Amazon is among the top-ranked companies in the world, with over 1 Trillion dollars in valuation. It offers around 350 million products that are fulfilled and shipped by Amazon and third-party sellers and sites.
The most common method of selling on Amazon is Fulfilment By Amazon(FBA). It is a simplified method of selling even though the Amazon seller has expenses and fees to pay.
So how is the method simplified? You choose the product you want to sell, send it to Amazon warehouses, and set up your Amazon listing. Amazon takes care of all the fulfillment and shipping of goods while you enjoy sales and profits.
What Is the Average Amazon Seller Income?
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The amount of profit you make is based on your sales, quality of products as well as price point. According to JungleScout, about 50% of Amazon sellers make an annual average profit of about $12,000 to $300,000 which is at least $1,000 to $25,000 in monthly sales.
On the other hand, 13% make $25,000 to $250,000 per month, 22% make under $500 per month, and 3% have no idea what their monthly sales are.
Small businesses take a few years to achieve high-profit margins based on sales volume and business expenses. For example, 65% of Amazon sellers enjoy 10-20% profit margins, 32% receive profit margins above 20%, 8% of businesses are yet to be profitable, and 8% barely know if their businesses were profitable.
How much time does it take to start making money on Amazon? Most successful Amazon sellers started making profits within their 1st year of selling on the e-commerce platform.
How Much Money Do I Need to Start Selling on Amazon?
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The biggest hurdle of starting any business comes at the start. This is no different when starting an online business on Amazon. Here the initial costs include sourcing the products, Amazon fees, and promotions.
You will need about $500 to $10,000 to start your Amazon business. Most entrepreneurs fund their businesses using cash from their pockets, while others borrow money from family, friends, or banks. It all depends on the options you have at hand.
Amazon Selling Fees
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There are two types of accounts to choose from, professional and individual. You pay a monthly fee for the professional account($39.99), while the individual account is charged on an item-to-item basis($0.99).
The individual account is great for beginners who sell less than 40 products per month, while the professional one is perfect for an established business that sells more than 40 items monthly.
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The referral fee is what you pay Amazon for listing your products on their website, where they connect you with potential buyers. The percentage normally varies per category(8-45%).
3. Amazon FBA
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Amazon FBA sellers have to pay fulfillment and storage fees to Amazon. The fulfillment fee is based on the product category, size and weight, while the storage fee is calculated per the product's weight and size. Another fee new sellers should be aware of is the long-term inventory storage fee for products that have stayed longer than a year in the fulfillment center.
Why Should I Sell on Amazon?
1. All-rounded Retailer
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There are several perks to selling on Amazon, one being that over the years, the platform has grown into an all-rounded retailer outlet that most people in the US depend on and purchase at least once or twice a month.
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Amazon gets a lot of traffic. Over 60% of consumers check out the website when searching for a product online.
3. Ready-made Storefronts
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Additionally, selling on Amazon is easier, especially when using Amazon FBA, since all you have to do is create a seller account, send your products to fulfillment centers, and list your products online.
On the other hand, Amazon will fulfill the orders for you by taking care of storing, packing, shipping and returns.
4. Consumer Loyalty
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Consumers like to shop from Amazon because of their low prices, so you are assured that your products will get traffic on the website.
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Be your boss. Selling on Amazon allows you to work from anywhere and on your schedule. In addition, you can easily travel the world or even take care of your kids while managing your Amazon store.
How to Boost Your Sales on Amazon FBA
1. Setting Up Your Amazon FBA Business
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There are a few steps that are a must follow To become a profitable Amazon seller, namely:
- Research the different business models, such as Amazon FBA, FBM, private labeling, and dropshipping, and pick one that suits you.
- Pick a popular but not too competitive product backed by facts to sell on Amazon.
- List your product on Amazon and optimize it.
- Set funds aside for Amazon advertising, so your product gains more visibility and sales.
- Audit your product performance on Amazon and plan your next move based on the results.
2. Read the Rules
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Read Amazon's terms of service and avoid breaking any of them, as your account may be suspended. For example, you may lose access to your inventory, or your Amazon store may fall in rankings.
3. Trust the Facts
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There are so many gurus on the internet claiming to know how to achieve overnight success on Amazon. There is no such thing. They are probably making money by selling you a course. So stay woke and do your due diligence before committing to any course.
Look for coaches who are also building their own Amazon stores, as Amazon FBA changes every year with the competition.
4. Product Quality
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The product quality you choose makes or breaks your Amazon FBA business. You will lose sales if you buy terrible products from a supplier because Amazon allows consumers to rate your products. Therefore, the more good reviews you have on your products, the more sales you will make.
Additionally, as a new Amazon seller, you need to be very careful of shady suppliers who may not deliver the goods even after you have paid for them. Therefore, vet your suppliers carefully before committing to buying from them. For instance, you could buy a small batch of test products to experience their customer service as well as the quality of the products.
5. Research the Competition
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There are so many Amazon sellers, so you need to research and find out the number of sellers selling similar products as you plan to sell. As earlier stated, pick a product with traffic but not too much traffic. If you pick a product with no traffic, there is a high possibility that it will not sell well since there is no demand for it on Amazon.
Once you have found the product with the desired number of competitors, review your competition's products and come up with ways of improving your own, for instance, by comparing the prices.
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You should avoid buying too much inventory until you understand the market and how it reacts to your products. Remember, as an Amazon FBA seller; you will have to pay long-term storage fees.
As a beginner, you want to keep your expenses as low as possible as they affect your profits. But, on the other hand, you also do not want too little inventory such that your product is always out of stock.
7. Optimize Your Listings
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Make your product listings show stoppers because that is the first thing the customer sees. You can do this by learning how to write eye-catching titles, sales copies, features, and benefits. Additionally, be well vast in keywords and take expert product photos. You can always invest in your business by hiring a professional photographer to take real photos.
8. Treat Amazon as a Search Engine
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Most consumers use Amazon to search for products. So treat it as a search engine and learn how to use SEO keyword research to rank organically. You can achieve this by understanding and creating target terms and phrases.
You can get this by researching and finding out the keywords that your competitors are using. Then embed these keywords on the front and back end of your listings.
9. Amazon PPC Advertising
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Paying for Amazon PPC ensures that your brand new products appear on page 1. It cuts into your profit margin but gives your good visibility. Once you start making sales, you get product reviews, leading to more sales and your products ranking organically. Therefore it is a necessary evil.
Frequently Asked Questions(FAQs)
1. What Influences the Average Amazon Seller Income?
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Time is the main determinant of a successful Amazon business. A seasoned Amazon seller can't compare to a beginner seller. Time and experience define how much profit these two sellers make. The more time and experience you have, the more money you will make.
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Money is another important factor when running an online business. Reinvest whatever profits you make so that you have more investments for your business. Otherwise, if you use all the revenue you make from your sales, you are no better than a brand-new seller. This is one way of gaining more experience in your business.
c. Optimize profit margins
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The easiest way to optimize your profit margins is by selling your product 2-3 times higher than you bought it. Of course, this depends on the type of product you are selling. Do not price it too high as you will make fewer sales.
Pricing it higher than the buying price ensures you can pay Amazon fees while also making a profit. Besides, that is the whole point of starting your business.
Another way of optimizing your profit margins is by lowering your operational costs. This includes getting a supplier who sells you quality products at a lower cost.
2. What Do I Need to Start Selling on Amazon?
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To start any successful business, you need capital and a business plan. The same applies to starting an Amazon business. A solid business plan helps when putting goals, products, and marketing campaigns in place.
To become a profitable Amazon seller, you must choose a profitable niche by conducting market research. You must also understand the platform, the costs of running a business on Amazon, and how to optimize your profit margins.
3. Amazon FBA vs. Other Online Platforms
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eBay is a buyers' online platform where consumers pay severely cut-down prices. Therefore, as a seller, you will make very small profit margins. On the contrary, as previously mentioned, you can optimize your profit margins on Amazon and make a living out of your online business.
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Etsy is well known for handmade products. Therefore it is quite limiting if that is not the type of product you would like to sell. On the other hand, Amazon FBA allows you to sell whatever type of products you would like t sell as long as it is within Amazon guidelines.
c. Facebook Store
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There are many Facebook users worldwide. However, people are yet to trust facebook sellers. This is because anyone can open a page and run their ads on Facebook. Consequently, scammers take advantage of this. Therefore, it is difficult to determine a genuine Facebook store from a scam.
However, the experience is different when it comes to Amazon FBA. Therefore it is more lucrative to open an Amazon account where you will eventually get sales and high-profit margins.
d. Your Website
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It takes some time to set up your website and gain a name for your business so that people trust you and start buying from you. But Amazon takes care of these issues since it has repeat loyal customers and traffic.