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.
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.
- 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.
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.
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.