In many ways, you can start selling products at the online marketplaces, but you need to select a great marketplace that will ensure the survivability of your business. Amazon stands out as a trusted and reliable marketplace to customers and sellers among other online marketplaces. Therefore, this article will only focus on sellers and discuss how to start a prosperous Amazon business as a seller.

Why Would You Want to Sell on Amazon?

First of all, Amazon serves as a platform where you can sell your products at ease since it is globally known and has a good reputation. This most assuredly drives your business. There are millions of sellers selling their products on Amazon Marketplace. There are four key reasons we will outline below that might spark you to start an Amazon Business:

  • Selling products on Amazon is simple, all you do is to submit the product and set a fixed price, then accept their terms and conditions.
  • Amazon does not charge you to list your product on their website. Therefore, you can list all the products or a small number of products as you like.
  • Since you are a beginner in the business, it is unlikely people would want to buy your products at first from outside. But in this case of Amazon, people believe Amazon marketplace. And Amazon’s secure payment system is trustworthy, therefore, people may be keener to purchase from you.
  • Amazon is a good place where you can easily see the competition, and how your competitors are doing, which can give you the insight to make a bold strategy to conquer the market.  

What Documents Do You Need to Start an Amazon Business?

To run an Amazon FBA (Fulfillment by Amazon) business, you need some proper documentation to submit to Amazon. These are:

  • Social Security Number or Federal Tax ID
  • Insurance
  • A Credit Card
  • Business License
  • Phone Number
  • Bank Account Number
  • A Utility Bill

Note: They may not ask for all the documents, but it is better to have them in case they ask them later.

Two Selling Structures that Amazon Let You Use

When you open an Amazon Business account, Amazon asks you to decide you want to sell your products. There are two basic methods namely Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM).

  1. FBA. This method is relatively easy since Amazon takes care of all the hard work. In the FBA method, sellers only have to ship the items to Amazon. And Amazon does all the rest of the work, such as storing, shipping to customers, and customer support.
  2. FBM. In the FBM method, Amazon only serves as an advertisement platform. Amazon notifies the seller that the customer has ordered certain items and asks to provide a tracking number if needed. Then you, as a seller, have to do all the rest of the work.

There is a great article where you can learn more in-depth about the comparison between FBA and FBM.  

Does it Cost You to Start an Amazon Business?

It is evident that if you want to run a business on Amazon, you have to pay some money as fees. This section will briefly discuss the costs of running a business on Amazon.

What are the commissions that Amazon takes from your business?

And the price varies depending on your choice. Amazon offers two selling plans, namely: the individual plan and the professional plan. You have to pay $0.99 per sale with the individual plan, whereas with the professional plan, you only pay a fee of $39.99 per month. Therefore, if you are going to sell more than 40 items, it is better for you to choose a professional plan for your Amazon business. There is also a fulfillment by Amazon Revenue calculator, which you can use to calculate fulfillment costs.

How much does the Inventory Cost take to run an Amazon Business?

Needless to say, that to run an Amazon Business, you also pay the inventory costs to store your products. It can be more expensive than you might think. You can start big with around $3000 or a little like $500. So depending on the items, you might try to get the number as big as 450 to as low as 200 numbers of items in your inventory. It is wise to start your Amazon inventory cost as low as possible.

If you plan to use Fulfillment by Amazon, or as it is known as FBA, you need to use FBA storage facilities. And Amazon will charge you for this service since you will be using their warehouses to store your products. There are two types of services that Amazon offers:

  • Monthly Storage Fees: As its name suggests, it is a service in which you have to pay Amazon monthly fees. Amazon calculates fees based on a per cubic foot basis. Over the period of the whole year, except from October to December, the price remains the same. However, during the holiday season from October to December you may have to pay three times the same amount that you normally pay the whole year.
  • Long Term Storage Fees: Amazon is more reluctant to keep products stored within the storage, they like to keep the product to be on move. Because the longer the product is in the warehouse, the less revenue they get and they deem it inefficient. They charge a fee of $6.90 per cubic foot of storage used. If you store the product for a year, you will have to pay an additional $0.15 per item. Therefore, if you plan to hold products for a longer period, you should plan on storing them by yourself. 

Isn’t there any Shipping Cost?

You might be wondering about the elephant in the room which is shipping costs, that you might want to take a look into. There are two ways how the seller can pay the shipping charges if you do not produce the goods. The first is when you buy products from another company, you have to pay for the transportation. The second option is when shipping your product to your customers. However, if you manufacture and then sell your product, you cut down the first shipping charges. Generally, Amazon sellers include the shipping fees with their product price. There are online sites where you can estimate and compare your shipping cost – a good start will be Freightos.

Other Associated Costs

To grow your Amazon Business, you will also need to spend money on advertising your products. Also, you need to take high-quality pictures of your products in order to show them to the customers. Furthermore, another key area would be spending money on graphic and logo design for your Amazon Business.

What Amount of Money Do You Need to Operate an Amazon Business?

With your costs to run an Amazon Business sorted, you may ask the question “How much money do I need to start an Amazon Business?” An Amazon seller can start investing $2000 while others can put money as a large amount as $50000. Needless to say with a small amount you can operate and learn the strategy, in the meantime, to grow your Amazon Business; while minimising the losses associated with the business. Also, it is evident that investing a huge amount will give you the opportunity to rapidly extend your business on Amazon. But it can be risky if you mismanage your Amazon Business. However, $5000 investment does not guarantee that you would be risk-free as Amazon Marketplace is not a risk-free venture, therefore, setting a stop loss is highly advisable.

With this information in your mind you can start your venture as an online seller at the Amazon Marketplace. Initial days can be hard, but over the period of time, you will develop a good economically feasible business model that will in turn boost your business. We recommend you to start small then gradually hit the target that you have aspired and then set a new target so on.

About the author

EWOR is a school conceived by Europe’s top professors, entrepreneurs, and industry leaders. We educate and mentor young innovators to launch successful businesses.

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