Starting to sell on Amazon can feel like a thrilling roller-coaster ride. You’re excited, but also a little scared. You’re not quite sure what’s around the next turn, but you’re ready for the adventure. And that’s perfectly normal.
In this blog post, we give you a step-by-step guide to help simplify the process and steer you towards success.
We’ll uncover the benefits of selling through Amazon, the earning potential it presents, and how it has transformed small businesses into thriving ventures. We’ll also share real-life success stories to inspire your entrepreneurial journey.
So, dive in with us as we navigate the ins and outs for how to start an Amazon Business to increase your chances of success.
Table of Contents
The Potential for Making Money Online
The Amazon marketplace has become a towering figure in e-commerce, revolutionizing the way we shop and sell.
Here are 3 of the major benefits of selling through Amazon.
1. A Vast Customer Base: Amazon isn’t just a U.S. phenomenon. It’s global. With millions of customers worldwide, your potential market reach is enormous.
2. Prime Membership Perks: Over 150 million people are Amazon Prime members, enjoying benefits like free shipping. As a seller, this means that you can reach a dedicated customer base that’s primed (pun intended) to buy.
3. Trust: Amazon has built a strong reputation over the years. When customers shop on Amazon, they feel confident about their purchases. This trust transfers to you as a seller.
But let’s get down to brass tacks. Can you really make money selling on Amazon? The answer is a resounding yes! Let’s look at some real-life examples.
Take the story of McClary Bros., for instance. This small business, which specializes in handcrafted drinking vinegars, saw a 60% increase in sales within the first year of selling on Amazon.
Then there’s the case of Nutpods, a dairy-free creamer company, which hit the #1 new release in its category within a week of launching on Amazon.
And it’s not just about immediate sales.
The passive income potential is significant. With Amazon’s FBA (Fulfillment by Amazon) program, you can store your products in Amazon’s warehouses. They handle storage, packaging, and shipping. This means you can earn money while you sleep.
Starting an Amazon business can be a game-changer. It opens doors to a global market and provides an opportunity to create a sustainable passive income stream.
Let’s explore how to start an Amazon Business step-by-step.
Amazon Business Models: Understanding Your Options
Did you know there are multiple business models you can choose from for selling on amazon.com? Each one has its own set of operations, and understanding their pros and cons can be crucial for your success.
Let’s break them down.
Retail or Online Arbitrage
Retail arbitrage involves buying products at a discounted rate from retail stores and reselling them on Amazon at a profit.
Online arbitrage is a similar concept but involves sourcing from online sellers. It’s a game of scavenger hunt, and your ability to spot potential profit-makers can make all the difference.
- Easy to start with minimal investment
- Opportunity to make quick profits
- Time-consuming product sourcing
- Risk of price fluctuations affecting profitability
Dropshipping (Selling Without Inventory)
Dropshipping is an eCommerce model where you sell products without ever touching the inventory.
When a customer places an order, it’s fulfilled by your supplier who ships the product directly to the customer. It’s a hands-off approach that can be quite appealing.
- No need to maintain inventory
- Lower startup costs
- Less control over product quality and shipping
- Lower profit margins due to supplier fees
Wholesale (Buying in Bulk, Selling Individually)
With the wholesale model, you purchase products in large quantities directly from manufacturers or distributors and sell them individually on Amazon.
It’s a classic retail model that works well if you’ve got the capital and the storage space.
- Stable supply of products
- Higher profit potential due to bulk buying discounts
- Significant upfront investment required
- Risk of unsold inventory
Private Label Products (Launching Your Brand)
Private labeling involves manufacturing and branding your own products. It’s your chance to create something unique and build a strong brand presence on Amazon.
- Control over product quality and pricing
- Potential for higher profits and brand recognition
- Requires substantial investment and research
- Risk of product failure
Amazon FBA (Amazon Handles the Logistics)
FBA stands for fulfillment by Amazon, and it’s more of a service than a business model, but it’s worth mentioning due to its popularity among Amazon sellers.
With FBA, you store your products in Amazon’s fulfillment centers, and they take care of storage, packaging, and shipping.
- Access to Amazon’s customer base and Prime eligibility
- Amazon handles customer service and returns
- Fees for storage and fulfillment
- Less control over shipping process
So, that was a quick rundown of the different Amazon business models you can start with.
Remember, there’s no one-size-fits-all answer here. Your choice should align with your business goals, investment capacity, and risk tolerance.
Now let’s look at the first step to get started with selling on amazon.com. Creating your seller account.
Step-by-Step Guide to Starting an Amazon Business
Step 1: Create Your Amazon Seller Account
Setting up your Amazon seller account is the initial leap into your entrepreneurial journey. Amazon makes the registration process straightforward, but there are a few things you’ll need to have on hand.
So make sure that you already have a business name and address, credit card information and bank account information, and tax identity number.
Right off the gate, Amazon will prepare you for the info they will need. Here’s a screenshot of the welcome page in the amazon Seller Central Portal.
Remember, your Amazon store name is your first branding exercise; so make it count.
You’re also presented with a choice between the Individual and Professional plans.
Wondering which one’s right for you?
The Individual plan is free but charges 99 cents per item sold, while the Professional plan costs $39.99 a month but comes with no per-item fee.
If you’re serious about this venture and plan on selling more than 40 items a month, the Professional plan might be your best bet.
Whatever you choose, keep in mind that the Amazon Seller Central is your command center. It’s where you manage your listings, track your orders, and analyze your sales.
Familiarize yourself with its features and functionalities to make the most of your Amazon selling experience.
Step 2: Product Research
Product research is like setting up the foundation for your business. It’s about exploring your passions and aligning them with a niche market.
Are you a fitness enthusiast or do you have a flair for home decor? Pick a niche that resonates with your interests.
However, even within your chosen niche, it’s crucial to avoid going head-to-head with brand names or super well-established products. It’s like trying to outswim a shark! Not the best idea, right?
Certain markets are already saturated, and competing in these spaces can prove to be very challenging, both for newcomers and experienced entrepreneurs.
So, how do you determine product viability? That’s where product research tools come in.
Tools like Jungle Scout and AMZScout are like your personal scouts in the Amazon marketplace forest. They help you understand important market aspects of each niche, or product, such as demand, competition, and profitability for various products within your chosen niche.
Remember, choosing profitable products isn’t a dart-throwing game; it’s a calculated decision based on thorough research. You want to find the sweet spot where demand meets reasonable competition.
In the world of Amazon selling, that’s the golden ticket to profitability.
Step 3: Finding Suppliers and Sourcing Products
Let’s dive into one of the most crucial stages of starting your Amazon business. That of finding reliable suppliers and sourcing products.
First, you need to identify potential suppliers. There are several ways to do this, but one of the most effective is through platforms like Alibaba.
This global trading platform connects you with suppliers from all over the world, giving you a vast choice of products and suppliers.
Whether you’re searching for a local artisan or an international manufacturing plant, the platform’s extensive offerings can guide you to a multitude of supplier options.
However, while digital searches undoubtedly offer convenience, they shouldn’t be your only resource.
Broaden your horizons by going out and looking for other opportunities for business partnerships. Consider attending trade shows, for example.
These events, often underappreciated, can be a treasure trove of opportunities.
Trade shows are hubs of business activity, bringing together suppliers from various industries under one roof. They offer a unique platform for networking, enabling you to meet potential suppliers face-to-face.
This personal interaction can help you build stronger, more transparent business relationships.
Moreover, trade shows are a source of innovation and inspiration. As you walk the exhibit hall, you’ll find yourself surrounded by the latest trends and products. This exposure can spark new ideas and maybe even lead you to suppliers you wouldn’t have discovered otherwise.
Once you’ve identified potential suppliers, the vetting process begins.
Always request sample products to assess the quality firsthand.
Product sampling is often overlooked by first-time entrepreneurs, however, this is not a step to be skipped or rushed through. It is an essential part of your business operations and it directly impacts your brand reputation.
Remember, what you’re selling is a direct reflection of your brand, so make sure it’s top-notch.
When you sample your products, you have the opportunity to scrutinize what you’re selling from a customer’s perspective. This helps you identify any potential issues or room for improvement, ensuring that what reaches your customer is nothing short of exceptional.
Also, sampling allows you to understand your product better. You’ll be able to provide a more detailed description, explain its benefits, and even give suggestions on how to use it.
This detailed knowledge can greatly enhance your sales pitch, making it more convincing and relatable to your customers.
Your customers expect your brand to deliver quality and value, and on the amazon marketplace they can easily give their feedback. So, don’t risk damaging your Amazon reputation and trust by delivering sub-par quality products.
So, always request samples from your suppliers, and don’t hesitate to seek a better supplier if the quality doesn’t meet your expectations.
Step 4: Crafting Your Amazon Product Listings
Now that you have your products, it’s time to list them on Amazon. This stage is all about presentation and persuasion. You’re showcasing your products to potential buyers, so make it count.
Start with keyword optimization
This is key to ensuring your products are found by the right audience.
Keyword optimization refers to the strategic use of relevant search terms in your product titles, descriptions, and other listing details.
This is a crucial aspect of your Amazon listing as it helps your products appear in search results when potential customers are looking for items like yours.
To optimize your keywords, begin by conducting thorough keyword research and identify the terms your target audience is likely to use when searching for your product.
Try and incorporate these keywords naturally into your product titles and descriptions, but avoid keyword stuffing, as this can lead to a poor user experience and potentially harm your search rankings.
Take a look at the example below where this amazon seller includes different variations of the keyword in their product description.
High-quality images are equally important
A picture is worth a thousand words, and in the world of E-commerce, it could be worth a thousand sales.
In the digital marketplace, customers can’t physically touch or inspect products before purchasing. This is why high-resolution, clear, and detailed images are vital.
They allow potential buyers to get a close look at your products, increasing their confidence to make a purchase.
Try and upload multiple images of your products, from various angles, and consider adding close-ups of specific features. If your product comes in different colors or styles, include images of all available options.
Using a white background is recommended by Amazon as it removes distractions and places the focus squarely on the product.
Compelling product descriptions
You want to highlight the key features and benefits of your products. This is your chance to convince customers that your product is the solution they’ve been looking for.
Your product description should be informative, engaging, and persuasive. Highlight not just the features of your product, but also how it solves a problem or improves the buyer’s life.
Use a conversational tone to make your descriptions relatable and easy to understand.
Present the information in a structured manner, incorporating bullet points for key features or benefits. This makes it easier for potential customers to scan through the information and understand the value of your product.
Setting your pricing strategy is the delicate balance between remaining competitive and ensuring profitability. In determining your pricing, consider both your costs and the prevailing market rates.
Analyzing your competitors’ pricing can give you an idea of what customers are willing to pay for similar products.
However, don’t just compete on price alone. If your product offers superior quality or unique features, don’t undersell it. Instead, highlight these differentiators in your product description to justify a higher price.
Remember, your aim should not just be to attract customers with low prices, but to build a sustainable business. Hence, your pricing should cover your costs and provide a reasonable profit margin.
As you can see, a successful product listing on Amazon requires a blend of different factors that, all combined, will enhance your product’s visibility, and appeal to potential customers.
Step 5: Launch and Promote Your Amazon Products
You’ve done the legwork, found your products, listed them, and now it’s the moment you’ve been waiting for – the launch. How you present your products to the market can have a significant impact on the success of your business.
As you gear up to launch your new amazon store, consider these strategies to ensure you start with a bang.
Utilize Amazon PPC (Pay-Per-Click)
Improve the visibility of your products with Amazon’s PPC. This advertising strategy can give your products an essential boost, particularly during the initial launch period.
You can find a comprehensive 12 step guide on Amazon PPC here.
Amazon PPC results are those that appear at the top of the results for any related search query, with the words ‘sponsored’.
Initiate Promotional Discounts
Encourage early sales by offering promotional discounts. This can serve as an incentive for potential customers to try your products.
This strategic approach is not just about slashing prices, but rather about creating a win-win scenario for both you and your customers.
Promotional discounts serve as an incentive for potential customers to try your products, especially if they’re unsure about making a purchase.
Promotional discounts also create a sense of urgency, encouraging quick purchases and driving early sales.
Promotional discounts can take several forms, such as percentage discounts, buy one get one free (BOGO) offers, or dollar-off discounts.
For instance, a new Amazon store that sells handmade soap might offer a 20% discount for the first 100 customers. The discount not only encourages the first 100 customers to buy quickly, but also creates a positive buzz around the brand, which can lead to additional sales and new customers.
Harness the Power of Social Media
Don’t underestimate the potential of social media platforms. They provide a cost-effective medium to reach a wide audience and enhance your brand awareness.
Before plunging into social media marketing, it’s crucial to understand who your target audience is. What age group are they in? What are their interests? What social media platforms do they use most?
Once you’ve answered these questions, you can tailor your social media strategies to attract and engage them.
Facebook, Instagram, LinkedIn, Twitter (X), TikTok and Pinterest are among the most popular social media platforms. However, your choice of platform should depend on where your target audience hangs out.
For instance, if you’re selling trendy clothes or accessories, Instagram, TikTok and Pinterest might be your best bet. On the other hand, professional products might fare better on LinkedIn.
Social media thrives on engaging content. Regularly post about your products, their features, and benefits. You can even share customer testimonials or positive reviews from your Amazon store.
The goal of promoting your Amazon store on social media is not just to sell, but to build a community around your brand.
Always include a link to your Amazon store in your social media bio or posts. This directs your followers to your store, making it easier for them to make a purchase. You can also run paid social media advertisements to boost your post in front of the eyes of your targeted demographic.
Lastly, use analytics tools provided by these platforms to track your performance. Analyze what’s working and what’s not. This information will help you refine your strategies for better results.
When you’re launching your own Amazon store, it’s crucial to realize the significant role customer reviews play in your venture’s overall success.
Positive reviews not only build trust but also improve your product ranking on Amazon.
They provide potential buyers with first-hand experiences and insights about your products and services. When shoppers see positive reviews, they are more likely to trust your brand and make a purchase.
Beyond building trust, positive customer reviews can also boost your product ranking on Amazon. The platform’s algorithm favors products with high-quality reviews, meaning your products are more likely to appear in shopper searches if they have been positively reviewed.
This increased visibility can lead to more sales and consequently, a more profitable Amazon store.
To gain positive reviews, prioritize offering top-notch customer service. This includes timely and responsive communication, prompt shipping, and the handling of returns and refunds professionally.
When customers feel valued and well-served, they are more likely to leave positive reviews.
Don’t be shy about encouraging satisfied customers to leave reviews. You can do this by sending follow-up emails or messages thanking them for their purchase and kindly requesting them to share their experience.
Remember, however, to keep this process authentic and avoid offering incentives for reviews, as this goes against Amazon’s policies.
Investing time and effort into garnering positive customer reviews can significantly benefit your Amazon store. It’s a cycle that starts with excellent customer service, leading to positive reviews, improved product ranking, and ultimately, increased sales and success.
Challenges of Starting an Amazon Business
While starting an Amazon business might seem like a golden opportunity, it’s also important not to forget about the potential pitfalls. Topping the list are intense competition, tricky inventory management, and the ever-evolving Amazon policies.
Competition is fierce on Amazon. With over 2.5 million sellers actively selling on the platform, standing out from the crowd can feel like an uphill battle.
And let’s not forget about inventory management. It’s a balancing act. You need to ensure enough stock to meet demand, but not so much that your cash flow is choked.
An added complication of selling through Amazon is their ever changing policies. They’re designed to maintain a high-quality marketplace, but they can sometimes catch sellers off-guard with their latest policies.
Overcoming the Amazon Hurdles
So, how do you tackle these Amazon challenges head-on?
First, commit to continuous learning. This is non-negotiable when it comes to Amazon. The e-commerce landscape is ever-evolving, and Amazon is no exception.
Stay abreast of the industry trends, changes in Amazon policies, and technological advancements. Subscribe to e-commerce newsletters, follow industry influencers, and regularly visit Amazon’s Seller Central for updates and resources.
Next, consider joining seller communities. These forums are teeming with experienced sellers who offer invaluable advice and support.
Communities like ‘Amazon Sellers‘ and ‘FBA Today‘ on Facebook, for instance, are filled with discussions on common challenges, tips, and success stories. It’s an opportunity to learn from others who have already walked the path you’re embarking on.
And finally, keep a pulse on Amazon’s guidelines. They may be fluid, but they’re there for a reason; to maintain a high-quality marketplace for both sellers and buyers.
Therefore, understanding these guidelines is a crucial part of running a successful Amazon store. Regularly check Amazon’s policy updates, participate in their webinars, and don’t shy away from asking questions in seller forums when in doubt.
Lessons Learned from Failed Amazon Sellers
While there are countless success stories, there are also Amazon sellers whose ventures didn’t pan out as planned. It’s important to understand what went wrong for these sellers and learn from their mistakes.
Here are 7 lessons learned from those who faced challenges in their Amazon selling journey
1. Relying Solely on Amazon
Making Amazon your primary online business income source can be risky. If you don’t own the platform, you have little control over your business.
When you make Amazon your primary source of income, you’re essentially building your empire on rented land. Amazon controls the platform, the rules, and the customer base.
This means they can change their policies, fees, or algorithms at any time, and you have little say in the matter. You’re at the mercy of a platform that prioritizes its own interests, which can be a precarious position for any business owner.
Amazon charges various fees, including listing fees, referral fees, and fulfillment fees. These can eat into your profit margins, especially if you’re selling low-margin products. When Amazon is your primary income source, these fees can significantly impact your overall profitability.
Last but not least, one of the biggest drawbacks of relying solely on Amazon is that you don’t own the customer relationship. Amazon does. This means you can’t build a customer database for future marketing efforts, limiting your growth potential outside the platform.
2. The Ever-Changing Amazon Algorithm
Amazon is known for its strict and ever-changing policies. A minor violation, even if unintentional, can lead to your account being suspended or even terminated.
Apart from this, the amazon algo can make or break your sales potential. When customers search for products, they usually pick items from the top results, not necessarily focusing on the specific merchant.
A change in this algorithm can push your products down the search results, affecting your sales.
3. Beware of Niche Encroachment
If you’re selling products without owning their rights or patents, you risk Amazon or other sellers encroaching on your niche.
Amazon’s Basics program is known for picking profitable products, private-labeling them, and selling them at competitive prices.
4. The Challenge of Fake Reviews
Amazon is a customer-centric platform, meaning user reviews heavily influence purchasing decisions. Through these reviews, customers can gauge the quality of a product or service, making them a significant factor in the success of your Amazon store.
However, fake reviews are the dark side to this system. Some sellers resort to underhanded tactics, either generating positive reviews for their own products or negative reviews for their competitors.
These reviews are misleading, untrustworthy, and can distort the market, creating an uneven playing field.
Fortunately, Amazon has recognized this issue and implemented measures to combat it.
For you as a seller, this presents another layer of complexity. While fake reviews can artificially inflate a product’s popularity, they can also lead to penalties, including being banned from selling on Amazon.
5. The Struggle to Find Untapped Niches
Previously, private labeling was a profitable strategy. However, finding an untapped niche has become challenging. Even if you discover one, intense competition can make it hard to sustain.
While selling on Amazon opens your store to millions of potential buyers, it is also a double edged sword, in that you are also facing a highly competitive marketplace with sellers from around the globe.
When selling on Amazon, you’re pitting your products against a vast array of competitors, some of whom may engage in price wars. This can lead to reduced profit margins, making it challenging to sustain your business in the long run.
6. Inventory Management is Crucial
Inventory management is a critical aspect of running a successful Amazon store. It’s the backbone of your operations, ensuring you have enough stock to fulfill orders promptly and keep your customers satisfied.
When your inventory runs low or completely out, it can have detrimental effects on your Amazon store. Amazon uses a performance metric known as the ‘Order Defect Rate’ (ODR), which measures your ability to provide a seamless shopping experience to customers.
Factors contributing to your ODR include negative feedback, A-to-Z Guarantee claims, and service chargebacks.
If you’re consistently out of stock and can’t ship within Amazon’s established service window, you risk increasing your ODR, which could potentially lead to Amazon suspending your selling privileges.
Your inventory status also influences your product’s sales rank on Amazon. This ranking is based on your sales history and is used by Amazon’s algorithm to determine where your product appears in search results.
If you don’t have enough stock to meet customer demands, your sales will drop, negatively affecting your sales rank. A low sales rank can reduce your product’s visibility, leading to fewer customers and ultimately, lower revenue.
To avoid these pitfalls, implement effective inventory management strategies:
- Regularly check your inventory levels to prevent stockouts and overstocking.
- Analyze your sales data to predict future demand trends. This can help you plan your inventory purchases more effectively.
- Keep a buffer stock to handle unexpected sales spikes or supply chain disruptions.
- Use inventory management tools that integrate with Amazon’s system for real-time inventory tracking and automatic reordering.
Effective inventory management is not just about having enough stock, but also about having the right amount of stock at the right time.
7. Fluctuating Profit Margins
It’s essential to keep an eye on profit margins to ensure your business remains profitable and can withstand any unexpected costs.
Profit margins represent the percentage of each dollar generated that actually constitutes profit for your business. For example, if you sell a product for $20, and it costs $15 to produce and deliver that product, your profit is $5. Therefore, in this case, your profit margin is 25%. The higher the margin, the more profitable your business.
When operating an Amazon store, factors, such as shipping costs, and amazon’s pricing policies and fees can influence your profit margins.
Shipping Costs: The cost of shipping can significantly impact your profit margins. Factors like delivery distance, package weight, and shipping method can cause these costs to fluctuate.
Amazon’s Pricing Policies: Amazon has certain policies in place that can influence your selling price. These include referral fees and variable closing fees, which can eat into your profit margins. It’s crucial to understand Amazon’s fee structure to price your products strategically.
It’s therefore important to regularly monitor your profit margins to ensure your business remains profitable. This involves keeping a close eye on your costs and adjusting your prices as necessary. Utilizing tools such as Amazon’s Profitability Calculator can help you understand your profits better. For FBA sellers, you can also download this calculator as an app on your phone from here, for ease of use.
Maintaining healthy profit margins is not just about increasing prices. It’s equally about efficient cost management. Consider strategies like bulk purchasing or negotiating with suppliers for better rates to lower wholesale purchase costs, or optimizing your packaging and shipping processes to reduce shipping costs.
It’s important not to get discouraged by these risks. Remember, every setback is a lesson in disguise. We have included these aspects so that you can learn from other’s mistakes. By understanding and learning from the challenges faced by others, you can navigate the Amazon marketplace with greater confidence and foresight.
Additional Resources to Boost Your Amazon Business
For more insights and tools, check out these resources:
- Amazon Seller Central: Your one-stop hub for selling on Amazon.
- Amazon Business: Discover the benefits of an Amazon Business account.
- Fulfillment by Amazon (FBA): Learn how Amazon can handle storage, packaging, and shipping for you.
- Amazon Business Blog: Stay updated with the latest news, tips, and success stories from other Amazon Business sellers.
Starting your Amazon business involves more than just selling products. It’s about leveraging Amazon’s global reach, and its many features and services to create a tailored, efficient, and successful operation.
Whether you’re selling on Amazon, your own website, or both, the key lies in understanding your audience, offering quality products, and providing excellent customer service.
Remember, the path to success is always under construction. Keep learning, keep growing, and keep pushing the boundaries of what’s possible with your Amazon business.
Check out our other articles in the How To Start a Business Series.