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Selling products online is a great way to make money from home. For most entrepreneurs, the most popular choice is to sell on Amazon using the Amazon FBA service or by manually fulfilling orders as an FBM (Fulfilled by Merchant) seller. This article will introduce you to how you can start selling products on Amazon as a new e-commerce entrepreneur.
If you didn’t know it yet, Amazon is a marketplace with millions of customer visits per day, so being able to sell products through this platform can be very profitable if you know what you’re doing.
There are several options available for selling products on Amazon that all have their own pros and cons. The following are some of the many ways in which you can sell your products on Amazon:
Table of Contents
✅ Fulfillment by Merchant (FBM)
This is the traditional model where you ship items to customers directly from your inventory when orders are received. As an Amazon seller, your receive order notifications through your email and/or the Amazon seller app, store and manage your stock levels, and pack and ship items yourself.
While this model is an easy way to ease into selling on Amazon, it could be hard when your business starts expanding without hiring outside help to help with your eCommerce order fulfillment.
✅ Fulfillment by Merchant (FBM) With Drop Shipping
This is the adopted method of selling products on Amazon that allows sellers to sell products without having to store them in a warehouse or purchase inventory before selling. When sellers receive an order from their customers they simply mark it as shipped directly from their suppliers who will fulfill and deliver the item directly. This practice is also known as drop shipping where merchants sell and ship their products directly from the suppliers.
This model of selling on Amazon, especially for beginners is very profitable as they don’t have to purchase inventories up front, deal with inventory storage or pay FBA storage fees which means usually lower overhead costs than when they sell items with their own inventories, but it also means that you need to find a supplier who will allow dropshipping and still sells at competitive prices.
✅ Vendor Central (wholesale account)
This is the traditional wholesale model where sellers sell via a contractual agreement with wholesale distributors or manufacturers who sell in bulk, which offers better discount rates compared to selling individual units through dropshipping or retail arbitrage. Merchants would then sell these units at retail price and earn a margin per item sold while paying storage fees for any unsold inventory at Amazon warehouses until they sell.
This model for selling on Amazon is more profitable than the previous one, but it means that you need to order in large quantities and observe return policies which may include restocking fees when items are returned by customers.
✅ Seller Fulfilled Prime (SFP)
Merchants sell their products at a retail price directly to customers who are Prime members (Amazon’s paid membership program), while paying only for the services they use like packaging and shipping units sold. This method is suitable for merchants with items that require special packaging or delivery speed, otherwise, if your products do not require these, then you might want to opt for another selling model like FBM or SFP even if it means losing the potential profits from completing orders faster than regular sellers.
SFP is the most profitable model for selling on Amazon since you earn money from both selling items and providing additional services which are not offered by other business models like FBM or Vendor Express. However, it can be hard to sell in large volumes because only Prime members qualify as customers.
✅ Fulfillment by Amazon (FBA)
This is the most popular selling model on Amazon since it is simple, quick, and cost-effective. Sellers sell their products at retail prices directly to customers who can purchase with or without Prime membership, while paying for only the storage fees and commissions they use.
This selling model does not require any special knowledge or skill compared to other business models as it is operated just like an online store which makes it perfect for beginners. You sell multiple units of the same product and you only pay for storage fees and commissions, making this method easy to sell in large volumes which can be hard to achieve through other business models that have a limit on your inventory.
The downside of using FBA is that sellers will not receive any profits from retail price minus shipping charges since this will go to Amazon as a referral fee leaving you just with margins from storage fees until your sell those items which mean no access to funds immediately.
How to Sell on Amazon for Beginners [Step by Step]
So you really want to sell on Amazon? Here’s a step-by-step guide on how to start your very own Amazon selling business:
1. Choose the Amazon selling business model that best suits your goals and abilities. There are three models to choose from: flipping products, creating your own brands, or arbitrating products.
2. Do extensive product research to find profitable products to sell. Use online tools like Egrow, AmzScout, MerchantWords, and Google Trends to help you find winning products.
3. Invest in high-quality inventory to sell. Make sure that you have enough stock to meet customer demand and minimize the chances of running out of inventory.
4. Set up an Amazon seller account and register for Amazon’s services.
5. List your products on Amazon and sell them!
6. Build a good relationship with customers to keep them coming back for more while making more sales in the process.
7. Take advantage of Amazon FBA to scale up your business, especially if you aim to sell thousands of units per month or are just one person running this business alone.
8. Keep track of all expenses, profits, and taxes incurred by your Amazon selling business so that you can claim these on your taxes properly come tax time – which is every April 15th for most people!
9. Think about turning your Amazon FBA business into a real company by incorporating it under an LLC or S-Corp form of entity. This will help you separate your business and personal assets, should anything go south for whatever reason.
10. Open a business bank account. While you can use your personal checking account in your Amazon business, separating your business finances from your personal finances is a good practice. This prevents cross-over spending and will save you from accounting headaches down the road.
How to Sell Private Label Products on Amazon
Private labeling is when you sell a product on Amazon under your own brand. A simple search for “water bottle” would provide tons of results on Amazon. Many of these are private label products because the listing is not directly from the water bottle company itself but from sellers who sell it on Amazon.
Launching your own brand to sell on Amazon is one of the best Amazon seller business models. However, there are some factors that new entrepreneurs should consider before jumping straight into this business model:
1) It takes time to find success unless you have large capital to spend on advertising to sell private label products on Amazon.
2) Private label products have more margins than reselling or retail arbitrage because you are buying the product at wholesale prices and selling it on Amazon for a higher than conventional markup.
3) Fulfillment is tricky since there’s no real way around using FBA unless you sell enough to get your own fulfillment account that can handle larger orders. This option usually requires an upfront deposit of $1,000-$5,000 depending on the storage space required. There are ways around this by partnering with other sellers who use FBM but there’s very little control over your brand’s image when selling under another seller profile name- especially if they sell similar items too.
4) You will need to sell more than one or two products to gain true success unless you sell absolutely unique items that are not found by your competitors. This doesn’t entail selling ten different water bottle brands, but maybe selling three or four brands of the same product but with different features that set each apart.
5) Different markets have different price ranges for private label products so it’s possible to find a successful niche market in some countries where there’s less competition than others.
How to Sell Wholesale Products on Amazon?
The second best way of building a long-term business off Amazon is by sourcing products wholesale and retailing them on Amazon.
The first thing you need to do is research products that are already successfully selling on Amazon with not a lot of competition.
You then source wholesalers that sell these products, open a wholesale account as a retailer, then order your first items to list on Amazon.
Wholesale product sourcing can be done by visiting trade shows where you get the opportunity to buy directly from factories or product distributors that sell wholesale products which you can then purchase in bulk quantities and sell on Amazon.
Take note that not all manufacturers and distributors are excited to work with e-commerce sellers.
The best way to source products to buy wholesale is through product research tools like AMZ Scout which will enable you to find profitable wholesale items even without having any prior knowledge about them.
As an Amazon seller, you’re technically a retailer. The great thing about sourcing your products wholesale is that you can simply reorder every time your inventory runs low.
How much does it cost to sell wholesale products on Amazon?
You will hear a lot of gurus touting online that you can get started selling on Amazon without any sort of capital. While doable if you start out selling stuff you don’t need at home, it’s definitely a different story when it comes to wholesale sourcing as there are minimum order quantities (MOQs) required by manufacturers or distributors. This means that you will need some sort of capitalization to get your business off the ground.
The good news is, MOQs per item may cost you around $300 US on average. So, $500 can be a safe starting point for startup Amazon entrepreneurs but note that you will need to reorder products as your inventory runs low and Amazon is a bit slow in releasing payments, that’s why it’s always good to have a buffer.
If you have some savings that you can use, allocate at least $2,000.00 for your Amazon business, $5,000.00 is the best amount to start since as a wholesale buyer, you wouldn’t only sell one product but multiple product lines at a niche of your choice.
Wholesale sourcing is also less risky than retail arbitrage because when you sell wholesale products you’re buying directly from the source. When you run out of stocks, you simply reorder and customer returns may be returned to your suppliers.
Wholesale suppliers sell items for prices much lower than the market price. Although you can find wholesale sources that sell their products at high margins, still there’s no way to sell wholesale and not take a loss. Since Amazon requires all sellers to sell within a 25% margin of the MSRP, you should start your business by spending about $1,000 in buying 500 units of one particular product and then selling it on Amazon while making sure that your cost per unit is under $6-7 so as not to go beyond the limit set by Amazon.
You will need this money in order to purchase inventory which you should buy from reputable online wholesalers who sell products such as action figures, home appliances, clothing accessories among others. These wholesale products sell at high margins because they are bought in bulk from the manufacturers, so you can sell them on Amazon easily without worrying about losing money.
However, there are some risks involved with selling wholesale products on Amazon which include shipping damage, late shipping, or even packaging errors that could cause your listings to get suspended.
People don’t want to purchase a product that’s sold by an unknown seller – one of the reasons why it is difficult to sell wholesale products on Amazon is because first-time sellers have no reputation on the site and have not established themselves as experts in their niche yet.
How to Sell Used Items on Amazon?
Another great way of making money off Amazon without much investment is by selling used products. There are many reasons why people sell their old stuff like clothes, electronics, or gadgets on Amazon for example they want to earn some cash through the sale as well as declutter their house (getting rid of unnecessary things), sell unwanted gifts, etc. To sell used stuff successfully on Amazon, not only do you need an understanding of what sells but also need good product research skills so that you can find the best deals.
Just like wholesale, selling used products on Amazon is also very easy. You sell your products just like you sell anything else on the platform. All you need to do is find good deals for things that sell well over there and list them as FBM or FBA.
if you want to sell more than one item at a time, then I’d say go with FBA (Fulfillment by Amazon) as it’s much easier to sell multiple items under one listing rather than creating new listings every time.
How to Sell Retail Arbitrage on Amazon?
Retail arbitrage is the most common way most Amazon sellers start their Amazon selling journey as it can be done by anyone regardless of their e-commerce experience.
It’s like the traditional buying and selling of goods, it’s just a bit technical since you have to check first whether or not the items you intend to buy will actually sell profitably on Amazon.
As you may know by now, there are thousands of other Amazon sellers, as it’s the biggest online marketplace in the world. By saying this, know that you’re going to have competition so you technically make your money when you buy, and not when you sell because if you buy the wrong stuff, chances are they’ll sleep for a couple of years on your inventory before they actually sell. This means money sleeping on inventory and paying long-term storage fees if you’re shipping to FBA warehouses.
With retail arbitrage, you technically flip products from other stores (online or offline) to your Amazon store. To successfully do this, you have to find items with good sales rank that are on sale or clearance with deep markdowns.
The easiest way to get started with retail arbitrage is to visit your local liquidation and big box stores. Armed with a Bluetooth scanner and the Amazon Seller App, you can go out on a scanning spree to find great deals you can flip for cash on Amazon.
What Is The Cost of Getting Started?
The cost depends on which business model you want to use. If retail arbitrage seems appealing to you then all that’s required is buying some starter packs for $60-$200 depending on how many products you want to sell on Amazon. However, starting with private labeling will cost more because you’ll need to manufacture your own product first, at the minimum, you should have at least $2,000.00 to order your initial private label inventories. This goes without saying that you should have around the same amount for inventory when buying wholesale as each item you’ll want to sell will have its own MOQs.
As mentioned, the ideal capital to get a headstart as an Amazon seller, you should have between $2,500.00 to $5,000.00 of capital if you are to go straight to wholesale or private label product sourcing strategies.
How Hard is it to Sell on Amazon FBA?
It takes creativity, hard work, and determination to sell successfully on Amazon. There are a few things that will help make the process easier:
1) source good quality products with good margins (at least $3 net profit for retail arbitrage and wholesale, 50% gross markup for private label products)
2) sell items with high demand and low competition (ideally, 600 and below sales rank for consistent sales, not more than 5 competing sellers on the product listing (wholesale and arbitrage, you’ll have an exclusive listing with private label)
3) sell in categories that don’t require stringent approval (electronics, clothing, and furniture, for example, require strict approval before you can sell them on Amazon).
Selling on Amazon is fairly easy to get started but takes hard work and commitment to be successful. A new seller should consider learning from mentors who have been successful before they sell their first product.
What are the best selling products on amazon?
The most successful sellers sell many different things on Amazon’s platform. These include consumer electronics like cell phones, computers, and accessories; clothing items like t-shirts; musical instruments; tools; books; toys for children of all ages; beauty supplies; art, home decor, and garden supplies. This list is not exhaustive as there is a diverse range of successful sellers on Amazon’s platform. You can sell almost anything online if you find the right audience for your product.
The more important thing to consider when selling on Amazon is the products’ best seller rank, whether or not you make a profit when the product sells, and how many competing sellers you’re facing when you resell an existing product or manufacture your own.
The most time-consuming function of an Amazon seller is product research. Whether you’re just flipping products from your local stores (retail arbitrage), from other websites (online arbitrage), buying and selling in bulk (wholesale), building a brand (private label), the most important step of the process is finding profitable products that sell, with not a lot of competition.
You can do product research manually but I find this to be a gruesome task, using product research tools such as AmzScout saves you a lot of time.
Keyword Research Tips
Use Google Trends, MerchantWords, or other tools mentioned in this article. You can also use free services like Ubersuggest (for long-tail keywords) and Freekeywords.com (for singular words) – although these two are not as reliable as the ones mentioned here.
Individual vs Pro Seller Account:
An individual seller account gives you more freedom and control of your expenses when you’re just getting started but once you start selling multiple items a day, you’ll need to switch to a Professional account as it allows you to save on fees.
Pro sellers also have access to features such as Fulfillment by Amazon (FBA), where they can use Amazon’s resources and infrastructure to sell and ship their products.
If you sell as an individual seller, it is important that you manage your inventory well; there is no one to help you sell and ship your products unless you decide to hire an assistant or outsource the work to a virtual assistant.
There’s no monthly fee for individual sellers, but you do pay a slightly higher listing and selling fees compared to a Pro seller account which has a monthly fee but incurs fewer fees overall.
Amazon charges fees to both Individual and Professional accounts but Pro Sellers pay a $39.99 monthly fee plus lower selling fees compared to individual sellers.
The Bottom Line on How To Sell on Amazon for Beginners
There are many ways how to sell on Amazon but wholesale and private label are the best choice for those who are serious about building a profitable e-commerce business out of selling stuff on Amazon.
Ideally, you should have at least $2,000.00 to start either wholesale or private label since suppliers are going to have MOQs so you can have custom logos and packaging (private label), and negotiate wholesale pricing with distributors and manufacturers.
If you’re short on cash, the best way to get started selling on Amazon is by selling stuff you already have to raise capital then switch to retail arbitrage where you buy products from liquidation or from big box stores and websites.
Once you have enough money to order in bulk, you can then switch to wholesale or better yet, private label by researching products you can build a brand around.