In a world where over half of US ecommerce sales are controlled by Amazon, and Amazon CEO, Jeff Bezos, is poised to be the first leader of a trillion dollar company – it’s no wonder marketing agencies like Room 214 are fielding a larger volume of requests related to selling products on Amazon (from store setup to optimization of content and advertising).
Of course, the big picture in all of this is the perfect marriage between experience and desire. Experience in this context refers to the Amazon customer – who is conditioned to the satisfaction that comes from lower pricing, greater selection and online ordering convenience (give me Prime or give me death, regardless of the recent $20 price increase).
On the other side is the desire of businesses, wanting to ditch the complexities common to selling through traditional, retail distribution channels (or simply wanting to extend sales beyond their own ecommerce platforms). They may see Amazon as a long-term threat, but can’t deny the immediate advantages of a direct-to-consumer selling model that’s practically plug and play.Here’s a summary of the options you have as an individual or business interested in selling products on Amazon.Click To Tweet
So what’s best for your business as someone just getting started or considering all the variables? Here’s a summary of the options you have as an individual or business interested in selling products on Amazon.
Create an Amazon Seller Central Account
Seller Central has two options and is the way most people and businesses (new or experienced with ecommerce) go to start selling on Amazon. Specifically, you can choose Seller Central as an Individual or Professional.
The main differences are:
- How you are charged by Amazon.
- How many products you are allowed to sell per month (not product listings, but the actual number of products). If you’re doing less than 40 sales/month, go Individual. More than 40, and you’ll need to run Pro.
- Your ability and ease of scaling and integration of Amazon sales with existing ecommerce/inventory platforms you may be running (Shopify or BigCommerce, for example).
Both Individual and Professional give you the choice of fulfillment by merchant (you ship) or fulfillment by Amazon (FBA – you send products to an Amazon distribution center and they pack and ship to your customers for you).
If Amazon is fulfilling for you under Individual or Professional, you should know the following:
- You will be charged FBA fees, which are divided into two categories: i.) a per unit fee that covers packing, shipping, customer service and product returns, and ii.) a monthly inventory storage fee. See details on Amazon FBA fees to help calculate your costs.
- Many sellers find the fees worth it when considering the alternative of costs and requirements to ship themselves, even in consideration of Amazon shipping credits (money Amazon credits to your account if you decide to ship instead).
- A big advantage to FBA, other than you not being in the packing and shipping business for every sale you make, includes an opportunity to be on Amazon Prime – arguably, a game changer when considering shoppers who look for this as a leading decision factor to buy. Note: there are no guarantees.
Other fees you should be aware of include the minimum referral fee, listing fee, and variable closing fee (that last one is for media products). You can learn more about how fees vary according to Amazon’s categories and Seller Fee Schedule, but we’ve provided the basic division of costs between the two Seller Central options as follows:
Seller Central Individual
Although fees vary as mentioned, generally, expect to pay a listing fee of $1/sale, in addition to a “minimum referral fee” that is the greater between $1/sale OR 15% of the sales price on every item you sell. So to reiterate, the fees will either be $1 + $1, OR they will be $1 + 15%.
Seller Central Professional
Amazon charges a flat fee of $40/month. You have no listing fee but are still subject to the minimum referral fee described for an Individual account above.
As the final note on advantages of Professional over Individual, these include:
- Bulk uploads with no product listing limits (the Individual account offers a very manual process of updating products, and isn’t built to scale)
- Ecommerce and inventory/order management integration with 3rd party platforms
- Gift wrap option
In terms of when you actually get paid by Amazon, it’s every 14 days. They will automatically subtract (all) fees from your payment. If bi-monthly payments sound too hard to stomach from a cash flow perspective, you can consider working with companies like Payability, which effectively advance daily deposits to your bank account based on your Amazon sales.
This is by Amazon invitation only, which means you’re likely crushing enough sales to get their attention. The Vendor Central scenario positions you as a first-party seller, which means you’re acting as a direct supplier and wholesaler to Amazon.
Amazon negotiates to buy in bulk from you, then more actively participates in the pricing and marketing of your products in the Amazon ecosystem and beyond (as in, they may actually choose to run a Google Adwords account to help sell your products on their website).
Note: In case you’ve heard of, or are wondering about “Vendor Express,” the program somewhat sitting between Seller Central and Vendor Central… you can forget about it. Amazon announced the end of it in March of 2018.
As an Amazon Central Vendor, you arguably lose certain levels of control with respect to inventory, operations, and even ways to defend your brand against entities selling older versions of your products or straight knock-offs. Note: businesses with Amazon Vendor accounts have been known to run separate Seller accounts as part of defending their brand in this context.
Unlike getting paid every two weeks via a Seller account, you’re on 60-day terms as a Vendor. Vendor Central is a volume game, with margins that may continue to be negotiated down by Amazon. But obviously, the potential upside is incredible as Amazon acts more like a sales partner with Vendor Central accounts.
That includes opening up a range of additional and more sophisticated opportunities to market your product (A+ content, greater use of images, video, more AMS functionality and AMG support options, etc.). At the end of the day, your focus may need to shift more towards the supply chain, like any manufacturer or distributor, recognizing that inventory levels may either spell success or death by success.
Additional Amazon Selling Functions
Although the focus for selling on Amazon in this article has been platform-specific for businesses, Seller and Vendor, there is, of course, an entirely separate discussion on promoting what you sell while on the marketplace (through smart content and Amazon advertising strategies).
Beyond the platforms/options referenced herein, are other selling channels such as CreateSpace for self-publishing books and other media on Amazon (this is the platform we used to publish our Amazon best-seller, Transformative Digital Marketing).
A more recent channel, Merch by Amazon, features a way to sell your own designs via on-demand T-shirt creation. As of this writing, you need to submit a request to participate in the program – which is not only a clear indication of how popular it is but arguably sets the stage for completely disrupting the promotional products industry.
As you consider all the possibilities with Amazon, adopting a perspective of fear or excitement is equally understood. For some, “your margin is my opportunity” is a Jeff Bezos quote that will live in infamy. We prefer to focus on another statement he’s known for: “what’s dangerous is not to evolve.”
Need help launching or optimizing your brand on Amazon? Contact us to see how Room 214 can help you grow your direct-to-consumer business.