Amazon is the largest online marketplace in the United States, netting over 85 million unique visitors every month. If your products aren’t listed on Amazon, you are missing a huge opportunity to reach millions of customers every day.
That sounds simple enough, but how do you get started? And once your products are listed on Amazon, how can you increase the visibility of your listings among the millions of other products on Amazon?
This series will explore how to set up a Seller Account on Amazon, how to create your listings, and how to optimize your listings so you can sell more on Amazon.
This first part of the series will examine the various types of Seller Accounts available to you, and how to decide which one is right for your online business.
How Does Selling on Amazon Work?
An Amazon Seller Account allows you to sell your products on Amazon’s platform, giving you the opportunity to reach millions of potential customers every day.
In short, you start by creating product listings. Then, when a customer sees and purchases your product, it is shipped (either from you or from an Amazon warehouse) to the customer. Finally, Amazon transfers payment to you, less variable fees.
With a seller account, Amazon is essentially taking a cut of your profits to let you use their platform to reach their customers. The kind of account you want to choose will depend on the volume you expect to sell, as well as how you prefer your orders to be fulfilled. Keep in mind you can always switch between these types of accounts and fulfillment methods, too.
“But I don’t want to sell on Amazon because…”
Many businesses are hesitant to sell on Amazon. Perhaps you worry about hurting your brand image, or race to the bottom pricing. In almost all cases, these concerns are unfounded. There is a reason why you can find nearly everything on Amazon.
If growing your online sales is a priority for your business, you really need to be on Amazon.
The question about pricing comes up often, because Amazon is known for having competitive online pricing; in fact, it’s one of Amazon’s key principles: providing exceptional value to their customers. But that doesn’t mean you have to undersell other online channels that also carry your products (with a seller account, you control the price of your products). It just means your products must be priced on parity with other online channels. For example, you can’t sell a yoga widget for $5 on your own website and $15 on Amazon.
Another concern we hear often is about the lack of control over how your products are listed on Amazon. Some businesses are shocked to discover their products on Amazon, even though they didn’t create the listings. In most cases, wholesale customers will list other companies’ products on Amazon to increase reach and drive sales. By creating a Seller Account on Amazon, you can actually take over these 3rd party listings and control the way your products are listed.
But we’re getting ahead of ourselves. For now, just take our word for it: You want to be on Amazon. So the first question to ask is…
Which Seller Account should you have?
There are two distinctions in Seller Accounts: Individual versus Seller, and Seller Fulfilled versus Amazon Fulfilled. This plays out into three options:
- Individual – Seller Fulfilled
- Professional – Seller Fulfilled
- Professional – Fulfilled by Amazon (FBA)
Referral Fee:
Regardless of the Seller Account type, Amazon will take a referral fee for every sale based on the sale price and the category of goods. For example, in the clothing category, Amazon will deduct 15% of the sale price from your payment (with a minimum referral fee of $1). Other category rates vary, but 15% is the most typical rate. Think of it as a commission Amazon takes for delivering the sale.
Individual vs. Professional: Individual Seller Account
Amazon recommends an Individual Seller Account as a good starting point if you expect to sell less than 40 units a month. This account level is FREE, but you will pay $0.99 per sale (in addition to the referral fee) and you will be responsible for shipping products to customers in a timely manner.
Keep in mind, if you are a new seller on Amazon, you are not going to have products flying off the proverbial shelves; but even if you aren’t going to sell 40 units in your first (or even your fifth) month, that doesn’t mean you necessarily should have an Individual Account.
Pros:
- Good low risk way to test the Amazon Seller Central platform.
- Easy to upgrade to a Professional Seller Account at any time if you find the Individual level too limiting.
- No monthly fee.
Cons:
- Pay $0.99 per sale.
- You must create your listings individually; no option for bulk upload.
- Limited access to analytics and reporting.
- You are responsible for processing and fulfilling all orders.
- You incur costs for shipping direct to the customer.
Restrictions:
Certain categories of goods are not allowed to be listed by Individual Sellers. The relevant categories for Yoga People clients include:
- Clothing and Accessories
- Beauty Products
- Gourmet Food
- Health and Personal Care Products
- Jewelry
That means if you sell items in these categories, you will need a Professional Seller Account.
Pro-Tip:
Pass on the Individual Seller account. This is small fish. Even if you don’t sell 40 units in your first month, you will be selling more than 40 units a month in no time. The professional level has fewer limitations, and the monthly fee is worth it for access to valuable tools and resources.
Individual vs. Professional: Professional Seller Account
What’s the downside of a professional account, you ask? Well, Amazon sticks you with a $39.95 monthly charge. (Hence it’s only “cost effective” to have a Professional Account if you’re selling more than 40 units a month if you were only considering the $0.99/unit charge.) But, with a Professional Account you get access to the bulk product upload feature, reporting and analytics, and most importantly, Fulfillment by Amazon (FBA).
Pros:
- First monthly charge waived
- Bulk product upload feature
- Reporting and analytics
- Option to have Amazon do order fulfillment
Cons:
- $39.95 monthly fee
So what’s the big deal about having Amazon do the fulfillment? With FBA, you can let Amazon do the heavy lifting, saving you time and money to focus on other aspects of business development.
Seller Fulfilled vs. Fulfilled by Amazon (FBA)
With a Seller Fulfilled Account (either Individual or Professional) the process is the same:
Amazon notifies you when an order is placed, and you are responsible for processing and fulfilling the order. In other words, you ship the product directly to the customer. You have to do this promptly, or your seller rating will suffer.
Maybe you’re already fulfilling your own online orders and drop-shipping for several online retail channels, so doing your own order fulfillment doesn’t sound like that big of a deal. However, FBA not only saves you the hassle of order fulfillment; it also gives you significantly greater visibility on the Amazon platform, which translates to increased sales velocity.
You still have to ship your products, but instead of shipping them one at a time direct to the customer, you can ship them in bulk to Amazon. This is often more cost-effective since shipping costs decrease with increased volume. You simply decide how many widgets you want to sell and load them into the system. Then Amazon tells you where to send them.
Amazon then stores your products in their warehouses and fulfills orders as they come in. They also handle customer service and returns.
Because Amazon is faster at fulfilling orders than sellers, products that are warehouse-stocked qualify for the highly-coveted Prime Eligible listings.
Why does Prime matter?
The people who shop most frequently and spend the most money on Amazon are “Prime” customers. For an annual fee, they get access to millions of Prime Eligible listings. Prime customers can purchase these items and have them delivered in just a couple of days for free. So these customers search almost exclusively for FBA products. It’s one of the most common filters used on Amazon because online shoppers care about getting their purchases quickly and direct from Amazon.
So what’s the catch?
Amazon charges for all this leg work. To have your products fulfilled by Amazon, you will pay a number of fees that vary based on the size and weight of your items:
- Handling Fee: Up to $1 per order for non-media items and $0 per sale for oversize items.
- Pick and Pack Fee: Per unit ordered $1.04 for non-media, $1.44 for clothing, $4.05-$10.34 for oversize items.
- Weight Handling Charges: Starting at $0.50 per item – additional charges apply; starting at $1.59 for oversize items, weight charges apply.
- Storage Fee: $0.48-$0.64/cubic foot/month calculated based on daily average volume.
At the end of the day it’s not as much as it sounds, though. For example, Yoga Company sells a $70 mat on Amazon FBA and nets $48. Amazon takes a 15% referral fee plus about $12 in FBA charges. Turns out, it would cost Yoga Company $20 to ship the yoga mat to the customer (not including time for processing). Instead they can ship 10 yoga mats to Amazon saving time and money.
At the end of the day it’s almost always better to let Amazon do the fulfillment. This frees up time for growing your business instead of drowning in logistics. Plus, you will sell more just by being a Prime Eligible Seller.
This sounds great: How do I get started?
It’s easy to sign up for an Amazon Seller Account. You can do so here. While we usually recommend businesses establish an Amazon Fulfilled Professional Seller Account, every business is unique. Let us help you launch your brand on Amazon. Start with a free consultation today.