How to Start an Amazon Business in 2021

Amazon businesses are getting a lot of attention, and starting your own could be a great idea! After all, the majority of Amazon sellers make at least $1,000 a month, while some even make as much as $3 million a year. All you have to do is get started, but how? Below, we walk you step-by-step through starting your own Amazon business and setting it up for maximum profitability. 

business analytics, financial charts dashboard, profit and revenue of company, BI or KPI concept
Choosing a business model will help determine your core strategy for maximising profits.

Step 1: Business Model and Start-Up Costs

Your first step is to decide on your business model. Most Amazon businesses are one of three kinds: 

1. Retail Arbitrage: Retail arbitrage, sometimes called online arbitrage, requires purchasing items at local stores or other online shops, then reselling them on Amazon. 

2. Private Label Manufacturing: Private label manufacturers modify existing products, then add their own brand names before selling on Amazon and other e-commerce platforms.

3. Wholesale Supply: Wholesale suppliers purchase items in bulk from a wholesale supplier to sell on Amazon and elsewhere. 

Once you have determined your business model, including how you will source your products, then it’s time to think about your upfront costs. Eighteen percent of all Amazon sellers began with less than $500 in start-up costs. About 22% spent between $500 and $2,500 to get started, and 32% spent between $2,500 and $10,000. The final 22% started their Amazon business with $10,000 or more.

The amount you spend will depend upon the type of product(s) you sell, your starting inventory amount, and how much money you want to invest upfront. Whatever your start-up costs, expect it to cover your initial inventory, the cost of your new Amazon account, UPC codes, a logo and/or product branding, and product photography. 

Step 2: Opening an Amazon Account 

Before selling on Amazon, it’s necessary to open an Amazon seller’s account. You can find the registration option on Amazon’s sales page, near the top. Your first big decision during the registration process is whether to “Sell as a Professional” or to “Sell as an Individual.” Individual sellers are charged 99 cents per item sold, whereas professional sellers pay a subscription fee of $39.99 per month.

Most new sellers choose to sell as an individual because it can take a couple of weeks to a couple of months to begin building up a customer base. Next, you will fill in all of the requested information. Your personal information (including your social security number) is enough to get you started. Any earnings made will be considered personal income. 

Congratulations! Now that you’ve submitted all of your information, you are officially an Amazon seller!

Step 3: Profitable Products

A successful business of any kind requires selling something, so your next step in creating an Amazon business is to find a profitable product. 

Profitable products:

  • sell for between $20 and $200 
  • sell more than 10 units a day
  • are easy to ship because they are small and light 
  • can be shipped with express air
  • have earned fewer than 150 reviews 
  • Sell at two to three times their cost, for a minimum of 50-60% profit margin 

Alternatively, not-so-profitable products also share a few characteristics:

  • can be purchased from the big box store down the street
  • demand a very high quality, like electronics or mechanical products
  • are trademarked 
  • are fragile and/or difficult to ship 

It’s smart to start your Amazon business with a beachhead product — that is, a popular item that will sell quickly. Once your beachhead product begins earning you a profit, then you have the opportunity to start branching out with other products. 

Restricted Amazon Categories 

As you are determining your beachhead product and beyond, keep in mind that there are certain categories for which Amazon requires sellers be approved to sell. There are currently 15 product categories on this list. Some, like Fine Art and Jewelry, are probably expected. Others, such as Made in Italy and Music & DVD, might be a little more surprising. 

Most seasoned Amazon sellers suggest that new sellers steer clear of restricted categories until they have the time, money, and experience to earn approval. So how do you find the perfect first product to sell on Amazon? Do a little research. There aren’t any magic products, and the best product will be one about which you are passionate.

For those who like to rely on research, a number of Amazon Product Research tools are available online. You can also have a professional Amazon automation company walk you through the process. 

Step 4: Sourcing Suppliers 

Now that you have an idea of what you want to sell, it’s time to figure out where to get it. Amazon sellers who focus on retail arbitrage can purchase their products from just about anywhere. Some of the most common resources for this type of seller include outlet malls, clearance sales, and stores like HomeGoods and T.J. Maxx.

On the other hand, many private label Amazon sellers purchase their products from overseas. More specifically, they purchase from Alibaba, one of the world’s largest wholesale websites. Begin by setting up a free Alibaba account. This will require a valid email address and some basic information like your name and phone number. Once everything is submitted, you will be taken to your Alibaba account homepage from which you can start purchasing products. 

Alibaba is a great resource, but it isn’t perfect. Ensure any supplier that interests you meets all three of the following:

  • they have been certified checked by Alibaba 
  • they accept the most secure payment methods of PayPal, AliPay, and Trade Assurance
  • they are a Gold Supplier

To protect yourself and your business, it is recommended that you find at least three suppliers that can supply your product as needed. Once you have found your potential suppliers, it’s time to reach out. On the bottom right of an Alibaba supplier’s product photo is a link to “contact supplier.” Communicate with the potential supplier what it is you are looking for, and they will respond with an estimate for pricing and time. 

It may take some time to get a feel for negotiation and communication tactics that work for you. You will want to communicate that you expect the supplier to earn your business, and that you will be using an inspection process to approve any items. Leave all of your messages open ended, and you’ll quickly enter into a conversation that hopefully leads to a fruitful partnership. 

Once you and the supplier agree on a price, you can place your first small order for what will be your Amazon’s business’s first product. 

Step 5: Amazon Listings 

Your Amazon listing is arguably the most important part of your e-commerce business. Not only does your listing need to be found by the masses, but it also needs to convince said masses to buy your product! The first step towards creating a great Amazon listing is to visit seller central on Amazon. From this page, you will see your current week’s sales and your inventory, and you can choose to “Add a Product.” From there, “Create a New Product Listing.” 

Fill in the required information for your product, including its category, title, and price. Choose the latter thoughtfully, and try to make it as close as possible to a similar product’s Prime price. You can hold off on the Amazon keywords for now. We’ll add those once Amazon has your inventory in its warehouse, and your product listing goes live.     

However, you will need to purchase a UPC Code, which you can do via a website like SnapUPC. Once you have purchased your UPC package, find your UPC JPEG in the folder you downloaded, and enter the number into the “Product ID” box of your product listing. You can also choose to add the Prime logo to your listing to offer Amazon’s famous speedy shipping. Finally, “Save and Finish.”   

Step 6: Photograph Your Products

Before sending your inventory off to the nearest Amazon warehouse, remember to take good, appealing photographs of the item(s) you’re trying to sell. Amazon sellers have two main options when it comes to product photos. They can either take the photos themselves, or pay a professional service to do it for them. 

There are a number of product-photographing services to be found online, but if you opt to save your money and photograph your items yourself, then consider taking the photos in your home bathroom. Bathroom lighting is optimal, while the bathtub serves as the perfect clean, white background.  

Step 7: The FBA Shipping Plan 

Amazon offers two different fulfillment methods, the most popular of which is FBA, or Fulfillment by Amazon. Amazon FBA business owners pay an additional FBA fee in exchange for Amazon storing their inventory, plus picking, packing, and shipping any sold items. Amazon FBA sellers save money on storage and shipping costs.  

List your product as FBA by choosing to “Edit” inventory in your Amazon seller account, and clicking “Change to Fulfilled by Amazon.” Once you choose to “Convert Only,” it will take the website a couple of minutes to create your product labels. You will want to print these barcoded labels to put onto your product packaging. 

The next step is to “Edit,” and then “Send/replenish inventory.” You will see a couple of options here, but you’ll want “case-packed products,” which means all of your products will be sent to Amazon in a single large box. Fill in the “Ship From” box with either your home address or the address of your FBA inspection service

Next comes the Hazmat review form. The information requested on this form includes how many units are being sent per case, how many cases are being sent in total, the product’s dimensions, and whether or not any hazardous materials are included.  

Then record that no prep is required once your product has arrived at Amazon’s warehouses. When the form continues and asks “Who labels?,” select the merchant. There’s no need to print any labels here, because you will have either put the label on the packaging earlier, or your hired company will do it for you. 

Amazon will automatically figure out to which warehouse your products will go, but you will need to click “Work on Shipment” to choose how your products will ship to that warehouse. You will see UPS, DHL, FedEx, and USPS as options. Finally, record your tracking numbers into your Amazon seller dashboard. 

business man working on a tablet of the with the words optimization process written on it
Optimizing your products is the last step before you can start making money on Amazon!

Step 8: Optimization 

You are almost there! This final step towards beginning your own Amazon business is actually a continuation of Step 5 in which you created your product listing. Now that Amazon has your inventory in their warehouse, your products are ready to go live and to be sold. But in order to sell, they need to attract potential buyers in the first place. This is why optimization is so important. 

What is product optimization? Product optimization is simply incorporating important terms — such as terms a potential customer would use in the search box — into a product’s title and description. A fully optimized product listing will include:

  • a title
  • at least one image 
  • a product description listing the major features 
  • a product rating, and product reviews  

Now that your product listing is live, the sales should be right around the corner. You’ve succeeded in officially starting your own Amazon e-commerce business, and you can expect to make money in no time! But there are still some steps to take to fully maximize your new business’s potential. The first thing is to decide if you’ll stick with selling your current product, and what products might be next for your inventory list. 

Once that’s decided, you can begin branding your business. Come up with a catchy business name and create a logo (or have a freelance graphic designer create one for you). Add additional photos to your listings that show your products’ size, alternate styles, and more details.    

A Quick Note About Third-Party Automation Service 

If you want your own Amazon e-commerce business, but all of these steps are feeling a little overwhelming, then consider hiring an Amazon automation company like this one. These third-party companies act as the middle man between you the owner, and your supplier. According to Fulfillment by Amazon rules, suppliers are not allowed to prep products in any way. Thus, an owner who wants to free up as much work as possible will find it very useful to hire an automation company to keep their inventory moving. 

Some other benefits of an Amazon automation company include: 

  • scheduling freight services
  • communicating with suppliers 
  • inspecting products before they are sent to Amazon
  • returning any defective products to the supplier 
  • maintaining product pages

Basically, the right automation company can do it all. 

Final Thoughts

Aspiring e-commerce retailers have lots of options when it comes to creating an online business. What sets Amazon apart from competitors like eBay is the platform’s Fulfilled by Amazon option. This unique option allows sellers to pass on some of the heaviest lifting when it comes to fulfilling orders.

Other tasks necessary for running an online business can be hired out to third-party Amazon automation companies. But for the entrepreneur who enjoys diving into the construction of a new business, these eight steps are sure to prove helpful.  

What’s the Average Income from Selling on Amazon?

If you are wondering about the average income from selling on Amazon, then you have probably been dreaming about profitable, yet freeing business endeavors.

So just imagine: your own e-commerce business that allows you to live comfortably and do what you want when you want, but with very little time and effort. Sounds like a pipe dream, doesn’t it? 

More people than ever before are conducting their shopping online. This phenomenon has created an incredible opportunity for would-be business owners to begin their own e-commerce businesses through the world’s #1 online platform: Amazon. Indeed, Amazon business owners are making upwards of $3 million per year selling a variety of products online! 

But how much can you really make selling on Amazon? Is it worth the time and effort? Below, we walk through all that’s needed to find financial freedom through e-commerce, and the ways in which Amazon sellers actually make money. 

Mini shopping trolley with Amazon logo and Amazon app on Google Play on smartphone and wallet with pounds currency.
Making money on Amazon isn’t as easy as some people make it seem.

The Average Income Selling on Amazon 

Is it possible to make a living by selling on Amazon? The easy answer is “yes!,” though what kind of living depends on a number of factors, and will most likely take a little bit of time. Let’s look at some statistics… 

According to Indeed.com, the average annual income of someone who sells on Amazon is about $42,000. Some even make as much as $3 million-plus in a single year! On the low end, that’s $3,500 per month in income. On the high end, $250,000. 

About 26% of Amazon sellers bring in less than $1,000 per month, but nearly half report sales of between $1,000 and $25,000 each month. Nineteen percent of sellers — or about one in five — say they make anywhere from $25,000 to $250,000 each month. An incredible 6% of Amazon best sellers report sales in excess of $250,000 each month.  

Okay, so you can make money selling on Amazon. But do these big numbers actually equal profit?  

While big sales certainly indicate a successful business, it really comes down to profit. In any other market, the vast majority of small business owners fail to see any profit before two years. But the Amazon marketplace isn’t your average marketplace, and most sellers see profits within just a few months.

As with just about anything, first-time sellers face the biggest challenges when it comes to selling on Amazon. And yet, two-thirds of Amazon sellers report sales and profits before the end of their first year.

Twenty percent of Amazon sellers say they became profitable within three months of launching their online business, while 17% report profits after three to six months. The majority, 23%, began raking in the profits between six months and one year. An additional 20% say it took them a little longer, but they were ultimately profitable before two years. 

Overall, Amazon sellers make more money when their profit margin is better. Most sellers — about 70% — see profit margins over 10%, while 36% of sellers have profit margins over 20%. 

Up-Front Costs and Time Commitment of Selling on Amazon

Before starting any business, it’s important to determine what you’ll need to spend in money, time, and effort in order to get started.  

While 22% of Amazon shop owners spent upwards of $10,000 to get started, doing so is far from necessary. About 32% spent between $2,501 and $9,999 to get started, and 22% spent between $501 and $2,500.  

If you want to start a small business, but don’t want to spend a whole lot to get started, then an Amazon business could be a great option. Eighteen percent of Amazon sellers report spending less than $500 in order to get their e-commerce business off the ground. 

Usually, these up-front costs are spent on inventory, Amazon selling fees, and promotions to attract customers.   

In terms of time, selling on Amazon doesn’t have to require much. In fact, about two-thirds of Amazon sellers report spending fewer than 20 hours per week maintaining their online e-commerce business. Seventeen percent spend just 30 minutes a day on their Amazon shop! 

And while it’s generally true that you get out what you put in, it’s also possible to hand the work over to the pros, so that you can focus on everything else worth focusing on. 

Choosing Amazon to Sell

Amazon has been a powerhouse in the world of e-commerce since its founding as Cadabra in the summer of 1994. In that time, it’s become the world’s #1 best-performing e-commerce website, ranking higher than eBay, Walmart, Shopify, Etsy, and others. 

Online sellers choose to sell on Amazon because Amazon knows how to attract customers. From its mission statement (in which they state their goal of “customer obsession”) to its generous return policy, Amazon is a place that shoppers depend upon. 

A 2019 poll by Feedvisor determined that 89% of shoppers are likely to purchase a product from Amazon over any other online marketplace. Additionally, a whopping 70% of online shoppers regularly use Amazon as a search engine to find new brands and products.

And it seems this industry dominance is set to continue into the post-pandemic world. Consumer Trends reports that 74% of people believe they will continue to do their shopping via Amazon and other e-commerce platforms, even over brick-and-mortar retail stores when life returns to normal.      

Fulfillment Methods for Amazon

If you want to sell on Amazon and maximize your profits, then it’s necessary to understand the two order fulfillment methods that are offered. 

The first fulfillment option is Fulfillment by Merchant, or FBM. FBM sellers are responsible for storing their items, and then picking, packing, and shipping them when they sell.   

The second option is Fulfillment by Amazon, or FBA. The overwhelming majority of Amazon sellers choose to sell their products as Fulfillment by Amazon. When a seller is registered as FBA, Amazon handles all aspects of an order, from storing, to picking, to packing and shipping. Amazon even deals with all returns, so this option takes a huge part of a seller’s workload off of his or her hands.  

Although it would be easy to assume that FBM sellers save more money in fees (and therefore make more money), this isn’t always the case. FBA sellers do indeed pay more fees, but they also save money on storage rent, packing materials, and shipping costs — all things that can really add up in the long run. In fact, most serious and professional (and successful!) Amazon sellers choose to go the route of an FBA account.  

the words FEES CHARGED typed on calculator.
If you’re not careful, transaction and refund fees can take a large chunk out of your profts.

Amazon Seller Fees

What fees do Amazon sellers pay? The answer depends on the product(s) being sold, as well as whether the products are being fulfilled by the merchant or Amazon. 

There are three main fees associated with selling on Amazon: 

  • Selling on Amazon Fee: Both FBM and FBA sellers pay the Selling on Amazon Fee. Sellers registered as Individual Sellers will pay a Selling on Amazon Fee of 99 cents per item sold. Sellers registered as Professional Sellers will pay a monthly subscription fee of $39.99. Included in this mandatory fee are the Amazon Referral Fee and the Variable Closing Fee.
  • Fulfillment by Amazon Fee: Amazon FBA sellers will pay the Fulfillment by Amazon Fee which is calculated by an individual item’s weight and dimension. This FBA fee also includes the Monthly Storage and Fulfillment fees.
  • Refund Administration Fee: The Refund Administration Fee is only charged to an Amazon seller when an item is returned. In this case, the seller is charged either 20% of the refunded amount or a flat $5.00 rate — whichever is less. 

Frequently Asked Questions About Selling on Amazon

1. What percentage of Amazon sellers make money? 

According to a study done by Jungle Scout, 71% of Amazon sellers make $1,000 or more per month. Of that 71%, 13% can say they make between $5,000 and $10,000 each month, and 6% make more than $250,000 per month. 

Only 26% make less than $1,000, while a whole 6% of sellers have become millionaires by running an e-commerce Amazon business. 

2. Do sellers make more on Amazon or eBay?

According to Indeed.com, the average Amazon seller makes just under $42,000 per year. This breaks down to an average income of around $3,500 per month, which is 26% below the national average. 

Indeed also reports that the average eBay seller makes about $76,000 per year, or 35% more than the national average. 

3. How many sellers are on Amazon? 

As of 2021, there are 9.7 million Amazon sellers worldwide. Of those, only about 1.9 million are active sellers. However, Amazon continues to grow. Each year, more than a million new sellers join Amazon in hopes of striking it rich.  

4. If Fulfillment by Amazon takes over all the work, then what is left for a seller to do?

Even though a seller may pass along the responsibilities of storing, picking, packing, and shipping their items, there are still some things an FBA Amazon seller needs to do. For example, sourcing and pricing their own products still fall onto an Amazon seller’s plate. But at least in terms of the latter, online tools like this Amazon FBA cost calculator can make tasks a little easier.  

5. How do I get paid as an Amazon seller?

Whether you are a new seller or a veteran, Amazon makes it very easy to get paid. When you register for your Amazon seller’s account, you will fill out all required tax forms. You will also submit your bank account information.

Once you begin selling and creating profits, Amazon will disburse your money from your online Amazon seller account into your preferred bank account. This is done every week or two, though it is also possible for sellers to request more frequent withdrawals. 

6. Do Amazon sellers need to work full-time in order to bring in the big bucks?

No! In fact, most Amazon sellers work just part-time — sometimes as little as 30 minutes each day! With the Fulfillment by Amazon option taking care of the packing and shipping, sellers have more time to focus on aspects of their business like product research for new products, pricing, and SEO. Those sellers who want to free up even more time can work with a professional company like Amazon Automation

7. How do you get started selling on Amazon?

At the get-go, getting started as a seller on Amazon is likely to cost you a little more time and research than you likely expect. It will also cost you some cash to get started, but maybe not as much as you assume. 

Statistically, 58% of sellers spend less than $5,000 to get started selling on Amazon, while 28% of those spend less than even $1,000. Eighteen percent of those even spend less than $500 to get started. 

Of course, your starting costs greatly depend upon what kind of items you’ll sell. Most money spent upfront goes towards product, fees, and promotions.   

Pros and Cons of Selling on Amazon

Pros: 

  • With more than 200 million Prime subscribers worldwide, Amazon is currently the world’s #1 best-performing e-commerce site 
  • One of the only e-commerce websites that allow its third-party sellers to store product 
  • Two convenient fulfillment options offered to sellers 
  • 89% of online shoppers say they check Amazon before any other place to shop online
  • The vast majority of Amazon sellers make at least $1,000 per month
  • Does not require a high amount of capital to get started
  • You can run a successful e-commerce business on Amazon while working just four to five hours per week

Cons:

  • Seller fees are a little bit higher than some other e-commerce sites, though there are options for the seller to save money 
  • Amazon product categories are limited to new and/or high-quality items, which will restrict the potential of someone who specializes in second-hand product
  • The average annual income of an Amazon seller is less than that of those who sell on other online retailers 
  • With nearly 10 million Amazon sellers worldwide, there can be a ton of competition 
  • Unlike some of its competitors, Amazon allows its customers a very generous return policy, though this policy also builds trust on the part of consumers

A Final Word 

Running an Amazon FBA business can be a freeing and profitable endeavor. The e-commerce giant’s Fulfillment by Amazon program takes much of the hard work — including the storing, shipping, and return of product — away from the seller.

Though the FBA program does require more fees, it frees up sellers to focus on other aspects of their business. It also creates profits. Seventy percent of Amazon shop owners report profit margins of 10% or more, and Indeed.com reports that the average Amazon seller rakes in $42,000 annually.

Entrepreneurs looking for an affordable way to start a business that could bring in anywhere from $1,000 to $250,000 per month would do well to consider a Fulfillment by Amazon e-commerce shop.