Amazon marketplace is one of the world’s most famous e-commerce marketplace by the number of sales. An e-commerce marketplace is a set of tools and technology that connect online buyers and online vendors. Basically, the argument is simple rather than opening a physical store, or a self-hosted online store, and face all the challenges that come with running a business, join the Amazon marketplace, and forget about most of your worries.
Actually, on the Amazon marketplace, you start selling from day one, if you are all set with your inventory. You can literally sell everything that can be legally shipped on Amazon. Amazon marketplace aims at alleviating more than 70% of the seller’s pain. In fact, think of a mall or your typical local Sunday market and picture it online instead.
A. Amazon.com vs Amazon marketpalce
But before we jump into details, it is important to point out briefly the difference between Amazon.com and Amazon marketplace.
Basically, Amazon.com is different from Amazon marketplace. Because the integration of both websites is practically perfect it is hard for customers to clearly establish a difference.
Essentially, when you shop on Amazon.com you are purchasing directly from Amazon. I am sure you have for example seeing Amazon private label inventories such as Amazon basics for example.
On the flip side, Amazon marketplace is for everyone that is approved to sell on Amazon. It is the third-party retailer marketplace open to external vendors. One key feature is the price comparison algorithm that enables the marketplace to be competitive. As an approved retailer, you can sell used items as long as the products meet Amazon requirements.
Consequently, when you shop a product directly from Amazon, Amazon gets 100% of the revenue. But, when you shop from a third-party vendor, the revenue is split between Amazon.com and the third-party vendor according to a pre-establish agreement.
Therefore, as a third-party vendor, you will not only compete against all the thousand of registered vendors but also against Amazon products.
B. How does Amazon marketplace works
Indeed, with over 150 Million monthly active shoppers looking to buy a product on amazon (Statista,2019), Amazon is definitely a go-to if you want to sell at scale.
People browsing the giant marketplace already have a buying intend they are just looking for the right product. That means as a business owner, you don’t have to worry about driving potential customers to your store, whether is an online store or a brick and mortar. That is because Amazon does that for you.
More, for shipping, if you wish, after you package your products, just send them to Amazon’s warehouses spread across the country and they will take care of the fulfillment on your behalf. Amazon calls that fulfillment by Amazon. Simple right, well actually there are some subtilities you need to understand and get familiar with before you start selling on Amazon marketplace.
B.1 How to start selling on Amazon:
B.1.a The Process
How it works
- Source a cheaper good
Be sure to find a reliable supplier. You don’t want to run out of your inventory or get stuck with bad quality products that would eventually lead to a high return rate at our cost. Therefore take your time to find the right sourcing partner. Keep in mind dropshipping is not authorized on the platform.
- Make sure it meets all the legal and compliance requirements
Depending on the type of item you carry. There are some basic legal, quality control, and compliances that absolutely need to be met. Be sure to check if all your items meet those criteria.
- Protect your brand
To benefit the most out of the marketplace, your brand needs to be legally protected. Actually, it is increasingly becoming a legal requirement. So be sure to register your brand.
- List it on Amazon marketplace
This is a pretty straightforward process as the platform itself is extremely usual friendly.
- Ship it to Amazon warehouse
Should you decide to take advantage of Amazon FBA program. However, you can elect to fulfill yourself. In that case, be prepared to ship nationwide within a specific time frame as notify by Amazon.
- Run promotion
This is perhaps one of the most neglected aspects. Indeed, most vendors underestimate the cost and time of running ads and marketing campaigns. The goal is to get your product out there in front of the public. That is your responsibility. So do make sure to take that into consideration. Your product is not going to be magically sold by itself.
- Amazon customers buy it
Two things to keep in mind. You don’t get access to the data and a sale is never a done deal until the return period is over. Any return cost is supported by the vendor.
- You get paid
Once the return period is over, you typically get paid through your preferred payment method. Usually, it happens within 15 to 30 days depending on your agreement.
Typically, you source a cheaper good, you ship it to Amazon warehouse, list it on Amazon marketplace, run promotion, the customer finds the product, buy it, Amazon does the shipping, you get paid.
However, you can also manufacture your own exclusive product known as private label, capitalize on amazon as one of your sales channels. If you choose to do the latter you need to be trademarked to protect your brand.
Usually, it is a pretty straightforward process no major technical skill is required. The marketplace outreach is deep and large. In addition, you can easily integrate with many third-party software applications to facilitate your operations.
Nevertheless, they are two ways to sell on amazon. You can either sell on Amazon Vendor Central or Amazon Seller Central.
B.1.c Amazon Vendor Central
This is an invite-only platform that is typically for merchants, manufacturers, and wholesalers. Those invited sell their inventory in bulk directly to Amazon at a wholesale price. To avoid any unnecessary confusion and challenges Amazon maintains full ownership of the products after transactions.
B.1.d Amazon Seller Central
This is the way to go for many like you who have decided to sell on Amazon.com. Seller on Amazon Seller Central maintains full ownership of their inventory. They either sell under their brand name (Private label) or stores on Amazon.
Therefore, when most people think of selling on Amazon, they mostly mean selling on Amazon marketplace by joining the Amazon Seller Central program. However, you have to learn How To Start Selling on Amazon. To be effective.
Below you can find a summary process of a typical Amazon seller central vendor.
B.1.e Fulfilled by Amazon (FBA)
Fulfilled by Amazon, often referred to as FBA, offers sellers the opportunity to take off their shoulders one of the most paint full aspects of online business. Indeed, through the program, Amazon would handle packaging, shipping, and the majority of customer relationship management on your behalf. All you have to do is to ship your inventory directly to one of Amazon’s fulfillment centers across the US and the world.
B.1.f Fulfilled by Merchant (FBM)
Unlike FBA, the seller is fully responsible to fulfill any sale. Normally, you are entailed to ship, manage customer service, and all related activities and expenses affording you more control. But, you need to meet Amazon’s strict requirements and stay up-to-date with their policies should you choose this fulfillment option.
B.1g. Fees For Sellers On Amazon Marketplace
Regular seller fees structure typically breaks down as follow:
- No monthly subscription fee
- $0.99 fee for each item sold
- Variable closing fees that vary by category (ranging between $0.45 to $1.35)
The professional plan works a little bit differently. It is usually reserved for high performers but comes with more options.
- A monthly subscription fee of $39.99
- Referral fees on each item sold (ranging from 6% to 25%, averaging 13%)
- Variable closing fees that vary by category
The referral fees are subtracted from the sale of your product as part of Amazon’s cost-per-acquisition (CPA) model. These include fees such as selling price, shipping, and gift wrap.
If you are still interested on selling on amazon. learn how you can start selling on amazon below.
C. How to start selling on Amazon:
It is important to weigh in your options because selling on Amazon marketplace might not actually work for you. That is why before jumping in, you need to do a comparative analysis to find out if Amazon marketplace is the right fit. Three main approaches are available should you decide to do online business. Each of them with its unique advantages and inconveniences compared to selling on Amazon.
- Amazon marketplace vs dropshipping
- Amazon vs your self-hosted e-commerce site
C.1.1 Amazon marketplace vs others
This is a pretty straightforward process. You open an online store, customers buy, and the vendor ships the product.
Clearly, you don’t manage or own any inventories. Thus, limited options in assessing product quality. However, you are responsible for customer satisfaction. The latter include managing a high volume of unsatisfied customers.
If well done with high-value ticket products or fast-moving products of high value it can be very lucrative. On the flip side if the products are poorly manufactured it could quickly turn into a nightmare. This approach will get you banned on Amazon marketplace.
We are talking about a self-hosted online store. Everything is controlled by you from the technical aspect of your site to shipping your products. In addition, to inventory management.
However, you can outsource some activities including fulfillment operations so you can focus on your core business. Driving traffics, managing fulfillment, taxes, payment processing, etc… Even though it comes with many advantages, this is very demanding and requires a lot of commitments
Many alternatives to Amazon exist in the marketplace. In some cases cheaper and with a larger potential customer base. For instance, Facebook Marketplace is a great illustration.
In conclusion, take your time and evaluate your options. Do your due diligence about other options and alternatives. You can either have full control of your business, control part of your business process or join a marketplace. Nonetheless, if Amazon marketplace is your go-to here are some challenges you need to take into consideration.
C.2 The challenges
Selling on Amazon comes with its set of challenges and risks. Therefore, it is necessary to acknowledge and be ready to deal with them.
- Stock rotation
Keep in mind if you decide to work with Amazon fulfillment program, your inventory cannot be warehoused at Amazon for a long time. In fact, if your rotation stock is low chances are your cost are going to go up. Therefore the quicker its sales the better you are. But, you cannot also run out too often. So, inventory management is a critical component of your Amazon store.
2. Estimate the real cost of joining amazon marketplace
Many people just jump directly onto joining Amazon marketplace as a seller without actually spending time asking the right questions. How much would Amazon marketplace really cost me? Break down all your cost structure to its granular level.
C.1.b Challenges of selling on Amazon marketplace
Marketing on Amazon marketplace is not easy and costs money. You have to learn how to market on the platform so you can drive traffic to your store.
To get your figures right, I recommend an empathy map. Certainly, this tool might be new to you but it is effective. So, draft an empathy map from your perspective as a seller. Then, do another empathy map from your customers’ perspectives.
4. Business plan
At the end of the day, you are building a business. Even if, for you, at this moment it is just a hobby. Regardless, make sure to put in some groundwork. Because you want to avoid a financial disaster.
Be aware of returns. Consequently, include that in your plan. Approximately,10% of your stock. Returns are of your responsibility, you bear the cost.
6. Amazon private label
This is a killer for most Amazon stores. Amazon owns brands in the marketplace. Chances are you will be competing against those in addition to others.
Amazon might not be for everyone. Especially when you want to start a local business. Typically, Amazon marketplace should be considered as an additional channel for your business. It should be included in your omnichannel mix. Nevertheless, is a great career choice for anyone wanting a semi-passive income or the potential of unlimited earnings.