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What Should You Know before Starting an Amazon Business?

Amazon has helped millions of people to start an online business, make money, and realize their business dream.
How? They created an Amazon account which enabled them to build a shop on the platform. In the shop, they listed their products and initiated various marketing campaigns aimed at increasing conversions.
Do you want to join their group and start to make money? Maybe you are trying to decide if it’s right for you. It’s not for everyone. This article contains all the things you need to know before deciding to become an Amazon seller. It will help you determine if it’s in line with your goals and expectations
What are your options to sell on Amazon? What can you sell on Amazon? What should you know about the Amazon business? We will break down these questions, and give you the details before starting your Amazon business. Let’s get started.

1. Amazon Seller Account

If you are going to sell on Amazon, you have to create an Amazon seller account. There are two options for you; you can choose an individual seller account or professional seller account.
Which one is best for you? It depends on what kind of business you are going to run. Let’s look at their features before you make your decision.

Individual Seller

An individual seller account comes with basic features. You can’t advertise in the marketplace. Further, you are limited to selling products that already exist on the Amazon platform. You can’t create new product listings, or sell customized, or labeled products.
It’s free, but you have to pay $0.99 per sale plus other referral and variable closing fees.

Professional Seller

As a professional seller, you are entitled to much more; you can sell an unlimited number of products, create new listings, initiate ads on Amazon, start using the Amazon FBA program, and register for an Amazon Prime account. The cost is $39.99 per month plus other fees.
It’s the best option if you are planning to sell more than 40 items per month, sell private label products, or new products in the marketplace.

2. Amazon Business Models

If you want to sell on Amazon, you have to understand the different methods available to you. As far as we know, there are four ways to start selling on Amazon.
Retail Arbitrage
Retail arbitrage is the easiest way for you to sell products on Amazon. In this way, you find retail stores nearby that sell products at a great discount, and then you sell them on Amazon at a higher price.
For instance, you find discounted products in stores like Walmart, and you see they are selling for more on the Amazon marketplace. If you are unsure, you can test. Register an individual seller account, and you can try up to 40 products. This test will allow you to see the performance of your sales.
It’s easy to start. However, you need to get the receipt/invoice proving you purchased the products from the manufacturer, list these products as “used.” Your profits are limited, and you are at risk of getting suspended if you run into problems with the products’ manufacturers.

Online Arbitrage

Online arbitrage is quite similar to retail arbitrage. The difference lies in the source of products. If you use online arbitrage, you purchase the items from online stores instead of physical stores.
Similarly, you will gain limited profit as shoppers look for the products at the lowest.

Wholesale Products

Buying products wholesale allows you to purchase profitable products directly from the manufacturers and resell them on Amazon. You are a third party seller. You sell the products under the manufacturer’s brand. You will need a wholesale license and adhere to the requirements in your country.
It’s profitable because you source the items at the lowest price and resell them at a relatively high price.

Private Label Products

Selling private label products is the most popular and profitable business model on Amazon. You determine what you want to sell and have it manufactured under your brand; a brand which you have also created.
If you sell private label products, it’s very easy for you to beat the competition and squeeze into the Amazon marketplace.

3. Your Potential Profit

You have to estimate your potential profit. You can get an idea of profit margins for your business when you do some research on sellers of the same niche. When it comes to your profit, there are fixed business costs to consider and fees you have to pay if you sell on Amazon.
Monthly Subscription Fee
The monthly subscription fee is for those with professional Amazon seller accounts. The cost is $39.99 per month. They will enjoy the eligibility for winning the Amazon Buy Box.
Item Fee
Applicable to individual sellers who need to pay $0.99 per sale.
Referral Fee
All Amazon sellers have to pay a referral fee for each item sold out. It is not fixed. This fee differs by product category. Different product categories charge different fees.
Shipping Cost
Shipping costs are paid by Amazon FBM sellers who fulfill their orders by themselves. The cost is dependant on the sellers’ shipping method.
Amazon FBA Fees
Amazon FBA sellers pay for order fulfillment and inventory storage. Fulfillment fees depend on the item classification, and this is based on the weight and dimension of the item in the order. You can refer to the Amazon order fulfillment fees to check your cost. Inventory storage fees are comprised of a monthly charge and a long-term charge. Again the amount is determined by the size, dimension, and weight, but also the period of storage in the Amazon fulfillment center.

Last but not least, you have to pay tax according to the US authority. This means you have to pay your sales tax based on the Amazon seller program you use, your location, and the order fulfillment process. This tax guide may help you understand more about sales tax.

4. The Amazon Buy Box

The Amazon Buy Box is the box on a product detail page where consumers can start the buying process by adding the item to their shopping carts. This device allows customers to buy the item from sellers who are ready for a bulk of sales.
It is normally very difficult for sellers to win the Buy Box as there is fierce competition for it. To be eligible for the Buy Box, you must be a professional seller, know the difference between the Buy Box and the Buy Used Box, and have items in stock. Check the Buy Box eligibility in your seller central account and estimate if you are eligible or not.

5. Amazon FBA

FBA stands for Fulfillment by Amazon. Only professional Amazon sellers have access to this program. You send your products directly from the manufacturer to the Amazon warehouse, and Amazon takes care of storage and fulfillment.
This program makes it extremely easy to start a business on Amazon. You don’t need to worry about picking the order, packing the items, shipping to the customer, or basic returns. You have to pay a small amount for this Amazon service. If your items are not packed in line with the Amazon guidelines, they will offer you FBA prep service.  If you are an Amazon FBA seller, you will have much more time to promote your business.

6. Inventory Management

Product inventory is a key part of the supply chain. It plays an important role in a successful business. Whether you are an Amazon FBA or FBM seller, you have to maintain your product inventory level to ensure against running out of stock.
If you use Amazon FBA, you don’t need to manage the inventory by yourself, but you have to keep an eye on your product inventory level. For a smooth operation, remember to update the product inventory level regularly and consistently. Combining the product inventory level and the average sales per day helps you forecast and avoid running out.

7. Business Marketing

If you are planning to sell on Amazon, you have to understand the marketing resources on Amazon. There are millions of shoppers on Amazon each day, but how can turn them into your buyers? You need to market your business.
If you want to market on Amazon, you can leverage the Amazon resources to promote your business. You have to reach out to your target customers to increase your conversions. The easiest way is to start advertising on Amazon. You can use Amazon Sponsored Products and Headline Search Ads to promote your business. If you have an email list of target customers, you can promote directly to their inbox. Another idea is to promote on social media or partner with an influencer to spread the word about your products or services. Find the right ways to increase conversion rate on Amazon.

8. On-page SEO (Search Engine Optimization)

If you are selling on Amazon, you have to pay attention to your on-page SEO. Your ranking on Amazon is decided by product relevance and quality.
How relevant is your listing to the search term that customers are using? Pay special attention to the keywords you use in the product listing page, especially the product title, product features, and product description. Keywords are the main factor influencing relevance.
Your product’s performance determines your quality score. Amazon is a customer-focused platform and always wants to offer the customer the products with the best quality and lowest price. The aim is to show the most trustworthy sellers with the best deals. There are several factors to be considered to determine the product quality including the product title, images, product price, FBA or not, seller rating, product availability, conversion rate, and customer reviews, etc.

9. Customer Reviews

If you are an Amazon seller, you can’t ignore customer reviews.  Both the quantity and quality of reviews matter to your product ranking and sales. Shoppers look at customer reviews to figure out if the product is good value and worth buying. It’s important to encourage customers to leave a good review for your product. These customer reviews may push on-the-fence shoppers into a purchase because they assure the customer of the product quality. Online reviews act in much the same way as word of mouth recommendations.
Note that Amazon prohibits sellers soliciting or paying for reviews. You should not manipulate or falsify customer reviews because Amazon actively defends the integrity of the community. There are ways for you to gain more customer reviews; you can send follow-up emails, get customer feedback on social media, and partner with the top Amazon reviewers.  

10. Don’t Expect to Get Rich

You should keep a normal mindset and never expect to get rich overnight. Whatever you do, you can’t expect that you will get paid instantly; it’s no different when starting an Amazon business.
Done correctly, the Amazon model is profitable, but you have to promote your sales, track and analyze your selling performance, and optimize them over and over. Constant monitoring and refining is a great way for you to keep your business in a healthy state.

All in all, selling on Amazon can be a great option when starting your own business – just make sure you follow the rules and do everything in the right way. You will learn a lot about building your store and promoting sales as you proceed. Before starting though, read this blog carefully, and then make your decision, write your business plan, and take action accordingly.

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