Today’s article is part 1 of a 3 part series on how to sell on Amazon.
Amazon is a goldmine. In 2017, Amazon saw nearly $178 billion in revenue, and year-to-year growth has been a minimum of 20% for over a decade now. Naturally, everyone wants a piece of the (very lucrative) pie.
Enter the third-party Amazon seller — the individual or small business who sells goods on Amazon. Third-party sellers are flocking to the marketplace hoping for anything from a little side cash to a full-time income to an early retirement.
“It’s too saturated!” you say. “Selling on Amazon is dead!” you say.
Naysayers might argue that the Amazon marketplace is entirely too crowded for any individual to turn a considerable profit. In an October 2017 Forbes article, Marketplace Pulse founder Juozas Kaziukenas estimated one million new sellers would join Amazon in that year alone.
Then one might consider that Amazon U.S. itself has hundreds of millions of products listed — and more than three billion products across 11 marketplaces worldwide. It’s not all that surprising, then, that some people think learning how to sell on Amazon is nothing but a dead end.
The massive volume of sales, as well as the sales growth, indicates there is room for more sellers. However, it also means there’s a high failure rate. If you want to actually turn a profit, you must learn how to sell on Amazon.
To be clear, making money selling on Amazon isn’t as simple as:
- List a product
- Watch as the Benjamins start to roll in
It certainly is doable, though — but how?
Hold my beer.
This article will teach you all the must-know information regarding how to sell on Amazon, including the various ways to do it, the steps you take to get started, pitfalls to watch out for, and so much more — including the oft-debated topic: selling on Amazon vs. eBay.
If you’re still on the fence, wondering if this is even for you, know that there are several reasons millions of people are racing to the marketplace as new sellers. Here are just a few.
The Traffic Comes to You
As of December of 2017, nearly two hundred million people were visiting Amazon websites each month. Does that mean two hundred million people will see your product listed for sale? No. Does that mean you’re going to have an easier time getting traffic to your product? Probably.
While creating your own website to sell from certainly has its advantages — the biggest being that you own the site and your customer list — it also presents a huge disadvantage: you have to drum up all your own traffic from scratch. Amazon effectively mitigates that problem when you sell on the marketplace.
It’s already a trusted name. It’s already well known. You don’t have to convince a shopper to check out Amazon, because they probably already have.
While you will undoubtedly have to go to significant lengths to stand out from your competitors, you’re still well ahead of the person trying to sell their product on a random website nobody’s ever heard of.
The Opportunities to Scale are Endless
How much money can you make selling on Amazon? You can make as much money as you want.
One more time for the cheap seats in the back: you can make as much money as you want!
Amazon isn’t going to stop you from making more money. The more you make, the more they make.
You Can Be as Hands-Off as You Want
If you’re tired of being chained to a desk for nine hours a day, learning how to sell on Amazon might be for you. You can make money from your phone or in bed. You don’t even have to put pants on.
If you do FBA (more on that later), Amazon handles all the customer service so you don’t have to deal with cranky people who want to complain because their product was supposed to arrive in two days but it took in two and a half.
Furthermore, if your daily responsibilities ever get to be too much, you can always document all your processes and then hire a few virtual assistants to follow your systems.
Your business can run like a well-oiled machine — and largely without your involvement. Fact: the best kind of job is the one that involves no work on your part.
So, you now have an understanding of what you stand to gain by selling on an existing online marketplace, but why Amazon?
Before we can move forward with this marketplace specifically, we need to settle one major debate: selling on Amazon vs. selling on eBay.
Understandably, online sellers want every chance for success, which often means selling on every marketplace platform they can find. However, not all marketplaces are created equal. Case in point: eBay.
Selling on Amazon and eBay could very well mean increased revenue — but at what cost? Is it wise to invest your valuable time in both marketplaces?
Let’s look at how both Amazon and eBay measure up.
The Size of Their Marketplaces
If Amazon is a great white shark, eBay is a minnow. Remember that $178 billion Amazon made in revenue last year? eBay’s was $9.6 billion — and that number has hardly budged over the last few years, whereas Amazon’s revenue has grown tremendously.
Is this the only factor that matters? Of course not. However, one must consider that the great white shark continues to climb the proverbial food chain, while the minnow seemingly flounders. You don’t want to be the minnow.
The verdict: In terms of marketplaces, Amazon takes the cake. In fact, it takes the whole bakery. If you want to test eBay, go for it, but be sure you learn how to sell on Amazon while you’re at it.
The Difference in Fees
Online marketplaces are like Tom Cruise in Jerry Maguire: “Show me the money!” When you make a sale, they want their cut.
Sellers sometimes make the mistake of determining their margin simply by subtracting the cost of goods sold from the sale price. However, there are other fees you’ll have to pay — something else you need to consider when it comes to selling on Amazon and eBay.
Here’s how Amazon’s fees work, straight from the horse’s mouth.
The first fee you have to consider is your selling plan:
- The professional selling plan costs $39.99 a month
- The Individual plan is free, but Amazon will take $0.99 for every item sold (in addition to other fees)
Additional selling fees vary based on the category to which your item belongs.
Plus, if you decide to use FBA (which you likely will), Amazon will charge you to pick, pack, and ship the product, as well as handle all the customer service.
Then there are storage fees, since Amazon hangs onto your products for you. If you’re not careful, these can really sneak up on you.
If you want to test a product as an example to see what you could expect in fees, check out Amazon’s FBA calculator. I also love the Chrome extension RevSeller because it allows you to quickly and easily determine a product’s profit margin and FBA fees right from the product listing page.
eBay is a lot more cut-and-dry. The two main fees are an insert fee to create the product listing and a final value fee when you sell your item. There are some exceptions — such as the fees for real estate listings — but generally, this is how it works.
When it comes to the cost of selling on Amazon vs. eBay, admittedly, eBay’s simplicity is attractive, and Amazon indeed ends up costing you more. However, this isn’t the end of the conversation.
Amazon might take a bigger cut, but they’re also creating a better experience for the customers — and you. Your time costs money, and when you allow Amazon to handle your packing, shipping, and customer service, you save a lot of time (and headaches).
And while you may not have to pay eBay for pick, pack, and ship fees, you’ll have to pick, pack, and ship yourself, or pay someone to do so. You’ll also have to pay for shipping separately, and in most cases you’ll find that Amazon charges you less to ship than the post office will.
The verdict: The old adage “You get what you pay for” holds true. You pay more for Amazon, and you get more in return. #TeamAmazon
Learning how to sell on Amazon and eBay offers two completely different experiences. Considering how simple eBay is in terms of the selling process and fees, the platform is relatively straightforward. Remember that people often turn to eBay to sell random stuff they find around the house and don’t need anymore. They’re looking to make a little extra cash.
Selling on Amazon is kind of like making your way through a three-story mall looking for one store on the opposite end that’s hidden in a dark corner.. and meanwhile, the entire mall is on fire.
That being said, because the platform is infinitely more robust than eBay, it affords you, the seller, the opportunity to provide a more unique, customized, and competitive experience for the shopper. Plus, Amazon Seller Support is always a click away.
The verdict: eBay is easier, yes. If you’re looking for simplicity, that’s where you should go. If you’re looking for opportunity, it’s Amazon all the way.
The Final Word on Selling on Amazon vs. eBay
Should you focus on selling on Amazon or eBay? Much of this depends on your goals. If you found your Great Aunt Edna’s crocheted pillow in the basement and want to see if anyone would actually pay money for it, list it on eBay.
Keep in mind that eBay is technically an auction site. This means shoppers go there looking for rock-bottom prices. Used items and collectibles are big.
However, if you’re looking to make a steady stream of income — and importantly, you’re interested in scaling an actual business — head to Amazon, because:
- Shoppers here are willing to pay more for quality and value
- The marketplace is far bigger
- The platform caters to sellers who want to make money
- They offer additional services to help you sell more, like FBA
Second only to the Amazon vs. eBay debate is FBM vs. FBA: yet another important discussion when it comes to learning how to sell on Amazon.
As an Amazon seller, you can sell via FBA and/or FBM.
FBA stands for Fulfillment by Amazon, and FBM means Fulfilled by Merchant. What are they, what are the pros and cons of each, and — perhaps most importantly — which one should you go with?
What is Fulfillment by Amazon?
FBA is when you list a product for sale on Amazon, and you send your product to one of their fulfillment centers. When someone buys one of your products online, Amazon will pick, pack, and ship your product to the customer.
With FBA, Amazon will also handle any and all customer service issues. If a customer wants a refund or replacement, Amazon will take care of it. In their own words, FBA means, “You sell it, we ship it.”
And really, anything that means less work for the seller is usually a good thing.
What is Fulfillment by Merchant?
You can probably guess this one by now. With FBM, the merchant — that’d be you — is responsible for shipping a product once a customer buys it. This means you’re also responsible for:
- Storing the product
- Prepping and packaging the product
- Handling all customer service — including returns and refunds
How Does Each Stack Up?
I know it’s not nice to compare, but, well…
Any savvy seller needs to compare the cost of storing their products themselves to the cost of Amazon storing it.
Here’s what Amazon’s storage fees are looking like, as of now.
Whether your products are selling or not, you’re going to have to pay up if you’re taking up space in Amazon’s fulfillment centers. These costs can get pretty steep if you have a ton of inventory or really big items (or both).
What’s the alternative?
If you go with FBM, you either need a warehouse or a very understanding spouse. It’s not uncommon for newbie sellers to keep all their products in their homes and garages to start, and depending on how your business grows, you might be able to keep it that way.
If you want to scale, though? You’ll need a more viable option.
The verdict: If you have very little inventory and extra time to pack and ship, or if you’re able to pay for and staff a warehouse, you can make FBM work. Otherwise, pay Amazon’s storage fees and save your marriage.
When you use FBA, Amazon effectively becomes a middleman between you and the customer. That means that between the time the customer buys and later receives the product, something could happen — good or bad.
If a customer buys your bottle of shampoo and it arrives leaking everywhere (ew?), the disgruntled customer is going to leave you a one-star seller feedback and talk about how much you ruined their life.
To be clear: You can get Amazon to remove these bad ratings, if they were indeed responsible for the mishap. Just bear in mind you are sort of at Amazon’s mercy.
When you sell FBM, you have far more control over the situation, since you’ll package and ship the product yourself. Plus, selling is faster. You can sell your products as soon as you have them.
With FBA, you have to wait for products to arrive at the fulfillment center and be processed.
As an added bonus, when you’re selling FBM, you have more control over what you sell, and it’s easier to sell products like hazmat items and meltables. FBA rules are much more strict on this, and getting approval can be challenging.
The verdict: FBM offers more freedom, but with freedom comes responsibility.
Buy Box Power
Unless you’re enrolled in the Seller Fulfilled Prime program, FBM usually puts you at a disadvantage when it comes to the buy box ( FYI, buy box is the term for whose product is purchased when a shopper clicks the Add to Cart button on Amazon).
Amazon is totally guilty of playing favorites, and when it comes to FBA vs. FBM, they are Team FBA all the way. While several factors go into who wins the buy box, Amazon absolutely gives special treatment to FBA — unless there’s an FBM seller offering the product for a lot cheaper.
(Side note: When you use FBA, all of your products are automatically enrolled in Prime. Win!)
The verdict: For better buy box odds, choose FBA.
The Final Word on FBA vs. FBM
It’d be nice if there was a more clear-cut answer here, but life isn’t fair. Which route you go down will largely depend on what kind of business you have right now, and what kind of business you’re trying to build.
In comparing the two, it’s safe to say that if you intend to keep your online business relatively small and simply want to know how to make money online on the side (which is A-OK), you might very well be just fine with FBM.
However, even then, many sellers will confirm that for all of FBA’s downsides, it’s still worth the extra investment and slight loss of control. Can you make it big with FBM? Absolutely. It’s a myth about selling on Amazon that FBA is the only way to go.
To start, though, you might be better off letting Amazon do more of the heavy lifting (literally) for you.
Especially because you won’t have to deal with angry messages in the middle of the night about how a customer received a broken shampoo bottle. I thought that was worth mentioning again.
Want to learn more about how to get started on Amazon? Join our Amazon Insiders community and register for our next free training webinar and then continue on to read part 2.