When I was young and foolish, Amazon was a place to buy books, music, and movies. Now, it’s a place to buy almost anything and to have those anythings shipped to your home in hours.
I can buy a toothbrush from the Gods of the Internet and have it delivered to my door all within 24 hours. When I was a kid, it would have taken 24 hours just to place an order.
Amazon isn’t just selling you its stuff, either. Now, third-party sellers can hop on the bandwagon and use Amazon as a launch point for their wares.
According to Amazon, “Shoppers ordered more than 28 million items from third-party sellers [on Cyber Monday in 2016], versus more than 23 million items on Cyber Monday in 2015.”
Selling on Amazon can increase your exposure without costing you an arm and a leg. That said, there are hoops to jump through and decisions to be made. If you’re looking to increase revenue, you have to make sure you understand all the moving parts.
This guide will help you figure out your place on Amazon and get you up and running.
How to sell on Amazon
Let’s talk basics. Selling on Amazon means listing your products within Amazon’s directory structure.
You sell phone cases, for instance. Whether you’re selling cases you make or ones designed and produced by another maker, you’ll be treated the same —Amazon brand products being the major exception.
Amazon seller listing
You list your items, Amazon manages the listing and payments, and you ship the items—we’ll talk more about fees and shipping options in a second. Finally, Amazon drops cash in your account at regular intervals.
Amazon is open to both professional sellers and individuals. The kind of seller you are can impact what you’re allowed to sell, how much you’re allowed to sell, and how much you’re charged for selling.
Professional vs. individual sellers on Amazon
Amazon divides the world into professionals and individuals. This is based solely on how much you’re going to sell on Amazon. If you sell fewer than 40 items per month, you’re an individual. More than that and you become a professional.
Professionals have more features and access than individuals. Professionals can sell internationally, get access to reporting tools, control shipping rates, and offer promos.
There are a number of categories that you need to be a professional to sell in:
- B2B Products
- Collectible Coins
- Fine Art
- Shoes and Handbags
- Sports Collectibles
Most of these make a certain amount of sense. Food is high stakes, from a health and risk perspective. Collectibles, jewelry, handbags, watches, and luggage are prone to forgery.
The real category winners for individuals, I think, are electronics, cell phones, home and garden, and handmade, all of which have high margins, low shipping costs, and solid demand.
Pricing for professionals and individuals
Individual sellers pay a fee for each item sold, while professionals pay a flat fee. These basic fees just get you in the front door and they’re the smallest fees you’re likely to pay as part of the process. At the time of writing, individual sellers pay $0.99 per item sold, while professionals pay a flat, $39.99 per month.
Everything you sell on Amazon has additional fees beyond the basics. For every item, you’ll be charged a referral fee.
Adding a product on Amazon.
Referral fees are, basically, the fee that Amazon is charging you for the value it adds. You’re paying this small fee for working with the company, and then Amazon brings you business. It’s that second part that’s captured in the referral fee.
Most referral fees run anywhere from 6% of the item’s cost to 15%. The major exception is Amazon device accessories, which command a whopping 45% referral fee. The thinking, I suppose, is that Amazon is supplying both the traffic and the basic demand for your product. There’s a minimum referral fee in most categories, which is usually a buck.
Depending on the item sold and your shipping setup, you may also pay a closing fee and a shipping fee.
Each media sale—defined as any books, DVD/Video, software, or video game sale—comes with a closing fee, which is currently $1.80.
Shipping fees and options
Every item you sell has a shipping fee associated with it, paid for by the customer. For individuals, these fees are set by Amazon. For professionals, these fees are flexible, unless you’re selling a media item.
Amazon charges some flat fees and some variable for shipping, depending on the type of item being shipped. For instance, standard delivery for media items always runs $3.99, while outdoor living products cost $4.49 + $0.50/lb for standard delivery. The price charged to the customer is given directly to the seller.
For individuals, it makes sense that you do all the shipping on your own. Selling fewer than 40 products in a month isn’t going to break anyone’s back, and setting up a system apart from your normal routine seems unlikely to be worth it.
The downside to shipping yourself is that the credit Amazon pays you—based on its standard shipping fees—might not cover the actual shipping costs you incur. If you’re selling a bunch of headphones to retirees in Florida out of your Seattle home, there’s no way the $5 Amazon charges is going to cover you every time.
Fulfillment by Amazon (FBA)
If you’re selling a high volume, though, you might want to consider outsourcing. Fulfillment by Amazon (FBA) is a solution. FBA taps into Amazon’s massive distribution system, allowing sellers to store and ship products through Amazon’s facilities.
How FBA works
FBA makes your products eligible for Amazon Prime and sets a clear fee structure for order fulfillment and storage. You ship all your stuff off to Amazon and it does the rest, charging you based on the number of items shipped, their size, and the amount of space you use in the warehouse.
As an example, suppose you sell headphones and average two cubic feet of storage and fifty sales per month. Every month, you’ll pay $1.28 for the storage space (2 x $0.64) and $120.50 for shipping (50 x $2.41).
That charge is independent of what Amazon charges the buyer, who might pay $15 or $0 while you pay $2.41. If those are all free, two-day Prime orders, Amazon is going to eat the—not inconsiderable—difference. Plus, you get the benefit of having your item Prime eligible.
Seller Fulfilled Prime (SFP)
If you still want to be Prime eligible, but you don’t want to ship to Amazon or deal with its FBA system, you can now sign up to fulfill Prime orders right out of your parents’ basement. Seller Fulfilled Prime (SFP) is a newish program that allows sellers to list Prime eligible items without relying on Amazon for shipping.
CommerceHub has a rundown of the SFP system, which has strict requirements but could be a great solution for some sellers. In short, you’ll need to consistently hit deadlines for shipping and fulfillment. The upside is the Prime label and the ability to ship an item just once—instead of paying to ship it to Amazon and then paying Amazon to ship to the customer.
There are corner cases and geographical considerations, but don’t let yourself get overwhelmed. If you’ve got questions, Amazon’s Seller Forum is a good place to look for answers.
Selling on Amazon can open your business—or hobby—up to a huge new audience. With millions of products sold everyday, all you need to do is jump in the boat and start printing that sweet cash.
Well, you also need to figure out the logistics of the thing, make sure you can actually make money, get the product, and jump through all Amazon’s hoops, but those are easy, right?
Amazon has a ‘get excited’ section for seller stories. You’ll find Lyons Trading, which is going to do $6 million on Amazon after outgrowing its local market. Or maybe you’re more in line with Driven products, which is seeing huge growth on Amazon, largely due to the differentiation that comes with positive reviews.
There’s a place for just about any business to grow; all you need to do is figure out your niche.
If you’re looking for more small business insight and retail tips, check out Capterra’s retail blog.