The vast majority of people know about Amazon, an online marketplace with many retailers worldwide. These retailers put their goods up for sale through Amazon’s platform. You can then buy the product through that route as a consumer or company.
Amazon sells products worldwide and can ship to virtually all countries, but the most relevant are the USA, Germany, Great Britain, France, Spain, the Netherlands, Sweden, and Poland.
Amazon is – without comparison – thus the world’s largest marketplace. Here you can buy almost everything. So, Is Selling on Amazon Worth It? Yes.
What companies should consider Amazon as a distribution channel?
Basically, everyone has the potential to sell their goods on Amazon. But the most important thing is, of course, that there is a business in it if it is to pay off for your company. There is a difference here, whether you are a brand owner, manufacturer or dealer.
Brandowners
If you are a brand owner, you should definitely consider Amazon. Amazon gives you a good degree of coverage, which means that you can sell your goods at a reasonable price on Amazon and at the same time compete with all those who sell similar products. As a brand owner, Amazon is therefore the obvious place to jump in. This also applies if you would like to start exporting and enter new markets.
Manufacturers
You can also be a manufacturer – that is, where you don’t really have a brand yourself, but you simply produce some goods. It could be, for example, that you have 2-3 items that you are particularly good at making. In that case, Amazon is also a good option for you.
Dealers
Are you a retailer of products from major brands with a size that means you buy in really large quantities and thereby have coverage levels that are more advantageous than others’? This means that you can sell goods that are already offered on Amazon from other retailers – but at a lower price.
Amazon, on the other hand, is not interesting if you are a retailer of brands where the degree of coverage is not very high, partly because there are some costs associated with selling via Amazon.
But if you are a brand owner or manufacturer, then you simply have to consider Amazon.
How much does it cost to sell on Amazon?
It is of course different what it costs. It depends, among other things, on what you sell. Amazon, for example, has a fixed fee that you have to pay. It is determined by which category your product belongs to. Here are a few examples:
- If you sell fashion (clothing), you pay a share of 17%.
- For furniture, you pay 15% in cut to Amazon.
- You only pay 8% for food such as protein powder.
It thus depends on which category you are in. There are actually many important considerations to make. We often experience customers who have primarily focused on B2B sales and who would like to start with B2C sales. Here we are talking about a completely different degree of coverage, because you sell directly to the consumer.
In addition, you need to consider which type of merchant account matches your business. Are you ‘selling’ via a ‘vendor’ agreement, where Amazon buys the goods from you and where you avoid a lot of administration in relation to sending goods out etc. It’s an easy solution, but it has to be done right so that you can make money from it – for example by sending larger quantities with each shipment. We look at this in more detail below.
What are the options for selling on Amazon?
Let’s try to look at the different ways to sell through Amazon. Generally speaking, there are two different account types with Amazon:
- Vendor account: The sale takes place as wholesale, where Amazon buys the item from you. Not all companies have this option, as you have to be invited to it.
- Seller account: Here you are the one who sells the product directly to customers via Amazon’s platform. This option is open to all companies. With a seller account, you have two different possible approaches:
- FBA: With FBA, you send your goods down to Amazon’s warehouse, from where they send the goods out to the customer. They handle all orders, returns, order-related questions, etc.
- FBM: With FBM, you send the goods directly to the customer yourself. You pick the item from your own warehouse, pack it and send it to the customer. You handle the individual order, returns and order-related inquiries yourself.
Advantages and disadvantages of FBA and FBM
It is important that you understand the advantages and disadvantages of the different ways of selling.
FBA
When you sell on FBA, your item automatically becomes a prime item. This means that Amazon blue-stamps your product as an item they know can be delivered quickly and at a good price. This is a huge advantage because you then get a buy box (i.e. the ‘buy’ box), through which 82% of all purchases on Amazon are made.
89% of all who sell on Amazon also use FBA. If you don’t use FBA, there are 89% of companies that are already many steps ahead of you.
Concrete advantage of FBA:
- You don’t have to think about handling each and every order.
- You save time on e.g. customer service.
There are of course costs associated with Amazon having your goods in stock and having to handle all your orders. But it very rarely happens that it is actually more expensive to pay the fee with Amazon than it is to handle the orders and inventory yourself.
Therefore, it almost always pays to use FBA.
FBM
With FBM, you have more control over your inventory. It is, for example, an advantage if you sell on several platforms and suddenly run out of an item. In that case, it is of no use that the item is in stock at Amazon. Control over your own inventory is the primary advantage of FBM. In return, you buy some things. Especially if you sell products that are easily available, and customers expect it to be delivered quickly. In that case, you must have stock in the countries in question if it makes sense for your business to use FBM rather than FBA.
What does FBA cost?
It depends on what the item weighs and how big it is (height, length and width). As a rule of thumb, you can expect that if you have an item such as a remote control or a telephone, it will cost around $2 per item. product shipped from Amazon.
You pay for the service on a monthly basis according to how many square meters you use down there. It is – as mentioned – a variable cost, so it is important that you calculate what it costs for your particular product.
How to get started with Amazon
In fact, it can be difficult to see what it costs to sell on Amazon, due to all the variable fees. That is why we always start by making an analysis of your coverage rate when everything to Amazon has been paid and what has been invested in marketing.
Once we have found that the coverage rate is satisfactory for you, we look at what your competitors are selling the item for and how many they sell per month. month.
Then we have a solid business case where we can count on what it gives you if you sell for 10% of what your competitors sell for.
After that, it’s easy to decide whether this can work for your business or not. That is, when you have worked out all the numbers and you have decided that you can live with the commission that Amazon has to receive – at the same time that you know that you have a lot of goods in stock and can easily send some there.
If we decide you would like to proceed, you will need to create a seller account with Amazon. It can be complicated, and it is always a good idea to get help for this part of the process. If you are set up incorrectly, it can have major consequences later on.
What countries is my business available in when I register on Amazon?
In principle, you can create your account online and then be present anywhere in the world from the start. And it can be extremely tempting. However, the best thing we can recommend is getting to know one market at a time.
It is important for customers to find your goods when they search on Amazon. For example, your goods should be enriched with all the relevant data, which means that they appear in the organic search results on Amazon. This requires a lot of legwork.
In addition, there is a lot of logistics associated with it, as the item must be sent to each of the respective countries, in order to be close to the customer. Thus, the search terms must also be adapted to the languages of the various countries for your goods to be found.
All in all, Amazon’s potential is huge if you put the energy, time, and investment into it. The same may also be true for your company.
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