Ecommerce is rapidly growing in popularity, with 80 percent of Americans regularly purchasing something online. These trends look set to continue, with revenue from ecommerce websites growing over 20 percent year on year.
It’s a lucrative space, and there’s money to be made. If you want to get into the world of ecommerce and selling online, you have a few choices.
Of course, the dominant player in the ecommerce space is Amazon — it’s among the world’s largest ecommerce websites, and it provides some massive opportunities for sellers. As an Amazon business, you can offer your products for sale through Amazon to gain access to their enormous reach, technology and marketplace.
You might think selling on Amazon is easy; they do a good job of setting up sellers for success. Despite this, there are potential pitfalls to selling on Amazon, so we’ve put together this complete guide to tell you exactly how to maximize your chances of creating a thriving Amazon business. We’ll cover:
So, what exactly is an Amazon seller? Simply put, they are people and companies who source goods and then sell them on Amazon at a profit. There are two main kinds of Amazon businesses:
Sellers who source, procure, store and ship the goods themselves including taking care of customer service and returns. They only use Amazon to list their products, get exposure, sell them and take payment. These are known as "Sold by Amazon” sellers.
Sellers who source and procure products themselves but then send them to an Amazon warehouse for storage, sale, payment and shipping. Amazon handles all customer service and returns. These are known as “Fulfilled by Amazon (FBA)” sellers
If you want to be successful on Amazon, finding the right products and buyers is absolutely essential. Due to the success of the platform, there is a vast amount of competition across almost every niche and product. The biggest factors that will decide your success are choosing the right product, understanding the demand for that product and selling it at a profit.
People who buy on Amazon are motivated to purchase in a few different ways:
Amazon is famously known for its competitive prices, so much so that people often compare prices in traditional stores with what Amazon is charging. You need to keenly price your items.
Customers expect high-quality items that do what you say they will. Even if items are inexpensive, customers do not expect the quality to be “cheap.”
Customers want their items quickly. If you’re using FBA, Amazon will take care of that for you. If you’re shipping out yourself, you will need to have fast and reliable logistics and distribution.
Reviews are the lifeblood of ranking your products on the marketplace. Good reviews are essential for getting your products seen and creating trust with other buyers.
Although Amazon does resolve many of the issues facing an e-commerce startup (marketing, acquiring sales, managing distribution, etc.), that doesn't make running an Amazon business easy. You must be able to deal with significant competition, be acutely aware of the state of the marketplace, deal with Amazon’s regulations and policies and be a master administrator.
The profit margins are also likely to be razor-thin. You need to create, buy inventory, manage and maintain a successful business on small profit margins and against a very competitive landscape. But, if you can make it, the upsides are huge. If your product really gets traction, you could make your way into the upper ranks of sellers who make more than $1,000,000 a year on the platform.
Being a successful Amazon business owner requires a diverse set of skills:
So you can find the right suppliers, products and customers
So you can work out profit margins, cash flow and foreign currency exchange
So you can understand trends in the market and ensure you have enough stock and inventory
So you can examine top sellers, product specifications and supplier requirements
So you can adapt to changing requirements and customer needs
Since often basics such as headline writing, copywriting and call-to-actions can make or break your Amazon listing
Here are the main issues an Amazon seller entrepreneur is likely to face:
Here’s what you can expect in an average day:
Now that you have all the background information for your Amazon seller business, it’s time to make it into a reality. That starts by choosing the right structure or “legal entity” for your business. In the U.S., there are four main business structures. They are:
This is the "default" business
structure and is what your
business will be if you decide
not to create a more formal
structure.
We don't
recommend this type of
business as it doesn't give
you the legal protections you need.
The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your real estate
This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.
This is a more complex type of
business and isn't generally
recommended for smaller
organization.
These are the largest and most
complex types of businesses
and are far more than the
average entrepreneur or
business owner will need.
Once you've legally created your Amazon business you’ll need to get some other things in place.
Where are you going to run your business? Will you work from home, get an office, use a shared working space or something else? In most cases, unless you are planning to store products, it’s best to start an Amazon business from your home.
Running an Amazon business could come with certain rules, regulations and legalities you need to be aware of. Incfile can conduct a Business License Research package for you, or you can take the time to do the research yourself.
What kind of bank account will you get? And how will you pay your business taxes? How do you find the best business credit card? These are all important things to consider, so your Amazon business stays in the green. Check out our quick guide to finances and taxes for Amazon sellers.
What equipment do you need to manage your Amazon business? Make sure you understand exactly what you need to spend, so you can write it off against business expenses. In most cases, you won’t need any specialized equipment or supplies unless you are planning to ship products yourself.
What business processes are you going to use to run your business efficiently and effectively? You will need efficient processes for managing inventory, dealing with suppliers, ordering stock, looking at competitors and completing market research.
Is there software that can help you manage and market your business? There are dozens of software applications designed specifically to help Amazon sellers. Here are some great starting points.
Do you need to hire employees to help you out? This may change as your business grows, but try to think ahead about what sort of experts you may need.
Most states require businesses to file an Annual Report report once a year. You will also be expected to pay estimated taxes on what you plan to earn in the current business year. And, your federal, state, regional and city business licenses and permits may need to be renewed on a regular basis, typically once a year.
Our Start a Business Checklist will also help you get your Amazon business going in the best possible way.
Starting an Amazon business can be both very challenging and very rewarding. Find the right niche, source great products and sell them at a profit and you have the makings of a successful business. Eventually, you could be among the 15 percent who sell more than $1,000, 000 worth of products every year.
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