We have all seen those ads at the beginnings of YouTube videos that feature guys with hot sports cars and million-dollar mansions claiming that they achieved their success through selling on Amazon. Furthermore, they make it sound easy. You simply find products, start your account, and start watching the money roll in. Technically, it is that easy and there are people making serious money on Amazon as a seller. However, even though signing up for an account is easy, if you do not prepare properly, your life as an Amazon seller can be short-lived.
Start Up Costs
No surprise here – you’ll need a starting capital for selling on Amazon, which will cover few basic supplies. At the bare minimum, you will need a computer, smartphone, scanning app, printer, shipping labels, a scale, boxes, and shipping supplies. You will also need a dedicated space to run your shipping business. These are small items with the exception of the computer and smartphone. If you already have them you are ahead of the game.
Next, you will need inventory. Depending on what you decide to sell this cost will vary. It also depends on whether you will be manufacturing products yourself or sourcing them from another provider.
You will also need to consider whether you intend to fill and ship the orders or whether you will choose fulfillment by Amazon. This is where you ship your products to Amazon and they will send them to the customer when orders are placed.
Before you start your business, you need to research the products that you intend to sell and find out what the asking price is from other merchants. You need to consider your fees and expenses and make certain that the products will sell at a high enough price so that you can make your intended profit.
In choosing which items to sell, you need to consider the competition. Items that have a lot of sellers offering the same product may get into price wars. It is usually advised to steer clear of these products because it is very easy to get into a situation where you have to lower your prices below the point where you can make profit in order to sell. Choosing products in a specialized niche may be the best strategy for avoiding a price war. Deciding what items to sell and doing the research plays an important role in the success of your business.
Starting Out Right
Selling on Amazon is just like starting any other business. You will need to set up how you will pay your state and federal taxes, a “doing business as” name, and go through all the formal steps of setting up any other business. If you do not, you may find that the IRS is not happy with you.
Before you start selling you also need to have a system for managing inventory and updating it. There are advantages and disadvantages to fulfilling orders yourself and fulfilling them with Amazon. If you choose to have Amazon fulfill them, there are fees involved which could lower your profits. However, they are also highly reputable with customers. Many customers look for products that are fulfilled by Amazon as opposed to individual producers and manufacturers.
You also need to plan how you will market your products. You need to determine what keywords users search for, write ads that are appealing, and have a clear call to action. If you do not have the capabilities yourself, you may also wish to hire a professional photographer because Amazon requires high-quality photographs of the items.
Finally, there are a few caveats that you need to consider the start selling on Amazon too. Amazon has built its reputation on customer quality and providing a consistent experience whenever users interact with their platform. As part of the system, you will be expected to match the high quality that is expected. If you do not, you may find that Amazon bans your account without warning. Reputation is everything on Amazon and to be a success you need to do proper planning before you set up your seller account. This is the best way to ensure success.
Ryan Yarbrough is a small business consultant, speaker, and the manager at Davis Financial Services, a small business consulting firm.