How To Sell On Amazon: Complete Beginner’s Guide

When it comes to eCommerce, competition is fierce, especially with Amazon. 

Still, you can be successful with it if you put the right effort into it. In this guide, I explain how to start an Amazon business the right way. We have worked with Amazon experts to give you real advice, not just the same generic stuff you get from most guides. 

They include Amazon sellers who have succeeded, digital marketing experts who help Amazon entrepreneurs grow their businesses, and others.

As you can see from the stats, Amazon is the largest online retailer. Your brand gets exposure to new customers when you sell your products there.

Are you ready to sell on Amazon? Learn how to set yourself up for success with this beginner’s guide.

Exploring How Selling On Amazon Works

One of the big draws to selling on Amazon is how easy it is. Here, we break the process down into two stages: before you start selling and selling products. We also explain the basics of how Fulfillment by Amazon (FBA) works.

1. Before you start selling

Preparing to start selling on Amazon is a simple three-step process:

  1. Figure out what you want to sell. Amazon has 20 product categories open to all sellers and 10 or more additional categories open only to Professional Sellers.
  2. Decide on a selling plan. If you plan to sell fewer than 40 items per month, choose an Individual plan, which charges $0.99 per item. If you plan to sell 40 items or more, go with the Professional plan, which charges a $39.99 monthly fee and no fee per item. (See the later section “Comparing Amazon Business Types” for details.)
  3. Register to become an Amazon Seller. Go to SellerCentral.Amazon.com to register and follow the on-screen prompts.

2. Selling products

After you’re registered, you can begin to list products for sale. Our guide covers the product listing process in detail, but the process basically consists of the following four steps:

1). List the product(s) you want to sell. You have two options:

  • List products already on Amazon. Choose products already listed on Amazon and specify the number you have available, their condition (new or used), and your shipping options.
  • List products not on Amazon. If the product you want to sell isn’t being sold on Amazon, you need to specify the item’s universal product code (UPC) and stock-keeping unit (SKU); write a product title and description, and provide product photos.

2). Sell the item. Selling consists of waiting for someone to buy the item you listed. When someone clicks your listing and buys the product, Amazon notifies you of the sale. During this time, you can try to improve sales via pay-per-click (PPC) advertising on Amazon and engaging in other marketing and advertising efforts. Learn more about how to increase sales on Amazon.

3). Ship the product to the customer. Upon receiving notification of the sale, you ship the product to the customer or, if you use Fulfillment by Amazon (FBA), Amazon ships it from its warehouse for you. (See the next section for more about FBA.)

4). Get paid. As you sell products, Amazon deposits payments (less Amazon Seller fees) into your account and notifies you when payments have been made.

3. Using Fulfillment by Amazon (FBA)

With FBA, you ship inventory to various Amazon fulfillment centers across the country and, if desired, around the world. When someone clicks your listing and orders the product, Amazon picks, packs, and ships the product for you. FBA offers several benefits, including the following:

  • You save the time and cost of picking, packing, and shipping the product yourself. (However, you pay for inventory storage and pay Amazon an FBA fee based on the product’s size and weight, as explained in the later section “Tabulating the Costs.”)
  • Shipping costs are potentially lower because you benefit from the rates Amazon negotiates with carriers.
  • Your products are eligible for free two-day shipping and, in some cases, one-day shipping (for Amazon Prime customers) and free shipping on eligible orders (for all Amazon customers).
  • You increase your chance of winning the Buy Box (the box on the right of the product detail page that enables a shopper to add the product to his shopping cart).
  • Amazon processes returns and refunds for you.

Comparing Amazon Business Types

“Selling on Amazon” can carry different meanings, depending how you conduct business on or with Amazon. You may be selling on Amazon as a retailer, selling to Amazon as a vendor, selling professionally or as an individual, and so on. In this section, we explain the different business types and how they operate on Amazon.

1. Vendor (1P) versus Seller (3P)

Amazon vendors and sellers differ primarily by their relationship with Amazon and the way they sell in these ways:

  • Vendors have a first-party (1P) relationship with Amazon, selling their products directly to Amazon, which then resells the products to shoppers. Vendor status is granted by invitation only.
  • Sellers have a third-party (3P) relationship with Amazon, selling their products to shoppers and receiving payment through Amazon. Sellers are responsible for listing, pricing, and marketing their products, and anyone can become a seller through the Amazon Seller registration process.

Being an Amazon Vendor, has its pros and cons.

Here are the pros:

  • Products carry the “Sold By Amazon” label, evoking strong customer trust and hence increased sales.
  • Amazon offers a suit of marketing tools for vendors through Amazon Marketing Services (AMS).
  • Amazon vendors typically don’t pay seller fees, such as referral fees, fulfillment fees, and other charges.

Here are the cons:

  • Amazon sets prices, and sometimes prices are set so low that the vendor suffers a loss or may not realize the desired profit margin.
  • Launching new products may be a challenge because Amazon is often reluctant to issue purchase orders for products that have no sales history.

Meanwhile, being an Amazon Seller also has its pros and cons.

Here are the pros:

  • More control over the listing, pricing, and delivery options
  • More analytics and customer performance metrics for improving business
  • Direct connection with buyers to gather feedback and information on buyer preferences

And the cons:

  • Seller fees, including commissions and referral fees
  • Not having the “Sold by Amazon” label to instill the consumer trust that leads to increased conversions, which is especially valuable when competing head-to-head with vendor products

2. Individual versus Professional

When you register to become an Amazon Seller, you must choose from the following two plans:

  • Individual: You pay $0.99 per item sold, no monthly fee, and you pay only when an item sells. Amazon provides access to a basic set of listing and order-management tools. As an Amazon Individual Seller, you have the option to create listings one at a time by matching your products to existing listings or by creating new listings. Amazon sets the shipping rates for orders and determines which shipping service levels sellers can offer to buyers.
  • Professional: You pay $39.99 per month whether you sell nothing or a million items. You pay no per item sold fee. Amazon provides its Professional Sellers with access to additional features and tools and removes some selling restrictions.

These aren’t the only fees you pay to sell on Amazon. Other fees include referral fees and shipping fees. See the later section “Tabulating the Costs” for a complete accounting.

Do the math, and you quickly conclude that anyone who sells more than 40 items a month will save money with the Professional plan. However, costs are only one difference between the two plans.

3. Arbitrage versus private label

As an Amazon Seller, you’re responsible for procuring products to sell. Two common product sourcing options are arbitrage and private label, as we explain in this section.

Arbitrage

Retail arbitrage (or simply arbitrage) is an easy, low-cost approach to sourcing products, which involves buying discounted products from other retailers, marking up the price, and reselling them. Many sellers get their start on Amazon through arbitrage. 

Experimenting with arbitrage on Amazon enables you to develop the knowledge and experience of selling on Amazon without risking huge sums of money.

However, arbitrage does have potential drawbacks, including the following:

  • Arbitrage requires considerable time and energy in terms of finding deals and listing and marketing new products that may not be listed on Amazon already.
  • You run the risk of buying substandard, counterfeit products of popular brands and getting into trouble with Amazon for selling them as the real thing.
  • The brand owner may file a complaint, result in Amazon requiring you to remove the product from your listings, in which case you get stuck with the unsold inventory.

Private label

A private label product is a product that’s manufactured by a third party and sold under a retailer’s brand name. Examples include Amazon Essentials, Target’s Mainstays, and Walmart’s Great Value brand. To create private label products, you have two options:

  • Invent a new product, patent it, manufacture it (or have it manufactured), label it, and sell it as the manufacturer.
  • Contact a manufacturer of a product you want to sell, have the manufacturer label the product with your brand, and start selling it as your own branded product.

Selling private label products offers several advantages, including the following:

  • Reduced competition. You’re not selling the same brand-name products as everyone else on Amazon.
  • Greater control over pricing.
  • Improved changes of winning the Buy Box.
  • Greater ability to expand sales in the future and beyond the Amazon marketplace.

Creating and selling under your own private label does have some drawbacks, including the following:

  • Creating a private label can be expensive in terms of manufacturing, branding, labeling, and marketing new products, in addition to manufacturing and inventory costs.
  • Introducing a new product with unproven sales to the market increases your exposure to risk.
  • Negative feedback and reviews could sink your entire brand, hurting sales across all your private label products.

The cost of creating a private label and building and maintaining brand recognition discourages many sellers from taking this approach. However, if you can clear the initial hurdles, creating and selling your own private label products is very rewarding, and if you can establish a very good supplier base and control quality, you can build a very successful and profitable brand.

4. Sellers with and without brand registry

Although Amazon provides various tools to help drive sales, including Fulfillment by Amazon (FBA) and sponsored ads, marketing copy is still fairly restrictive for most sellers. 

Amazon Brand Registry provides a way for brand owners to overcome many of these limitations to deliver more robust, visual, and interactive product descriptions that set brand owner listings apart from those of other sellers.

Tabulating the Costs

Selling on Amazon isn’t cheap. In addition to the cost of the products you plan to sell are numerous expenses, including per-item closing fees (or monthly subscription fee), referral fees, inventory storage and shipping fees, and refund administration fees. To earn a reasonable profit from sales, you need to account for any and all fees when pricing your products. This section provides a full accounting of the costs.

Amazon fees may change at any time. Check the Amazon Fee Schedule for the country in which you’re selling to find the most recent fee details.

1. Product sourcing

When you’re buying products from a supplier, consider both the cost of the product and any additional fees, which include packing, labeling, and freight charges and may include duties (taxes levied by a governing body, such as import duties).

For example, suppose you’re ordering 500 units of a cellphone case, each of which costs $3.00. Additional costs may include a 4 percent import duty ($3.00 × 0.04 = $0.12), a freight charge of $100 ($100 ÷ 500 units = $0.20/unit), packing costs of $0.50 per unit, and labeling costs of $0.10 per unit. Your total cost per unit would be $3.00.

2. Shipping and storage

Shipping and return costs vary considerably depending on the product size and weight and the carrier or service you use. If you’re using Fulfillment by Amazon (FBA), you’re charged for both shipping and storage. At the time of this writing, shipping costs ranged from $2.41 (for an item weighing 10 ounces or less) to more than $137 (for special oversized items).

FBA storage costs are charged by cubic foot and at the time of this writing were $0.69 per cubic foot (January – September) and $2.40 per cubic foot (October – December) for standard-sized items. Storage for oversized items cost $0.48 per cubic foot (January – September) and $1.20 per cubic foot (October – December).

When using FBA, you need to account for Amazon shipping and storage fees plus the cost of shipping product from your supplier (or yourself) to Amazon fulfillment centers.

For example, suppose the cost to ship 500 units from your supplier to FBA warehouses is $50 — that’s $0.10 per item. The 500 units consume 10 cubic feet, so that’s $24.00 for storage (October – December) or $24.00 ÷ 500 = $0.048/unit, which you can round up to $0.05/unit. Finally, you’re charged $2.41 to ship the product from the FBA warehouse to your customer.

3. Amazon Seller fees

Amazon Seller fees include the following:

  • Per-item or subscription fee: $0.99 per item or $39.99 per month
  • Referral fees: A percentage of the price the customer paid, which varies depending on the product category but is generally 15 percent or less
  • Closing fee: Applicable to items in certain product categories, such as books and DVDs

4. Returns

Returns can be costly, especially if you sell items such as clothing that are commonly returned or exchanged. Depending on your shipping and returns policy, you could end up having to eat the costs of both shipping and returning the product along with an Amazon return processing fee (20 percent of the original order fees up to $5.00) and perhaps the cost of the product if it’s defective or damaged.

Factor in a ballpark estimate of 5 percent of returned items. If you’re planning to sell 500 units, plan to have 25 returned to you. In our example, if you pay the return shipping fee of $2.41, and 20 percent of the original order fees or 0.20 × ($0.99 + $2.25) = $0.65, you’re looking at $2.41 + $0.65 = $3.06 loss per item or a total loss of 25 × $3.06 = $76.50. Divide $76.50 by 500, and you get a loss per item of about 15 cents. You may want to add this to the total cost per unit of $9.72 in the previous section prior to setting your sale price.

5. Other costs

When setting a price for your products, consider additional costs, including your operating costs (professional fees such as legal and accounting and bank charges) along with any money you plan to spend on marketing and advertising. To ensure that your Amazon selling venture is profitable, be sure to account for all costs. Otherwise, you may barely break even or perhaps lose money.

As a retailer, you also need to collect sales tax on all sales and remit the collected taxes to the states in which your items are purchased. Sales tax isn’t a cost to you; the buyer pays it.

Learn more about the costs of selling on Amazon.

Following Amazon’s Rules

Amazon’s success hinges on customer satisfaction and maintaining a positive reputation in the retail space. The company allows other sellers access to its marketplace on condition that they behave themselves and share the company’s commitment to delivering superior customer service. In this section, we cover the rules that govern your participation in the Amazon marketplace.

Amazon’s changes its code of conduct and seller policies from time to time. For the most current information, click the Search icon (top right of Seller Central), type amazon code of conduct, press Enter, and click the Selling Policies and Seller Code of Conduct link.

1. Seller code of conduct

Amazon’s seller code of conduct stipulates that sellers act fairly and honestly on Amazon to ensure a safe buying and selling experience. All sellers must comply with the following do’s and don’ts:

  • Do provide accurate information to Amazon and your customers at all times.
  • Do act fairly and don’t misuse Amazon’s features or services.
  • Don’t attempt to damage or abuse another Seller, their listings, or ratings.
  • Don’t attempt to influence customers’ ratings, feedback, and reviews.
  • Don’t send unsolicited or inappropriate communications.
  • Don’t contact customers except through Buyer-Seller Messaging.
  • Don’t attempt to circumvent the Amazon sales process.
  • Don’t operate more than one Selling on Amazon account without permission by Amazon.

Violating the Amazon’s code of conduct or other seller policies may result in penalties such as having product listings removed, payments suspended or forfeited, or selling privileges revoked.

The following sections expand upon specific stipulations in the code of conduct.

2. Accurate information

As a seller, you’re responsible for providing accurate, up-to-date information about your business and the products you sell. For example, you must list products in the correct category and post accurate photos and specifications.

3. Acting fairly

Acting fairly means no cheating, such as:

  • Recruiting your friends to post positive reviews on your listings or negative reviews on your competitors’ listings.
  • Hacking or hiring someone else to hack into Amazon to remove negative reviews.
  • Hijacking a listing from the original owner to use as your own.
  • Filing a brand or intellectual property infringement notice against a competitor to have competing listings removed.

4. Ratings, feedback, and reviews

Amazon prohibits any attempts to influence or inflate customer ratings, feedback, or reviews. You’re permitted to contact customers to request feedback and reviews, but you’re not allowed to request or coach a positive review. Examples of other prohibited behaviors in this area include the following:

  • Paying for or offering an incentive (such as a coupon or free product) in exchange for removing a negative review or posting a positive review
  • Requesting only positive reviews or asking a customer to remove or change a negative review
  • Reviewing your own or a competitor’s products

5. Communications

Amazon requires that all communications to customers must be sent through Buyer-Seller Messaging and be necessary for fulfilling orders or serving customers. Don’t contact customers with marketing or advertising content or send any unsolicited or inappropriate messages.

6. Customer information

Customer information such as names, addresses, and phone numbers is to be used only to fulfill orders and provide customer service. After processing a customer’s order, delete the customer’s information. Don’t sell or share customer information with any third party.

7. Circumventing the sales process

Understandably, Amazon wants all sales to go through its marketplace, so it can collect fees and retain its customers. Any attempt to divert a sale to another website to avoid paying fees or to steal customers from Amazon is a violation of Amazon policies. Don’t provide links or messages that prompt shoppers to visit any external website, order a product from a different store, or complete a transaction elsewhere.

8. Multiple Amazon Seller accounts

Amazon allows you to have only one seller account for each region in which you sell unless you have a legitimate business need to open a second account and all your accounts are in good standing. If any of your accounts aren’t in good standing, Amazon may deactivate all your selling accounts until all accounts are in good standing. Here are a few examples of legitimate business needs that qualify you to open more than one seller account in a given region:

  • You own multiple brands, each of which is associated with a different business.
  • You manufacture products for two separate and distinct companies.
  • Amazon recruits you to participate in a program that requires separate accounts.

Use a different bank account and email address for each seller account in a given region. If you’re selling across regions (for example, in North America and Europe), you may use the same bank account for the two seller accounts as long as your accounts are linked through Amazon Global Selling.

Finding Products to Sell

Selling on Amazon assumes you have something to sell. That’s a foolish assumption, an assumption we didn’t make when writing this book. To the contrary, we assume you don’t have products to sell and that you’re looking for some guidance on how to choose products with great sales and profit potential.

Choosing great products to sell is a key first step to becoming a successful Amazon Seller. If you acquire low-demand products or products with hair-thin profit margins, you risk getting stuck with costly inventory you can’t sell or are forced to sell for a very disappointing profit or even a loss. On the other hand, high-demand products with generous profit margins make your job a whole lot easier and more rewarding.

Finding products to sell is a two-step process — deciding what to sell and finding suppliers that have the product and will sell it to you at the price you need to make profitable sales.

1. Deciding what to sell and not sell

We can’t tell you what to sell and not sell on Amazon. That would be like trying to hit a moving target. What we can do is provide the guidance you need to find potentially profitable products on your own. First, you need to know what Amazon will and won’t let you sell in its marketplace. Next, you need to know how to gauge demand for a product and estimate its profit margin.

Brushing up on Amazon product limitations

Assuming you shop on Amazon (a foolish assumption we did make), you’re aware that Amazon groups products into categories and subcategories, such as books, clothing, electronics, movies and TV, office products, and pet supplies. As a seller, you need to know that some of these categories are open, some are off-limits, and some are restricted:

Open categories: Amazon features product categories in which you can list items for sale with no prior approval, including clothing, shoes, and jewelry; electronics; home and kitchen; patio, lawn, and garden; sports and outdoors; and toys and games. However, even in some open categories, you may encounter restrictions, such as the following:

  • Restricted (gated) subcategories: You need to obtain permission from Amazon before you can list products in certain subcategories.
  • Restricted brands: You may be prohibited by the brand owner from listing its products.
  • Restricted products: Certain products may be prohibited, usually due to health or safety concerns.

Categories requiring approval: To ensure product quality, safety, and authenticity for its customers, Amazon allows only reputable sellers to list products in certain categories, such as automotive, collectible coins, fine art, music, movies, and watches.

Restricted products: Amazon prohibits the listing of certain products deemed unsafe, unhealthy, illegal, or unacceptable for whatever reason, including products available only by prescription. Don’t list any restricted products or products you think may be considered harmful or illegal. You’re responsible for making responsible choices regarding which products to list, and the penalties for violating Amazon’s policies are stiff; violations may result in account suspension, termination of selling privileges, destruction of inventory (held at Amazon distribution centers), and permanent withholding of payments.

Amazon does provide some guidance on which products you’re permitted to sell. When you try to list a product, for example, you’re prompted to select a category; restricted categories are displayed with a lock icon.

Learn more about what to sell on Amazon

Conducting product research

Product research is an important step to ensure the salability and profitability of a product. You generally want products that meet the following criteria:

  • High demand: To spot the best sellers in each product category on Amazon, visit Amazon.com, and in the toolbar near the top of the page, click Best Sellers. Use the navigation bar on the left to choose the product category you’re interested in.
  • Weak competition: Skim through the reviews for a product you’re thinking of selling. If you see a lot of low product ratings and negative reviews, you may be able to beat the competition by creating a more accurate product listing, providing better customer support, or selling a similar but superior product.
  • Decent profit margin: Generally, look for products that sell for more than $25 and you can buy for 60 to 70 percent less than the sales price, which will give you a decent profit margin after subtracting your costs.
  • Light and easy to pack and ship: Shipping and handling costs and complexity can leach the profit out of your product sales, so generally avoid products that are more than two pounds, fragile, or bulky. This will also save you money if you need to pay for storage.
  • Not seasonal: Look mostly for products that have steady sales throughout the year. Seasonal products, such as those that sell well only in the spring or summer or only near certain holidays are okay, but don’t rely on them for a majority of your sales.

2. Exploring product sourcing options

Product sourcing is the process of finding items for a low enough price that you can sell for an acceptable profit. Numerous product sourcing options are available, including the following:

Retail arbitrage: You buy deeply discounted products, typically from large brick-and-mortar retailers, mark up the price, and list them for sale on Amazon. Retail arbitrage also applies to buying from online retailers, such as eBay sellers. Keep in mind that Amazon restricts some product categories and specific items, including many branded products. For example, you may not be permitted to purchase a pallet of brand name shoes from a major retailer at discount and list them for sale as “new” on Amazon.

Auctions and liquidation sales: Local and online auctions (and estate sales) allow you to bid on items and often buy them for significantly less than they would be sold for in traditional retail stores, although you may be required to list these items as “used.”

Drop-shipping: With drop-shipping, you select items from a drop-shipper’s catalog and list them on Amazon. When a customer orders the item, you pass the order to the drop-shipper who picks, packs, and ships the item to the customer according to your specifications, so it looks as though it came from you.

Wholesalers: Traditional processing involves purchasing a large quantity of products from a manufacturer, then selling them individually at a significant markup to consumers. You can find plenty of domestic and foreign suppliers that offer products at wholesale prices. Product sourcing platforms such as Alibaba.com provide easy access to tens of thousands of manufacturers and other wholesalers. You can also connect with suppliers at popular tradeshows.

Handmade products: You can make your own products to sell on Amazon and list them for sale in the Handmade category. However, you must register with Amazon as an artisan, and your products must be hand-crafted, not mass-produced. (You can use hand tools and light machinery.)

See our guide for additional information and guidance about these product sourcing options. Also, you can learn more about how to evaluate and negotiate with suppliers.

Listing Products for Sale on Amazon

When you have products to sell on Amazon, you can list them for sale. Amazon features several methods for listing products:

  • List a product already for sale on Amazon. This is the easiest way to list products one at a time. You simply search for the product by name, universal product code (UPC), Amazon Standard Identification Number (ASIN), or some other unique identifier, select the product, supply the requested details, including the price you’re asking, and press the Sell This Product button.
  • Add a product not listed on Amazon. This method requires that you choose a product category most suitable for the product and create a product listing, complete with a product title and description, keywords (to help shoppers find the product), and product photos.
  • Upload a file to list multiple products at once. If you have a Professional Seller account, you can download and fill out a spreadsheet template with all the details required to list dozens or even hundreds of products at once. You then upload the file to Amazon.

Whichever method you choose, the first steps are always the same:

  • Log in to your Amazon Seller account at sellercentral.amazon.com. Open the Catalog menu and select Add Products.
  • Amazon presents a screen that enables you to search for products in Amazon’s catalog, add a product not sold on Amazon, or upload a file to add multiple products.
  • Follow the on-screen directives to complete the process. The steps vary depending on the method you chose to list products in Step 2.

See our guide for detailed guidance on how to list products for sale on Amazon.

Prepping and Shipping Products to Customers

As orders for your products pour in, you need to fulfill those orders. Order fulfillment involves picking, packing, and shipping. You pick all the items the customer ordered from you, pack them in a box or envelope, label the package, and drop it off at or have it picked up by a carrier, such as the U.S. postal service, UPS, or FedEx. And if that sounds too much like work, you can ship your products (or have your supplier ship them) to Amazon fulfillment centers, and let Amazon pick, pack, and ship your products for you.

In this section, we explain Amazon Prime, from a seller’s perspective, and introduce your order fulfillment options.

1. Introducing Amazon Prime

If you do much shopping on Amazon, you’re probably familiar with Amazon Prime. For about $120 per year, Amazon Prime members (shoppers) get a bundle of benefits, including free two-day shipping, free same-day delivery in eligible zip codes, free Prime Video, exclusive savings in select stores and on certain products, and much more.

As an Amazon Seller, you can gain from Amazon Prime even if you’re not a paying member. Any products you list that are eligible for Prime two-day shipping benefit in the following ways:

  • Your product listing earns the Prime badge, which gives shoppers more incentive to purchase the product from you instead of from a competing seller whose product isn’t eligible for Prime.
  • Amazon rewards your product with a higher ranking in its search results and a better chance of winning the buy box — the box on the right side of a product’s page where customers can add the product to their cart. Buy box placement accounts for more than 80 percent of all Amazon sales, so winning the buy box is a huge deal.

Your products aren’t automatically eligible for Prime two-day shipping. For your products to be eligible for Prime, you must do one of the following:

  • Have your products enrolled in Fulfillment by Amazon (FBA) and maintain a sufficient number of items in inventory to meet shopper demand. (See the next section for more about FBA.)
  • Qualify for Seller Fulfilled Prime. (See the later section “Seller Fulfilled Prime.”)

You can choose to ship some orders yourself and have others shipped through FBA. Those shipped through FBA are eligible for Prime, and those you ship yourself won’t be, unless you qualify for Seller Fulfilled Prime.

2. Fulfillment by Amazon (FBA) and Small and Light (SNL)

Fulfillment by Amazon and Small and Light are two order fulfillment options that enable third-party vendors like you to leverage the efficiency of Amazon fulfillment centers to their advantage. 

With both programs, you ship (or arrange with your supplier to ship) products to Amazon fulfillment centers ready to be scanned into Amazon’s inventory system and be shipped to customers. When a customer places an order that includes one or more of your products, Amazon picks the product from the fulfillment center nearest the customer, packs it (by itself or with other products), and ships it to the customer.

FBA offers the following advantages:

  • Products enrolled in FBA instantly gain Amazon Prime status, assuming enough items are in stock to meet shopper demand.
  • Products enrolled in FBA have a better chance of winning the buy box.
  • Amazon does the picking, packing, and shipping, saving you the time and effort.
  • Amazon handles most after-sales customer service issues, including product support, returns, and refunds.
  • Total cost for FBA may be less than the cost of doing it yourself when you account for factors such as Amazon’s ability to negotiate lower shipping costs with carriers.

Of course, Amazon charges sellers to cover the costs of storage, fulfillment, and customer support. Fees generally differ based on product weight and size, with different rates for clothing. However, FBA may cost less than if you were to pack and ship products yourself. 

By using FBA, you benefit to some degree from Amazon’s ability to negotiate lower shipping fees with carriers, and you’re not having to purchase packing supplies. In addition, using FBA saves you valuable time you can allocate to product research, creating excellent product listings, and performing other tasks to improve sales and grow your business.

Meanwhile, the Small and Light program is designed to lower your costs for packing and shipping products priced $7 or less, weighing 10 ounces or less, and 16-by-9-by-4 inches or smaller. Certain types of products aren’t eligible, including restricted, adult, and hazmat products. For sellers, the Small and Light program offers the following benefits:

  • Free three- to five-day shipping to Prime customers
  • Lower fulfillment costs
  • Instant customer trust through Amazon’s A-to-Z Guarantee program

Learn more about how Amazon FBA works.

3. Fulfillment by Merchant (FBM)

Unlike FBA, with Fulfillment by Merchant (FBM), you’re doing all the heavy lifting — storing, picking, packing, and shipping products yourself. FBM offers a few advantages over FBA, including the following:

  • Ability to pack items yourself, which may be best for large, bulky products or fragile items
  • Greater control over inventory
  • Potentially lower costs
  • Ability to deliver more personalized customer service

The major drawbacks of FBM, as compared to FBA, are that you lose out on the many benefits of FBA described in the previous section.

When you’re getting started with Amazon, packing and shipping a small number of products yourself may be the best approach. That way, you can take your time learning the basics of selling on Amazon without the added complexity of FBA and without the risk of buying large quantities of products. As your business grows and you become more comfortable and confident selling on Amazon, you can transition to FBA.

4. Seller Fulfilled Prime

Seller Fulfilled Prime (SFP) allows you to combine the benefits of FBA and FBM. With SFP, you ship products from your own warehouses directly to domestic Prime customers. (Amazon gives you access to the right transportation solutions to deliver products within the Prime two-day delivery window.) By committing to fill orders within two days at no additional charge for Prime customers, you ensure that your listings can display the Prime badge and have a better chance of winning the buy box.

As an Amazon Seller, you’re not automatically eligible for SFP. You must register for the program and then successfully complete a trial period to prove that you’re able to deliver products to Prime customers within the two-day delivery window. Assuming you’re accepted into the program, you’re required to buy shipping labels from an approved carrier, and you must pick, pack, and ship orders the same day you receive them.

During the writing of this book, Amazon wasn’t accepting new registrations for the SFP program, but interested sellers can add their names to a waitlist.

5. Drop-shipping

As we explain in the earlier section “Exploring product sourcing options,” drop-shipping is a product-sourcing and order-fulfillment option that takes most of the heavy lifting off your plate. You list products on Amazon and pass any orders you receive to the drop-shipper who picks, packs, and ships the order to your customer. You never touch the product.

The benefits of drop-shipping are clear, but this option has several potential drawbacks, including the following:

  • You pay a premium for the convenience of having the drop-shipper do all the work.
  • You have no control over inventory. If the drop-shipper runs out of stock, so do you.
  • You can’t promise two-day shipping, so your products won’t be eligible for Prime.
  • Handling refunds and returns becomes more complicated with a third party involved.
  • Customer satisfaction relies heavily on the performance of your drop-shipper, which you can’t control.

6. Multi-Channel Fulfillment

Amazon’s Multi-Channel Fulfillment (MCF) enables you to leverage Amazon’s worldwide fulfillment network to ship products to customers regardless of where they buy them online. For example, you can list products for sale on your own website, on an ecommerce platform such as Spotify, and on Amazon, and whenever (and from wherever) a customer places an order, Amazon picks, packs, and ships the product for you and handles customer support, refunds, returns, and so on.

MCF is very similar to FBA (but you don’t need to be enrolled in FBA to take advantages of MCF). You ship (or arrange with your suppliers to ship) products to Amazon fulfillment centers, and Amazon picks, packs, and ships products for you. With MCF, you can provide the same speedy delivery to all your customers, wherever they choose to shop, and you manage all your inventory through Amazon. MCF provides an easy way to scale your business without increasing your fixed costs.

For details about MCF, click in the Search bar, near the top of Amazon Seller Central, type multichannel, press Enter, and click the link for finding out more about filling orders from other sales channels.

Boosting Sales with Advertising and Promotions

Amazon is an extremely competitive marketplace, where Amazon, brands, and retailers are all vying for customer attention and sales. Whether you’re new to the marketplace or are a veteran trying to maximize your sales and profit margins, Amazon provides several tools for increasing your profile, getting your products in front of shoppers, and converting clicks into sales, including the following:

  • Sponsored Products: Sponsored Products are paid advertisements for individual product listings. Ads for your sponsored products appear on shoppers’ search results pages and on product detail pages when shoppers search for keywords or products relevant to the ad. To control costs, you specify your budget and how much money to bid per click. You pay only when a shopper clicks your sponsored ad.
  • Sponsored Brands: Sponsored Brands are paid advertisements available only to sellers enrolled in Amazon Brand Registry. Like Sponsored Products, Sponsored Brands appear on shoppers’ search results pages and on product detail pages when shoppers search for keywords or products relevant to the ad. These ads feature a custom headline, brand logo, and collection of the brand’s products.
  • Sponsored Displays: These ads run both on and off Amazon. You specify your audience, daily budget, and bid amount; choose the products to include in your ad, and create your ad campaign. These ads include a product image, pricing, badging, star rating, and Shop Now button that links to your product’s detail page on Amazon.
  • Amazon Store: You can create your own multipage store on Amazon for free to expand your profile and promote customer loyalty. As you prove yourself a reputable seller on Amazon, shoppers may be more likely to visit your store and buy from you when they’re in the market for the products you carry.
  • Early Reviewer Program: Product reviews can help boost your product search ranking and improve your chances of winning the buy box. This program allows you to offer customers who buy your products a $3 gift card for posting a review. You pay only when a customer posts a review. Amazon offers your reward to customers for up to a year or until your product has received five reviews.
  • Prime Exclusive Discounts: You can offer discount pricing on specific products to Amazon Prime members. Your discount will appear in the member’s search results and on the product detail page with the original price struck out along with the discount price.

Your marketing and advertising campaigns need not be limited to Amazon. Consider ways you can promote sales off Amazon, such as the following:

  • Social media marketing via your accounts on Facebook, Instagram, YouTube, Pinterest, and so on
  • Blogging about a topic you know a great deal about that’s related to the products you sell
  • Creating a website landing page for a product or collection of products and using it to drive traffic to your Amazon store where people can purchase related products
  • Launching an email marketing campaign to advertise directly to people on your mailing list

Learn more about how to advertise on Amazon

Providing Stellar Customer Service

To be successful in the long term on Amazon, focus less on sales and profits and more on satisfying your customers. We’re not advising that you sacrifice your own financial success to make Amazon shoppers happy. What we are advising is that you deliver sufficient value to create a shopping experience that makes people happy to pay what you’re charging. Delivering quality customer service drives sales, enables you to increase your profit margins, and keeps you in Amazon’s good graces.

To deliver quality customer service, you need to focus on several areas, including product quality, product listings, order fulfillment, communications, and returns and refunds. Here are a few tips for delivering quality customer service:

  • Give customers more than they expect in terms of product quality and customer service. If you’re selling a low-end product to customers who aren’t willing or able to pay for the high-end version, then don’t present your low-end product as a high-end one.
  • Create product listings with the goal of helping the customer make a well-informed purchase decision, not with the goal of selling the customer on a product.
  • Respond to all customer questions, concerns, and complaints within 24 hours and preferably much sooner.
  • Always be courteous and respectful when communicating with customers, regardless of what they say or how they behave.
  • Do your absolute best to resolve issues directly with customers to avoid having the customer try to resolve the issue through Amazon or her credit card company. Having the customer file an A-to-Z Guarantee claim against you or contact her credit card company to request a chargeback isn’t in your best interest.
  • Follow up on all customer product and seller feedback, whether it’s positive or negative. Thank customers for positive product ratings and reviews and positive seller feedback. If you receive negative reviews or ratings, contact the customer to see what you can do to turn a negative shopping experience into a positive one.

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