The question of “how to start selling on Amazon” is one that I get asked often. I have written many posts about how to sell on Amazon successfully, but never a comprehensive guide to selling on Amazon made especially for beginners. This post will start at step one and let you know what it takes to make money selling on Amazon.
My goal with this post is to show you the full process of what it takes to sell on Amazon. After reading this post I believe you will have enough information to decide if selling on Amazon is something that you wish to pursue.
Before we get into the details I will give you a quick introduction of my experience selling on Amazon.
I have been selling on Amazon since 2008 when I was a freshman in college. In September of 2013 I quit my full time job as an accountant to pursue making a full time income selling on Amazon, and have been running my own business ever since. During this time I have learned many things that have helped my business succeed. In both 2015 and 2016 my business did well over $1 Million dollars in sales each year on Amazon alone. It’s been a ton of fun, and it’s exciting to see sales continue to grow.
I didn’t start selling on Amazon at this level. My goal with sharing that is to give you an idea of the potential. In October of 2013, my first month selling on Amazon full-time, I did about $3,000 in sales. My point is to show that you can start selling on Amazon at a small scale.
With that brief intro, let’s get into what it takes to sell on Amazon.
Selling on Amazon for Beginners: An Overview
I will first provide an overview of how selling on Amazon works. Amazon is the largest online retailer in the world, and you can have products you sell listed for sale on Amazon. In return for some fees that you pay to Amazon, your items can be displayed to millions of customers. We will get into what products to sell later in this post. For now, let’s take a look at what it looks like when you have an item for sale that you are selling on Amazon. Note: Click on the image to enlarge for a better view.
- The arrow and underlined name in the center of the screenshot is a “3rd Party Seller” on Amazon. (Note: if you start selling on Amazon, you will also be classified as a 3rd party seller.) They are in what is known as the “Buy Box.” What this means is that when a buyer clicks the “add to cart” button” it will be this sellers item that is added to the cart to purchase. In this case the seller in the Buy Box is ROLANDA.
- The seller that is in the buy box has their listing “Fulfilled by Amazon.” This means that Amazon will handle shipping this item to the customer. We’ll get into more details on what Fulfillment by Amazon means shortly.
- On the right hand side of the screen you can see that there is a section with “Other Sellers on Amazon.” This section also displays 3rd party sellers on Amazon, however these sellers aren’t in the “buy box.”
- You might notice that “Amazon.com” is not listed as a seller in either the buy box or the other sellers sections. On many products you will see Amazon.com listed as a seller of the product you are looking at. Generally speaking, 3rd party sellers see better sales on their products when Amazon.com is not a seller on the same item.
When you sell on Amazon your item will be displayed in either the buy box or in the other sellers section of the Amazon product detail page. Generally there are only 3 different sellers shown in the other sellers section on the main product detail page. If there are more than 3 other sellers, which is very common, then the buyer will have to click to view all of the available offers to see every seller who is on the listing. It’s also important to note that all sellers for the same item display on the same page. If you’ve sold on eBay in the past, then this will be a bit of a change. When selling on Amazon, you are able to add your product offering on the same product detail page as other sellers. In the case of the Catan game above, there are 81 total seller that have this item for sale at the time of the screenshot. The buy box seller and the other sellers section are the only sellers who are featured at the current time. Getting the buy box is a key part of seeing success on Amazon. The exact algorithm is not known, but 3 of the top factors you can control are: your price, your feedback rating, and your fulfillment method.
The fulfillment method is very important to maximizing your results on Amazon. Using Fulfillment by Amazon as your fulfillment method will be one of the best things you can do to generate sales when selling on Amazon.
How to Sell on Amazon FBA
- Find a product that you want to sell on Amazon.
- List the product for sale on Amazon. At the time you are listing the item you will set the selling price of your item. We’ll get into more details on this later in the post.
- Prepare the item to be shipped to a Fulfillment by Amazon warehouse.
- Box up your items and ship them to the warehouse location that Amazon assigns. Note: you will be able to box up many different items together. Your only responsibility is to get the items safely to Amazon’s warehouse. You don’t have to worry about packaging things up in a manner that will go directly to the end customer. So if you have 20 copies of a board game you want to sell, you can ship all 20 in the same box to Amazon as long as Amazon has assigned all 20 to go to the same warehouse.
At this point your work is just about done with the product. Here are the steps that Amazon will take once the items arrive at their warehouses:
- Verify that you have sent the correct items in the proper condition.
- Upon verifying the items are correct, Amazon will activate your listings. This means that your seller name will appear on the applicable product detail page, and your item will be available for sale.
- Amazon will store the item in their warehouses until a customer orders it.
- When a customer orders the item, an Amazon team member will ship the item to the customer.
- Once the item has shipped, Amazon will deposit your share of the sale into your seller account. Your share is the selling price less Amazon’s fees. You will receive an email from Amazon every time they ship an order for you.
- Every 2 weeks you will receive a deposit to your bank account for items that have sold for the prior 2 weeks.
Essentially, you are responsible for finding items to sell and getting them to Amazon. After that, Amazon takes care of the rest of the process.
What Are the Benefits of Using the Fulfillment by Amazon Program?
There are a few key benefits to selling on Amazon using the Fulfillment by Amazon program.
The biggest one that impacts Fulfillment by Amazon sellers is the free shipping benefits offered to customers: The screenshot above takes a look at some of the benefits that shoppers on Amazon have who are a part of the Amazon Prime program. Amazon is rolling out some additional benefits and now offers, free one day, same day, and 2 hour delivery on certain items in select cities.
When you sell on Amazon using the Fulfillment by Amazon program, your items are available for all of these prime shipping benefits. That means customers can get Free 2 day shipping on the items that you sell. The fast shipping times are very appealing for customers, and makes them more likely to purchase an item from you versus a seller whose item is not available for prime shipping.
In addition to the fast shipping, customers also know that items that are shipped via Prime will have the same return policy as items that are sold by Amazon.com themselves. What this means is that customers can be extremely confident that their items will arrive exactly as described and when expected. In the unlikely even that their expectations are not met, then they know that Amazon’s customer service will get the issue resolved for them.
The extreme confidence that customers have in the program are 2 major benefits that will help your items to sell faster. The other key benefit that I will mention is that Amazon does most of the heavy lifting when you use the Fulfillment by Amazon program when selling on Amazon. You are able to ship items to Amazon in bulk, and they handle getting the items to the individual customers.
What Is the Other Option Besides Selling with Fulfillment by Amazon?
I mentioned above that there was another option when selling on Amazon that does not require you to use Fulfillment by Amazon. The other option is to “merchant fulfill” the items you sell on Amazon. This means that you will keep the items you have for sale at your location and when an order comes in you will ship the item directly to the customer. There are times when this can make sense, but 99% of the time using Fulfillment by Amazon will be a better option.
Just know that “merchant fulfilling” is an option, but for the remainder of this post, we’ll focus on selling on Amazon using the Fulfillment by Amazon program.
Now that we have an overview of how the process works, we’ll get into the details of how to setup your seller account, how to know how much you will get paid for items that sell, how to find items to sell, how to price your items, how to get your items to Amazon FBA warehouses, and what you can expect once you have items for sale on Amazon.
How Do I Start Selling on Amazon? Step by Step
The first step in how to sell on Amazon is setting up your Amazon seller account. You can do this by going to sellercentral.amazon.com and clicking the register now button as shown in this screenshot:
After clicking the “register now” link you will go through the process of setting up your Amazon account. Setting up your account should only take a few minutes, and then you will be able to sell products on Amazon.
How to Calculate Amazon Profit: Using the Fulfillment by Amazon Revenue Calculator
If you’ve setup a seller account at this point, the first thing that I would recommend is to download the Amazon Seller App. This is a free app that is available directly through Amazon that will give you details on the selling price, the fees, among a few other details, of any product that is available on their website. This app will allow you to use the camera on your cell phone to scan the barcode of any product, and will then show you the pricing and fee information for any item that you are considering selling on Amazon.
If you haven’t yet setup a seller account, then there’s another option that doesn’t require a seller account. You can view the Fulfillment by Amazon Revenue Calculator and get the fee details on any item. Here’s a look at an example product:
If you go to the Fulfillment by Amazon Revenue calculator, you will be able to search for any item that you are considering selling on Amazon. You will then enter the price (red arrow), how much it will cost you to ship to Amazon (black arrow), and how much the product costs you (green arrow). The calculator will display exactly how much you will be charged in fees, and most importantly at the bottom will display exactly how much profit you can expect to make on that item.
I recommend running every single item you sell on Amazon through this calculator or a different tool that serves the same purpose. With calculators like this available, you should know exactly how much you can expect to profit on every item that you are selling on Amazon.
Now that we have a tool that shows us how the fee structure works when selling on Amazon, we need some items to sell.
Deciding What to Sell on Amazon
The first potential way to find some initial items to sell is by seeing what you have around your home. A couple of the most common items that might make sense are books or any gifts that you have received and never opened.
The second option is to buy items that are available at low prices at a local retail store. Generally these items will be on sale or clearance. The idea is to find items that are selling for less in the retail store than they are selling for on Amazon. This practice of buying items at low prices in retail stores and then selling them on Amazon is known as retail arbitrage. Retail arbitrage is one of the best ways to get started selling on Amazon, as the initial investment is low, and it allows you to learn the process. The experience gained through retail arbitrage can provide extensive knowledge about how selling on Amazon works, which can be applied to other inventory sourcing methods in the future.
I will go over a quick overview of how I’d recommend getting started with retail arbitrage. To go through this, you will want to setup a seller account so that you can have access to the Amazon Seller App. This will provide you with the information that you need to see if an item is worth buying to resell.
After you have the app installed, go to a local big box store in your area. Wal-mart, Target, Home Depot, Toys R Us, Kmart, Walgreens, or any similar store will work. Once you are in a store, look for a clearance section or aisle similar to this:
This example shows a Walmart clearance aisle. Once you are in this aisle you want to open the Amazon Seller App, and use your phone’s camera to scan the barcode of the products in the clearance aisle.
After scanning a product, you should see a screen like this:
On this screen you want to check for 2 things. The first is to make sure you are eligible to sell the product on Amazon under the selling eligibility section. The second is the sales rank shown in the top left hand corner. On this particular item we can see that the sales rank is 60 in the toys category, which is an exceptionally good rank. The sales rank is a piece of information that Amazon provides that gives us an idea of how fast an item is currently selling on Amazon. A full discussion of sales rank is beyond the scope of this post, but it’s important to know the lower the number the better. For your first few trips, I’d recommend looking for sales ranks that are lower than 250,000. As you gain more experience you can definitely tweak this, but ranks under this range are a good starting point.
If the app shows that you are eligible to sell the item, and the rank is less than your threshold, then you want to check and see if the item will provide a desirable return on investment.
You will be able to enter the selling price, your cost per pound to ship to Amazon (I use $0.50/lb), and how much you can purchase the item for. In this example, I’m showing that I can buy this item for $10.
At this stage there are 2 quick checks that you want to go through. The first is to see if the net profit number shown at the bottom is higher than your minimum profit threshold. Typically I recommend setting this at around $3 per unit. This means that you won’t buy any items that you will make less than $3 in profit on. Having a potential net profit of less than $3 per unit does not allow for very much upside and small drop in price can wipe out your profit.
If the item meets your minimum profit threshold, then you will want to calculate a return on investment percentage. You can do this by dividing the net profit by the cost of the item. In this case it’s $7.13 divided by $10, so the return on investment percentage is 71.3%. When you are first getting started selling on Amazon, I recommend looking for items with a return on investment percentage that is higher than 50%.
So this particular item meets all of the criteria for purchasing the item, and should be purchased. For any item that fits all of the purchasing guidelines, I recommend purchasing up to 6 of the item. In this example, if there were 6 copies of this game on the shelf for $10 each, then I would buy all 6 of them.
Then it’s time to repeat this process on the next item, and the remainder of the items in clearance section. When you are first getting started, I recommend scanning as many items as possible. As you gain more experience you will likely will be able to avoid scanning certain items that don’t appear viable for resale. When first getting started though, I recommend scanning as many items as possible.
I recommend going through the process of determining if an item is viable for resale in the order mentioned so that you can quickly move on to the next item for any items that don’t fit your buying criteria. As soon as an item doesn’t fit one of your criteria, move on to the next item.
In this section, I went over what I recommend when just getting started selling on Amazon, over time as you gain more experience, there’s definitely room to adjust these guidelines.
How do I price the items I am selling on Amazon?
Now, that we have some items that we want to sell on Amazon, we need to know how to price them. When selling on Amazon using the Fulfillment by Amazon program, I recommend pricing at a similar level to the other Fulfillment by Amazon sellers on the listing.
To get to this screen, view all of the available offers for the product. This can be done by clicking the link that says “used & new (#) from” that will display on just about every product for sale on Amazon. The # field will be filled in with the number of sellers on that particular listing.
Now for the screenshot above, you can see that I filtered the view for only prime eligible items, and items in new condition. I recommend filtering the view to match the condition and fulfillment method of the item you are pricing.
For the item in the screenshot above, I recommend pricing between $41 and $41.41 if you are looking for a quick sale.
When pricing your items, I do not recommend pricing below the offers you are competing with. Pricing below your competition can often start a chain reaction of lowering prices, and can quickly erode margins. On the more aggressive side, I recommend matching the lowest price of the same fulfillment method. On the more conservative side, I’d price between $0.01 and 1% higher than the lowest price of the same fulfillment method.
As a bit of a side note, if you are willing to wait awhile for the item to sell, I would price the item between $46.52 and $49.95 in this example. The reason for this is there are a few different “gaps” in the prices these items are selling for. Whenever I am pricing an item I will look for significant gaps in price between the offers, and if there’s a decent gap, then many times I will price at the higher end of the spectrum to see if I can make some additional margin on the product I am selling.
Pricing is something that you will definitely get a better feel for as you gain more experience selling on Amazon, but these general guidelines should be a good starting point.
Throughout this post we’ve covered the bulk of what it means to sell on Amazon. I’d like to close with a few tips and thoughts from someone who has gone through the process before. The first thing that I would say is that if selling on Amazon sounds good to you, give it a shot! You can test the retail arbitrage strategies that are laid out in this post in just a few hours, and going through that process should be eye opening. Some people love it, and others can’t stand it. If you dedicate a few hours to it, you’ll know how you personally respond.
The other main thing that I would say is to set realistic expectations. Selling on Amazon, particularly via retail arbitrage, takes some work on the front end. If you are going to go for it, be willing to put in the necessary work on the front end. The effort can definitely pay off.
Hopefully this post has answered most of your questions about how to sell on Amazon, and gives you a better idea of what selling on Amazon really means.