The 7 Things You Need to Know Before Selling Anything on Amazon
Whether you’re looking to make a little money on your pristine closet castoffs, or creating your own profitable side gig, take this expert advice for selling on Amazon Marketplace.
From food delivery to white label products, it seems like Amazon has their hand in everything these days. Well, eBay better watch their back because now with Amazon Marketplace booming, anyone can get into the online retail biz. While buying on the site is super easy (almost too easy), selling is not as simple as snapping a pic and printing out a UPS label. If you’re a wannabe seller, whether on a small or large scale, there are specific steps you’ll need to take, not only to ensure you’re following the rules, but also to yield the most profit. We spoke to online retail specialists for their tips on how to navigate the marketplace.
1. Decide What Kind of Seller You Are
Most sellers who are new to the online retail business will likely want to start slow, reselling a never-opened blender or a complete Harry Potter series on occasion. If you’re looking to make some real money though, you could try online arbitrage. “It’s basically the process of finding items in other retail stores (or online) and buying them at a deep discount, with the intent of turning around and selling them on Amazon at a higher price,” explains Greg Mercer, founder and CEO of Jungle Scout, which helps Amazon entrepreneurs build their businesses. “It requires little selling knowledge to get set up, but it can also be more work than what the profits are worth.”
You may also want to look into being a drop ship seller, in which you create a listing for certain items on Amazon and, when someone buys it, you purchase it directly from the manufacturer and have it sent to the customer. Sites like AliExpress have a wide range of items to sell, and even provide software that'll link with your Amazon account. “This requires no inventory at all, but you must have an agreement with the business to promote and sell their products,” says Mercer. You can also try your hand at wholesale selling, in which you buy in bulk, and then resell on Amazon. “You will obviously need a hefty investment up front, which means it’s not for everyone,” he adds.
2. Research Your Potential Earnings
There’s no point in going to the trouble to sell online if the profit margin is minimal. “I recommend going into the Amazon app and scanning the barcode of the item you’re thinking about selling, whether it’s used books or toys at Target," says Tim Bildstein, sales supervisor at e-commerce platform Seller Active. "The app will populate the most popular listing under that product identifier. With those numbers, you can figure out what the margin is: the difference between the buy and sell price.”
Bildstein points out that the single most important factor in an item’s profitability is the sales rank. “If an item has a sales rank of #1, it’s obviously popular, but anything over 100,000 means that less than one of this item sells per month and that’s no good. For a beginner seller, it’s much easier to gain traction by reselling products that are already selling through other vendors.”
Additionally, you'll want to check Amazon’s list of restricted brands. If a brand is on the list, you can’t sell it on Amazon without first appealing to the manufacturer, providing paperwork, and specific details on selling methods. Additionally, there are certain items that are restricted or require approval, including alcohol, jewelry, and electronics. You’ll have to decide if the process is worth the effort.
3. Don't Forget to Factor in Shipping Costs
Shipping costs money, so you won't have an accurate picture of your profit potential unless you consider what you'll have to spend on fulfillment. Amazon offers a FBA (fulfilled by Amazon) option. You can drop your items to be shipped at an FBA center, and they’ll take care of the shipping and handling. It costs roughly $3 per item under one pound, and the larger and heavier the item, the higher the fee. “With that though, they will handle any shipping or delivery issues, and remove any negative reviews regarding S&H from your listings,” explains Bildstein. If you take care of the shipping and handling yourself, you may have to sell the item at a lower price and then charge for shipping. You’ll also be on the hook if there’s any delivery issue.
4. Open An Amazon Seller Account
Once you know what you’d like to sell and how much of it you’ll be doing, you can create a seller’s account on Amazon Marketplace. “If you plan on being an occasional seller and are just testing out options, you’ll want to start with an Individual Seller Account,” says Mercer. “It costs about $.99 per item that you sell, but Amazon will also take referral fees as well. Most products have a 15% fee (of the retail price) but can range between 12-40% depending on the category.”
There’s also a Professional Seller account you can sign up for which is $39.99 per month. “I recommend this for those who sell over 40 items per month because it’s more cost effective, and offers additional benefits,” Mercer explains. Either way, you’ll be directed to your own Seller Central dashboard which will be your guide for navigating the system.
5. Promote Your Business
If you decide to expand your side hustle, you’ll need to implement the right marketing tools. “Whatever the product, you’ll always be dealing with competitors selling the same product or something similar, and you need to find ways to stand out among them,” explains Mercer. “You’ll want to ensure that your product photography is top notch, that you have plenty of customer feedback, and that your description of the product is using the right keywords for search optimization.”
You also want to invest some money promoting your product as well, especially if you’re selling on a large scale. “This is the time to take advantage of Amazon’s advertising services,where you can create pay-per-click campaigns to get your product ranking. The higher the rank, the greater the visibility of your product on Amazon, and the greater the visibility, the more likely the sales will start rolling in,” says Mercer. He also recommends creating promotional giveaways and discounts to jumpstart your sales, and start building up those valuable reviews.
Speaking of reviews, no small business can survive without providing a positive buyer experience. “If you have bad customer feedback, no one is going to buy anything from you online,” warns Bildstein. “The customer is always right, so if there’s a defect or a shipping issue, make sure you handle it ASAP to ward off negative reviews.”
6. Follow the Rules
Amazon didn’t become a business behemoth for nothing, and they have pretty strict guidelines to maintain the success and profitability of the online marketplace. “You should familiarize yourself with Amazon’s Terms of Service. They tend to change each year, and companies like ours try to keep sellers on top of those changes to make sure their selling and promotional practices aren’t in direct violation of Amazon rules,” explains Mercer. For example, offering compensation and free products in exchange for a 5-star review is a big no-no!
Some other guidelines: don’t sell from overseas, don’t sell counterfeit goods, and make sure to meet your shipping deadlines. “Amazon will give you an overall score on your Seller Central Dashboard called an ODR (order defects rate),” says Bildstein. “It’s a percentage of total orders that are considered defective. An ODR above 1% may result in account deactivation.”
7. Don’t Forget About Taxes
Yes, Uncle Sam applies here. “You will owe income tax on any profits you make, and sales tax must be charged, no matter if you’re an occasional seller or a business,” says Mercer. “The income tax bracket you fall into is all relative to profit amount. When you’re filing taxes and are asked about additional income, this is where you’d enter your profit.” Also, as with any small business, you’ll want to be sure you’re writing off your business-related expenses throughout the year.
When it comes to sales tax, Amazon collects it, and passes it on to the government. Still, it is up to you, the seller, to remit it to the respective states and tell Amazon which states they should be charging tax in for your product. It gets complicated because every state has different tax codes, and some don’t even charge sales tax. Experts recommend using a service like TaxJar to help navigate this process.
Before building any business, it’s important to understand all of the steps and processes, from beginning to end. Be sure to hold on to this cheat sheet and refer back to it as your Amazon business continues to grow.