You've probably seen it all—the profits, the sales, the revenue crossing charts. Tons of Amazon selling success stories are shared all over social media each day. With over 350,000 sellers joining Amazon in the past four months and 6500 products being sold every minute, you’re dying to be a part of it too.
So, is it worth becoming an Amazon seller in 2021?
Absolutely! On average, a new seller makes $42,000 a year in profits on Amazon. To put things into perspective, that’s more than what 30% of the US population earns. And these sellers do it on their terms, working less than 20 hours a week on average.
Don’t listen to the naysayers claiming it's too late to become a seller, Amazon is the future.
Still not convinced? Keep reading!
In 2020, almost 3,700 Amazon sellers surpassed $1 million in sales in the US alone. Meanwhile, Ryan Grant and Ryan Daniel Moran of Freedom Lane have proved that doing 7-figure on Amazon is possible.
However, selling on the smiling A is not a walk in the park and requires grit, determination, and a whole lot of effort.
Before you dive in, make sure you know what you are getting into and familiarize yourself with the pros and cons of selling on Amazon.
Today, we’re here to guide you through it all.
Table of Contents
Let’s start by highlighting the pros of selling on Amazon and why it’s the eCommerce platform of choice.
Eighty-nine percent of buyers agree that they are more likely to buy products from Amazon than any other online marketplace. By listing your products on Amazon, you automatically gain credibility and buyers’ trust.
Amazon is one of the biggest e-com giants out there. Millions of customers shop at Amazon each month. Last year, the marketplace generated over $386.16 billion in revenue and gained 150 million Prime members worldwide.
This means you have a ton of warm leads ready to purchase your product. All you have to do is convince them to purchase your product and hopefully turn into loyal customers.
Amazon puts little to no restrictions on who can use its platform and has a low barrier to entry. You just need to sign up, fill in some details, choose a selling plan, and you’re ready to list your product.
When selling on Amazon, you have access to all of its eighteen marketplaces. Expand your store at a click of a button to target international customers across Amazon UK, Mexico, Canada, Sweden, Australia, Japan, India, and more.
With more than 180 fulfillment centers worldwide, you can ship your products in bulk to Amazon using Amazon FBA. Jeff and his team will store, package, and ship your inventory to your customers allowing for an incredibly convenient selling experience.
Definitely! By making a listing on your local Amazon marketplace, you can easily test if your product will sell well in the global market. Amazon handles everything—from international order fulfillment to around-the-clock local-language customer support. It takes the heavy lifting off your shoulders, and you don’t need to rack your brain figuring out the payment systems, logistics, or operations.
Assuming you’re still interested (and who wouldn’t be after coming across all of these benefits?), let’s take a look at the costs and fees of selling on Amazon.
For a product within the $15-20 price range, we would suggest you keep a budget of $3500-4500 in mind. Sourcing the inventory would cost you $2500. Add a further $500 in inspection and shipping charges. Professional product photography can sometimes be expensive, but you should be able to find a decent service provider for around $300. Lastly, expect the sponsored ad spend to be around $1400, with a portion of it to be covered from your revenue. Here is our full guide to better understand the budget requirements for selling on Amazon.
Amazon offers two selling plans: Individual and Professional. The Individual selling plan is free, but there is a fee of $0.99 on each item sold. The Professional selling plan costs a fixed $40 per month regardless of how many products you sell.
The latter also has some extra features that give you added advantage on the field. For example, you can manage your inventory through special spreadsheets, get access to in-depth business reports, create promotions, run sponsored ads, and use special listing features.
Of course, this selling fee can increase if you choose Fulfilled by Amazon (FBA) for your store.
Amazon FBA fees includes:
the referral fee, which is often 15% or less of the selling price,
the monthly storage fee, which ranges between $0.75 and $2.40, and
the fulfillment fee, which can be $2.50 or higher depending on your product’s dimensions, weight, and category.
You can sell many things on Amazon, but the categories you can sell without restrictions are Cell Phones & Accessories, Camera & Photo, Electronics, Musical Instruments, Tools & Home Improvement, Home & Kitchen, Clothing, Shoes & Jewelry, Books, Sports & Outdoors, Computers, Toys & Games, Office Products, and our favorite Patio, Lawn and Garden.
Other categories like Baby Products, Pet Supplies, Beauty, and Health & Personal may need prior approval from Amazon at the sub-category level.
We recommend avoiding the following products as these could bring a lot of complications for you:
Animals and animal products
Fine Art – Sculptures or works without artist names.
Automotive and Powersports
Composite Wood Products
Explosives, weapons, export controls, or related items.
Food and beverage
Hazardous and dangerous items
Lock picking and theft devices
Medical devices and accessories
For all the effort and hassle that goes into selling books, we are not big fans of them. That being said, many sellers are profitable selling them with the right strategy. However, expect some tough times before you become profitable.
You can make reasonable money selling clothes on Amazon. Customers love buying clothing items because the variety is huge, and they are easy to return.
Amazon Handmade can prove to be quite profitable for small businesses. You can create an artisan profile, get access to Amazon’s enormous customer base, and promote your products via different campaigns.
If you’re going towards the dropshipping or wholesale model, multiple sellers won’t be a problem. However, having numerous sellers does drive pricing down which may result in increased competition.
Customers prefer shopping on Amazon due to low prices, reliable and speedy delivery, and the assurance that they can return their order if it’s wrong. Keeping that in mind, here are some challenges of selling on Amazon.
Amazon may generate a lot of sales and revenue, but with great profit comes great competition. There are tons of sellers and products on Amazon because of which the market ultimately dictates your pricing strategy. Pricing can be even more challenging to deal with if you are a wholesaler or dropshipper. So make sure you choose a viable product.
With FBA, there are many benefits; you don’t have to worry about shipping and inventory. But when it comes to FBM (fulfillment by merchant), managing your orders can be a tedious job. You cannot afford any lapses.
Amazon has a book full of strict (and ever-changing) policies that you need to comply with. If you don’t, the company can ban you straight away. Some examples include getting reviews illegally, making false claims on your listings, and trying to increase the sales velocity using Black Hat techniques.
Nefarious sellers are also a significant problem on Amazon. Your competitors can attach to your listing and steal the buy box from you. What’s worse, they can trademark your account name and kick you off from your own listing.
To counter this, it is recommended to trademark your brand from the very beginning and sign up for the Brand Registry program. Then there are some sellers that may try to get your account suspended by hiring a service that leaves negative feedback (or negative reviews) on your listing.
Amazon sellers face another challenge when Amazon starts selling a similar product to theirs under its brand name. This brings them in direct competition to Amazon, and it can get tough for them to drive traffic to their listing. Therefore, always choose a product that Amazon is not selling.
Amazon has reiterated many times that it does not steal data from third-party sellers and doing so would be a clear violation of its policies.
So how does Amazon fare against other ecommerce marketplaces? Let’s take a look.
Amazon is obviously the more popular eCommerce site, at least in the US. It offers convenient fulfillment options along with great shipping discounts. On the other hand, eBay is the easiest marketplace to sell with no minimum quantity. Amazon is much more secure as compared to eBay especially when it comes to getting paid as a seller. Both marketplaces are buyer-centric and heavily saturated.
Verdict: If you’re looking to establish a stable online business, Amazon is clearly the better choice.
Shopify requires building your own website, doing a lot of marketing, handling emails, fulfillment, reviews, SEO, social media, and plenty more. On the flip side, selling on Amazon is much easier, mainly because of the fact that you don’t have to work too hard to acquire customers.
Verdict: Shopify is best for sellers with a good amount of investment who want to build up a separate brand. In comparison, Amazon gives you a ready-made platform to sell on.
While we recommend taking an Amazon FBA course to speed up your learning curve and get clear, organized, and structured information, we also fully understand that these courses may not always fit your budget. As an alternative, you can use the tons of free stuff available online. Go check out YouTube videos, visit seller forums, join Amazon-related Facebook groups, and read industry blogs.
The internet is filled with many good Amazon FBA courses. According to several forums, here are some of the best ones: The Amazon selling machine, Online Retail Mastery, Traffic and Profits, Ultimate Amazon Seller Course, and Private Label Masters.
Please don’t consider these as recommendations though. Do your due diligence before investing in any course.
Considering you have a product that you sell at a minimum profit of 25%, and your monthly sales volume is around 150 units, you can become profitable on Amazon in month 6-7 of your selling journey.
You can expect to take about 4-8 weeks before you’re well prepared to sell on Amazon. This time frame includes finding your product, negotiating with suppliers, and getting your inventory shipped to Amazon.
Is selling on Amazon profitable? It is if you start off in the right way and follow each step carefully. Do your research, build an optimized listing, and watch the sales rolling in. Check out our Amazon Seller Guide to get started!