As a major driving force behind the emergence of online sales, Amazon is one of the most popular platforms out there. While Amazon directly sells some products to consumers, third-party sellers account for a significant portion of sales on the platform. In 2018, around 53 percent of all goods sold on Amazon were from third-party sellers. Given that Amazon saw $31.8 billion in third-party seller service revenues, there is a substantial market for small businesses on the site.
Selling on Amazon is relatively easy: You need to set up a seller account, list your products, and ship them either directly to the consumer or to Amazon, depending on what type of account you set up. While the overall process is basic, there are some important details and decisions to make before you get started.
How to sell on Amazon
The first step to selling on Amazon is creating a seller's account and choosing a plan. Amazon breaks its Marketplace plans down into Individual and Professional. The Individual Selling Plan does not have a monthly subscription fee, and Amazon will collect a 99 cent fee per sale, in addition to other standard sales fees.
The Professional Selling Plan has a monthly subscription fee of $39.99, but there is no per-sale fee. This plan, like the Individual Selling Plan, is subject to other Amazon referral and closing fees. Amazon recommends signing up for the Professional Selling Plan if you plan to sell more than 40 items per month.
Once you decide which plan is right for your business, you can either list your products and sell them directly to buyers or enroll in the Fulfillment by Amazon program. Selling directly to customers involves posting your products, making sales and then sending them to customers. You'll be responsible for the shipping and handling of your products, and your customer will always have additional shipping costs for the sale.
With Fulfillment by Amazon, you send your products to Amazon and it handles shipping to the customer. It also makes your products eligible for two-day delivery, free shipping and other Amazon Prime perks. Enrolling in Fulfillment by Amazon can make you stand out from other third-party sellers – customers want to use their Prime perks, and free two-day shipping can be a powerful purchasing motivator. Many Amazon sales experts recommend opting for Fulfillment by Amazon unless it's financially impractical.
Fulfillment by Amazon is a great service, but there are some fees for third-party sellers. Amazon provides a full breakdown of its Fulfillment fees, but the basic structure is also important to understand. Amazon will charge you a monthly inventory storage fee per cubic foot and a Fulfillment fee for each item sold. These rates will vary widely based on your business's situation.
Amazon also charges fees for referral and closing sales. It breaks down its fees by category, but just about every item will have a referral fee, and some items will have a closing fee. On Feb. 19, 2019, Amazon will introduce fee changes, lowering some minimum referral fees and adjusting other referral fee percentages for some items. Home and garden supplies, for example, won't see a referral percentage fee change but can expect to see a decrease in the minimum fee requirement from 30 cents to $1.
Amazon divides its product categories into two groups: open and professional. There are more than 20 open categories for selling on Amazon, where third-party sellers can list products without specific permission. The professional categories require approval from Amazon to "help ensure that sellers meet standards for product and listing quality as well as other category-specific requirements." If you want to sell products in a professional category, you'll have to sign up for a Professional Selling Plan and get approval from Amazon to list your product.
Selling on Amazon is a basic process, and it's important to expand your retail operations wherever possible. Sometimes, the best first step to selling on Amazon is reviewing sales strategies for success. Once you have a strategy in mind, you can sell your goods across the country through Amazon. Creating a Marketplace account can also be a great way to connect with Amazon's Storefronts program, which focuses on fostering small business growth.