelligence goes a long way here. Look at the CPC (cost-per-click) of running Amazon ads for specific keywords related to your listing. Assuming a 10% conversion (a conservative estimate), calculate the difference between what you’ll make in sales after production costs, shipping costs, and Amazon fees and your advertising costs.
- Narrow down your list of potential products to a few that match your set criteria. Order samples from each supplier so you can inspect them and ensure they meet the quality standards listed on their website.
Listing Your Product on Amazon
Amazon uses a Global Trade Item Number (GTIN)—which could be a UPC, ISBN, or EAN—to identify the product you’re selling. You don’t need to provide one if the product already exists on Amazon (like some FBA products). If it’s a new product, you may need to get a UPC or ask for an exemption. Aside from a product ID, here are a few critical pieces of information for each listing:
- SKU: A unique code to track your inventory.
- Product title and description: You can use the same version that’s used on other websites
- Images: make sure to show your product from multiple angles.
- Shipping weight and dimensions: For FBA, this helps Amazon calculate shipping costs
- Price: Be competitive and research what similar products are selling for.
- Search terms and keywords: These are what customers will search for on Amazon, and they are how Amazon’s search engine will know to show buyers your product.
To increase your listings’ success, it’s important to follow best practices. Add clear images, descriptive titles, and brief feature bullets to help shoppers find your items easily. To avoid any negative impact on your launch, steer clear of the following pitfalls:
- Images: To ensure that your listings meet Amazon’s requirements, use images 500 x 500 pixels or larger (we recommend 1,000 x 1,000). The background should be plain white, and the product should take up 80% or more of the image space.
- Product variation: Consider listing products with only color, scent, or size differences as variations. Determine if customers anticipate finding these different products on one page and if not, list them separately.
- IDs: Adherence to Amazon’s standards for product UPCs and GTINs ensures consistency in its search engine and puts your product in front of more of the right customers.
Promotion and Growth Strategies for Amazon Sellers
Once you have your listing set up, it’s time to begin marketing. Amazon Ads and SEO can both drive organic traffic to your product listings. Influencer marketing and email campaigns are also great ways to increase others’ exposure to your products.
Here are a few of the most successful strategies for promoting your Amazon product:
- Affiliate marketing: Blogs, TikTok users, and other outside influencers can help promote your products. Amazon makes it easy to get them an affiliate link to share.
- Social media: Platforms like Instagram, Facebook, and Twitter are all great spots to link to your listings and reach customers who may not be searching on Amazon directly.
- Email campaigns: Reach out to potential customers with personalized emails. Make sure to include the product name, description, and a direct link to purchase the item.
- SEO: Amazon is the largest ecommerce search engine, and the logic behind its algorithms is similar to that of Google—it depends on showing customers relevant products immediately, and it uses keywords and relevant content to do so. By including different keyword variations in your product page copy and images, you can gradually help your products appear for the right searches.
- Reinvesting in ads: Amazon makes it easy for sellers to reinvest their revenue in ads on their platform. Instead of putting money in your pocket, you should use your profits to promote your products and increase sales.
Selling on Amazon is not a get-rich-quick scheme, nor is it an easy job, but if you have the right strategy, do your research, and follow best practices for setting up your product page, Amazon can be a great source of extra income. By following the steps and advice in this guide, you’ll be well on your way to selling like a pro.