Selling on Amazon: A Beginner's Guide

01

Why sell on Amazon?

Amazon equals big wins for the little guy. 

Despite some concerns that Amazon’s enormous eCommerce presence would squash local small businesses, many savvy SMEs are taking an “If you can’t beat ‘em, join ‘em” approach, and using the online marketplace to their advantage.

In fact, more than half of Amazon’s sales are made by third-party sellers who list their own products. Amazon reached US$194 billion in global sales in 2019, and this figure is projected to keep growing over the next ten years.

Benefits of selling on Amazon for wholesalers

For small businesses, selling on Amazon offers a number of advantages:

• Gain access to an enormous potential customer pool
  Building a loyal customer base and audience for your own store requires time, money, and effort – things many small business owners don’t have much of. Selling on Amazon allows you to tap into a veritable treasure trove of potential customers, not only locally, but all over the globe.
  
  
• Scale up by outsourcing fulfillment
  FBA, also known as Fulfillment by Amazon, offers a straightforward and cost-effective method of managing shipping and fulfillment of orders once items are sold through Amazon’s marketplace. Items sold are stored, packed, processed, and shipped through Amazon for delivery and customer service is managed by Amazon as well.
  
  
• Increase customer loyalty, trust, and average order values
  A study by Forrester reveals that selling on online marketplaces is likely to boost customer loyalty, increase average order values, and build trust. And almost 9 out of 10 customers search for a product on Amazon even if they find it directly on a retailer’s site – so it pays to surface your products at every possible touchpoint.

02

Amazon Vendor vs. Amazon Seller

There are two main ways to sell on Amazon: as an Amazon Vendor or an Amazon Seller. So which one is right for you?

In fact, more than half of Amazon’s sales are made by third-party sellers who list their own products. Amazon reached US$43.7 billion in global sales in 2017, and this figure is projected to keep growing over the next ten years. For small businesses, selling on Amazon offers a number of advantages:

What is an Amazon Vendor?

As an Amazon Vendor, you act as the manufacturer/distributor/supplier, and you are responsible for getting your products to multiple Amazon warehouse locations. You can also incur fees for products that don’t sell quickly enough. Although you take a hit on profit per product as a Vendor, you can make up for it with higher sales volume potential. There are two ways to sell as an Amazon Vendor:

Amazon Vendor pros and cons

Not sure whether selling as an Amazon Vendor is right for you? Here’s a rundown of the major advantages and disadvantages of this method of selling.

If you’re a relatively small business, you might find that being an Amazon Seller offers more support than being an Amazon Vendor. In fact, more than half of Amazon’s sales are made by third-party sellers who list their own products. Amazon reached US$43.7 billion in global sales in 2017, and this figure is projected to keep growing over the next ten years. For small businesses, selling on Amazon offers a number of advantages.

What is an Amazon Seller?

Amazon Sellers use the Seller Central Portal, where you own the products in your inventory until your customers buy and receive them. You can choose to manage fulfillment using Amazon’s FBA service, or you can do it yourself. Typically, being an Amazon Seller is the cheapest way to start selling on Amazon.

As a Seller, you have two different fulfillment options:

Amazon Seller pros and cons

Like being an Amazon Vendor, there are plenty of benefits to being an Amazon Seller – but some potential downsides as well.

03

The costs of selling on Amazon

Amazon Selling plans, Seller fees, Fulfillment fees and more.

There are certain costs and fees that you should be aware of, as well as small investments you can make to increase the saleability of your listing before you start selling on Amazon.

Amazon set-up costs

Before you get started selling on Amazon, you’ll need to think about some key set-up costs:

• UPC/barcode costs
  Although setting up an account is free, Amazon’s terms of service require that all products sold have a UPC (Universal Product Code) or barcode to be included as part of the listing.
  
  UPCs can be purchased online through various providers.
  
  
• Product images and logo
  To maximize your sales potential, it’s important to have clear product images and a business logo. If you don’t already have an online store with product images, you’ll need to either pay a professional to do a product shoot or cut down on costs by doing it yourself.
  
  
• Buying samples
  There’s no point in investing a significant amount of money on purchasing products only to discover that they’re not what customers are looking for. When starting out, set aside a conservative budget for a small test order so you can gauge customer interest without taking a major financial hit.
  
  Also, make sure to shop around to find a supplier that can offer a combination of favorable price points and terms.

Amazon seller fees explained

Here are the main seller fees you’ll need to pay for selling on Amazon. If you plan on selling less than 40 products a month, Amazon’s Individual Selling Plan charges $0.99 per item plus referral fees. A Professional Selling Plan is $39.99 a month and only comes with referral fees (not per-item fees).

What is an Amazon referral fee, you might ask? Simply put, it’s a percentage of your total item price paid to Amazon after a sale is made, and the percentage differs depending on the category of product being sold. You may also see what’s called a variable closing fee.

This fee applies only to media products (books, for example), and typically costs $1.35 per item. Why does Amazon charge a variable closing fee? It’s likely to ensure the company makes a profit on lowpriced items. Finally, you’ll want to be on the lookout for the Amazon commission if sold.

This is pretty straightforward – it’s the commission fee Amazon will charge if your item sells, and it represents a percentage of the overall price per item. Note that this fee changes depending on your location, but Amazon will provide you a breakdown of the commission fees once you sign up as a seller and list items.

Amazon FBA fees

Both Individual and Professional Amazon Sellers can choose to use Fulfillment by Amazon (FBA) to stock, pack, and ship products – but there are some costs to consider.

FBA fees include boxes and packaging, and even cover returns handling if your buyers return items to Amazon. There are two fees associated with Fulfillment by Amazon:

1. Picking, packing, and weight-handling fees
   Covers the entire pack-through-shipment process, including the cost of shipping.
2. Monthly storage fees
   Covers the cost of storing products in Amazon’s warehouses.

FBA fees are based on the size of the product you’re storing and shipping. Size include any packaging for your product, such as shoe boxes, blister packs, or retail packaging. There are two size categories:

1. Standard-size products
   Any fully packaged item weighing less than 20 pounds and not exceeding 18″x 14″x 8″.
2. Oversize products
   Any item over 20 pounds or exceeding 18″x 14″x 8″.

As with any business venture, choosing your fulfillment method for Amazon is all about proper planning and research to ensure it’s as cost effective and efficient as possible.

04

Preparing to sell on Amazon

We'll be touching on two things: sorting out your processes and defining your sales strategy.

Whether your business is a one-person operation or you have a team on hand to help, it’s important to dedicate time to reviewing your processes and growing Amazon as a viable sales channel. Think of your Amazon presence as a standalone venture that should be reviewed and improved on continually. For many businesses, this means testing different tactics and scaling those that work.

Sorting out order management and fulfillment

Before you pull the trigger on your Amazon store, make sure you’ve ticked all of the following boxes:

• UPC/barcode costs
  As we mentioned earlier, it’s likely you’ll need to have UPCs for any products you list for the first time. If you have an approved trademark, you can skip purchasing UPCs by registering your brand on Amazon.
  
  
• Set up Fulfillment by Amazon (FBA)
  If you’ve decided to use Fulfillment by Amazon to manage your picking, packing, shipping, returns, and customer service, remember that you need to set up an FBA account separately to your main Seller account.
  
  
• Create and solidify your shipping & returns policy
  Customer satisfaction comes down to shipping quickly and accurately. You should have a straightforward shipping and returns policy in place so that customers know when to expect their products, and what to do if they want to return an item.
  
  
• Prepare your inventory for an influx of orders
  Make sure you have a plan in place to handle an uptick in orders coming in from your new sales channel. While you don’t want to be left with a huge amount of surplus stock, you should have enough inventory on hand to avoid tockouts and keep new customers happy.

Defining your Amazon sales strategy

As a starting point, follow these steps to give yourself the best chance of success: 

• Brand your products
  Show potential customers that you’re established and trustworthy
  
  
• Register your brand with Amazon
  Make sure your brand’s trademarks are protected and increase your credibility
  
  
• Use high-quality images and videos
  Showcase your products in their best light
  
  
• Use your branding on product images, packaging, description, titles, etc
  Stand out from the competition and increase brand awareness
  
  
• Encourage reviews
  Back up assertions about your products with recommendations from real people

As you begin to grow, consider utilizing a dedicated team with the knowhow and time to implement strategies specific to selling on Amazon.

05

Amazon Integration Spotlight

QuickBooks Commerce gives Amazon sellers everything they need to seamlessly manage inventory, orders and more to streamline operations and focus on growth.

Give your business the commerce superpowers it deserves so you can focus on growth and scale with confidence. With Quickbooks Commerce you can manage your entire business from one central location - inventory, orders, accounting, fulfillments and more.

How Amazon and QuickBooks Commerce work together

QuickBooks Commerce’s Amazon integration helps you to manage stock levels on Amazon, retrieve sales orders and process them. Integrating Amazon with QuickBooks Commerce is free, as long as you have aQuickBooks Commerce account and an Amazon Seller account. Using the two systems together allows you to streamline and automate operations including:

• Creating products
  When you publish a product on Amazon, we match it by SKU and create the respective link in QuickBooks Commerce.
  
  
• Fulfillments
  QuickBooks Commerce checks for updated orders on Amazon every 10 minutes. If an order has been updated to Shipped on Amazon, it is automatically updated in QuickBooks Commerce.
  
  
• Pending orders
  For both FBM (Fulfilled by Merchant) and FBA (Fulfilled by Amazon), QuickBooks Commerce pulls pending orders from Amazon. Once the payment details tied to the order have been confirmed, the order will automatically progress to finalized, and the prices will automatically be updated in QuickBooks Commerce.
  
  QuickBooks Commerce also integrates with FBA specifically to automate shipping orders to and from FBA locations, transfer stock records across both systems, and control stock distribution among FBA warehouses.
  
  In other words, QuickBooks Commerce and Amazon work together to help you save time, work smarter, and ultimately, build a profitable Amazon business.