How to start an Amazon Marketplace business
Wondering how to sell on Amazon Marketplace? Check out our step-by-step guide to learn how to start an Amazon business...
Key areas to consider when selling on Amazon are:
How selling on Amazon marketplace works: types of seller
Essentially, Amazon Marketplace allows retailers and distributors to tap into Amazon’s infrastructure, in exchange for a fee. Amazon Marketplace enables you to sell your products under the Amazon banner.
Amazon Marketplace divides its sellers into two principal categories: casual and professional. Casual sellers are defined as those selling 35 items per month or less, and are asked to pay only a completion and referral fee for each item sold.
Professional sellers, those selling at least 35 items per month, are able to sell a greater range of products than casual sellers and are given bulk listing tools to make it easier to sell high volumes, but there’s a monthly subscription fee in addition to the individual completion and referral fees.
Amazon recommends that if you’re looking to sell more than 35 items through Marketplace, you should become a ‘pro-merchant seller’ which enables you to sell in one, or all all five EU marketplaces, for £25 a month (£28.50 including VAT).
With around 300 million active users on Amazon and over 50 million Amazon prime members, the market is ripe for budding e-commerce entrepreneurs looking to sell on Amazon marketplace.
It may be worth considering seeing if you can get a Business Loan to help you with financing your startup idea.
Selling on Amazon also benefits e-commerce start-ups looking to grow internationally
Amazon has unified its European marketplaces which means you can create and manage offers for Amazon.de (Germany), Amazon.fr (France), Amazon.es (Spain), Amazon.it (Italy) and, of course, Amazon.co.uk.
Amazon UK reports that the number of UK-based marketplace sellers exporting to European customers increased by more than 40% in 2016.
Ramping up revenue isn’t the only reason businesses should consider tapping into Amazon’s various marketplaces. Selling in a new market can be a great way to test product fit without too much investment.
However, the admin that comes with selling abroad – i.e, foreign currency payments and taxes – may be expensive and not that fun. And opening a local bank account may not be an option for some. Plus, banks tend to give businesses bad exchange rates and charge for them to move money into their domestic account – that means it’s possible to lose money if you sell in multiple currencies. And when you use your domestic bank account, Amazon will charge a currency conversion fee for you to withdraw foreign currency.
Thankfully there are alternatives. Services like TransferWise help Amazon sellers save. TransferWise is a free multi-currency currency account that comes with international account details for the US, Eurozone, UK, and Australia that you can get in a single click.
For businesses selling in Europe, you can sell in euros, use your European bank details to get paid into your TransferWise account, and then convert earnings back into pounds – using the mid-market exchange rate. And with less fees.
Not only could you turn profit and learn a new market – you can control over 40 currencies in your account with a single login.
Selling on Amazon: A low-cost business opportunity that’s quick to set up
If you’re just starting a business and finding it hard to drive traffic to your own site, Amazon’s global reach and brand identity can ramp up your online business.
Around two million people sell on Amazon Marketplace; although this means there’s lots of competition, it also enables you to find out how your rivals are pricing and marketing their products, boosting your own business strategy.
Here are five key reasons why you should consider selling on Amazon Marketplace:…
Exposure. Amazon currently has 130 million global customers – that’s over twice as many people as live in the UK. The Amazon market grew over 43% in the fourth quarter of last year, and according to stats from Nielsen, Amazon.co.uk was visited by almost 17 million British people in March 2011 – around 42% of those who are actively online. So it’s fair to say that, if you put up a listing on Amazon, a lot of people will view it.
Simplicity. As a small business, you want to get your products listed, and sold, as soon as possible to get money coming in and brand awareness up. The simplicity of Amazon is ideal in this regard; when you sell on Amazon, all you need to do is enter the product you want to sell, set a fixed price, record the condition and click Yes. In most cases, your listing will be live in 15 minutes. This compares favourably with other auction and ecommerce sites, which can be much more complicated and time-consuming. The simplicity and affordability of Marketplace provide genuine benefit for entrepreneurs who don’t know much about web development, and don’t have much money to spend on their own website.
Cost efficiency. You can list as many products as you like on Amazon with no listing fee, so you can choose a sales strategy to suit you – either putting all your products on display at once, or introducing new items slowly as awareness of your brand grows. There are no fixed costs for shipping and handling.
It’s worth bearing in mind that sellers in the professional category have to pay a monthly subscription of £28.75 or £25 if you’re a VAT registered seller; however, if you are selling enough products to fall into the professional category, chances are you’ll be making enough money to justify this fee. Also, Amazon Marektplace are currently offering a one month free trial on subcriptions so you now test it out without the charge.
Trust. Amazon is liked and respected by the majority of its customers; indeed a US survey last December gave Amazon a score of 86 out of 100 in terms of customer satisfaction, as high as any other American ecommerce site. If your product is listed on Amazon, you will benefit from the trust and loyalty which are fundamental to its brand.
If a potential customer isn’t familiar with your company, they may be reluctant to make transactions via your site. However Amazon, with its secure payment system, is known to be trustworthy, so people may be more willing to buy your product via the Marketplace.
Market awareness. By joining the Amazon Marketplace, you can easily view the prices your competitors are charging for their products, and see the marketing messages you are using. Any small business relies on targeted, intelligent pricing and marketing, and Amazon Marketplace can give you a real leg up in this crucial area.
While selling on Amazon boasts low-start-up costs, it’s also a great home-based business idea and enables you to work from the comfort of your home – provided you have access to the internet and can organise shipping etc.
Selling on Amazon: Business success stories
Successful UK start-ups using Amazon to increase their product sales and boost exposure include baking products and subscription service BakedIn, smart devices creator Smarter, organic baby food business Piccolo, Nespresso-compatible coffee pod start-up CafePod, and many more.
Currently, there are over 70,000 UK small businesses using Amazon Marketplace.
What to sell on Amazon marketplace: products you can sell
For selling on Amazon, you can sell items in the following categories:
- Industry and science
- Home improvement
- Lawn and garden
- Amazon device accessories (excluding Kindle batteries)
- Musical instruments
- Office products
- Toys and games (there are exceptions for selling over the Christmas period)
- DVD and video games
Products you can’t sell on Amazon Marketplace
If you’re considering selling on Amazon, there are a number of products that are prohibited including:
- Illegal products i.e. those that are illegally marketed such illegal drugs, guns and ammunition
- Prescription medicine
- High-strength alcohol (70% ABV+)
- Real fur clothing
- Used clothing and shoes (new clothing and shoes are permitted)
- Lottery tickets
For a full list of prohibited products for selling on Amazon click here.
Selling on Amazon: Business planning and preparation
If you’ve reached this page of our guide on how to start an Amazon business then the first step to getting started as a seller is to decide on your Amazon classification.
If you anticipate selling only small numbers of items (less than 35) or don’t have much money to spend, you’ll probably want to go with the casual Amazon classification. However, if you anticipate selling in bulk, or want greater range in the products you can sell, you’ll need to go for the professional (pro-merchant seller) classification.
To register as a seller on Amazon, you will need to provide the following information:
- A UK or internationally-chargeable credit card with valid billing address
- A phone number where you can be reached during the registration process
- Bank account information
- E-mail address
- VAT number (if your business is VAT-registered)
Additional rules apply for sellers from outside the UK, further information is available on the Amazon website.
Registering products for selling on Amazon
Once you’ve decided on your classification, you’ll need to register your products – thankfully this part of the process is extremely simple.
If you’re a casual seller, on each Amazon.co.uk product page you’ll find a blue box called ‘More Buying Choices’ on the right-hand side of the page. Click on the ‘Sell Yours Here’ button; you will then have to enter details regarding the condition of the product, its age, and an additional comment.
If you’ve registered for professional status, you can use Amazon’s web-based interface or its bulk listing tools to list your products. The specifics of the procedure depend on whether or not your products are already in the Amazon.co.uk catalogue.
If your products already exist in the Amazon.co.uk catalogue
Then you can list them individually using the site’s web-based interface, simply by entering the name of the product, the price and your available stock.
Alternatively, you can use Amazon’s bulk listing tools, which require the EAN, ISBN, or UPC code (barcodes) for each product. If you need a barcode, you can source one online by clicking here.
If your products do not exist in the Amazon.co.uk catalogue
Then you can create them using either the web-based interface or the bulk listing tools.
For each new product, you will be required to provide product information, including:
- EAN, UPC, or ISBN code
- The product title
- Product description
- An image of the product
- Available stock
Note that you might be required to input additional information to list your products in some categories.
Adding images to your Amazon Marketplace listing
Any images you use to accompany your product must be in a tif or jpeg format and sRGB or CMYK colour mode, with pixel dimension of at least 1280 pixels on the longest side.
File names must consist of the product identifier (Amazon ASIN, 13-digit ISBN, EAN, JAN, or UPC) followed by a full stop and the appropriate file extension – for example: B000123456.jpg or 0237425673485.tif. Spaces, dashes or additional characters in the filename will prevent an Amazon seller’s image from going online.
For more information on how to upload an image of your product, go to the Amazon Marketplace page.
Rules and regulations for selling on Amazon
Most products are allowed, but you need to consider a number of key restrictions before you begin the Amazon registration process.
As detailed in our guide to products you can and cannot sell on Amazon here, Amazon forbids anyone from selling any of the following on its site:
- Mobile phones (including service)
- Magazines and newspaper subscriptions
- Tobacco and alcohol
- Gift cards and gift certificates
- Prescription medication
- Guns and ammunition
- Photo processing
Both casual and professional sellers can sell in all remaining categories. However, all items you sell must be in Amazon’s existing online catalogue – you cannot add new product ranges.
Furthermore, products in a limited range of categories, such as watches, jewellery, groceries and health and beauty, require authorisation.
Pricing your products on Amazon
When working out the price to sell your product on Amazon, you should factor in the condition of your product, the price of similar prices on Amazon, and the potential impact of Amazon’s referral and variable fees, as well as your delivery costs.
To help gauge a reasonable price, and gain some insight on the competition, you might choose to use Amazon’s on-site Pricing Tools. These include the Low Price feature, which allows you to compare your listing against products of similar type and condition. If the Low Price calculator deduces that yours is the lowest-priced listing for that particular item, a green checkmark will appear in the Low Price column.
Also take a look at these guides to budgeting and setting prices.
You can also click on the listing ID for your items to view your listing information in a single detail page. On this page, you’ll see a box marked ‘This Item Also Available To Buy’, where you can see the lowest-priced Marketplace items offered by other sellers in each condition available. For more information on the specific requirements of selling on Amazon, view Amazon Marketplace’s useful help pages.
Costs of selling on Amazon
As a casual seller, you are required to pay a completion fee of £0.75 per product sold and a referral fee (this varies dependent on the item) in each case.
Professional sellers on Amazon pay a monthly subscription fee of £28.75 per month (£25.00 for sellers that qualify for VAT-exclusive fees), plus a referral fee and closing fee on certain products, such as books, music and DVDs. Referral fees and closing fee vary by category and whether you qualify for VAT-exclusive fees. Check out the Amazon website fee schedule for more information.
There are additional fees for the addition of bespoke Amazon services to your core Marketplace package. These services include Fulfilment by Amazon, a packaging and shipping facility; see below for more information.
Shipping and payment for selling on Amazon
Amazon has also developed strict rules governing distribution. You must ship your product within two days of receiving notification that it has been sold, and you must send confirmation of dispatch for funds to be credited to your account.
Once you have sent confirmation that the item has been sent, Amazon deposits your earnings into your seller account. Funds are then transferred to your bank account on a 14-day cycle.
Shipping and storage for selling on Amazon
The management of products and orders is done via the Seller Central account, and each seller has full access to this facility – all orders are visible on the interface, so you can track the progress of your transactions.
When your item sells, Amazon will send an e-mail to notify you that payment has been taken from the buyer. You must dispatch the item to the buyer within two days of receiving this e-mail.
You can either manage the product delivery process yourself, or let Amazon take ownership. If you are going to retain responsibility for the delivery, Amazon will notify you by email when an order has been placed. Once this is done, all you’re required to do is pack and deliver the item.
Fulfilment by Amazon
If you don’t want to manage the package and shipping process, then you can utilise the Fulfilment by Amazon (FBA) feature – whereby you sell it, and Amazon ships it. With FBA, a customer stores their products in Amazon’s fulfilment centres, and the site directly picks, packs and distributes them, as well as offering customer service.
There are no additional set-up charges or subscription fees when you add Fulfilment by Amazon to your seller account, but you’ll need to pay fulfillment and storage fees. Fulfilment fees vary depending on the type of item (media or non-media), its dimensions and weight, and the shipping method used.
There are two types of fee per month for inventory storage. From January to September, customers can expect to pay £0.30 per cubic foot, per month; between October and December the fee rises to £0.40 per cubic foot per month, taking into account the extra stock over the Christmas period.
The FBA service can be cost-effective, but ultimately it depends on the amount of items you are selling and shipping each month. To see whether the service would be beneficial, you should add up the costs of overhead you could be spending on warehouse space, packing supplies, postage and labour, dealing with customer service inquiries and returns handling, and from there work out whether the Amazon charges work out cheaper.
How do I get paid selling on Amazon?
Money paid by buyers of your products will be automatically deposited into your bank account every 14 days, starting 14 days after you register your seller account.
You will receive a notification by e-mail that your payment has been sent.
Tips and useful contacts for selling on Amazon
In summary, to start an Amazon business you will need to follow these steps:
- Register as a seller
- List your products
- Set your pricing – and account for the costs of selling on Amazon
- Organise shipping and storage (If you use Amazon’s fulfillment service, Amazon will pack and ship the item directly)
- Receive payment
The benefits to selling on Amazon are:
- Your products are easier to find and are displayed to millions of online shoppers
- You can sell across Europe in five marketplaces
- You’re listing your products with a trusted and established brand
- Your products are protected by Amazon’s security and fraud protection
- There are no listing fees (unless you exceed 2 million SKU’s in any given month)
- You can let Fulfilment by Amazon look after storage, picking, packing and shipping (or you can deliver your products to your customers)
Useful resources and contacts for selling on Amazon:
- Amazon Marketplace: How it works
- Startups.co.uk’s blog on the role for small businesses in Amazon’s growing empire
- Selling on Amazon FAQ and Amazon Marketplace Contact Us
What’s it really like to be an Amazon seller?
Based on testimonials from the Amazon Marketplace site, small businesses and start-ups selling on Amazon have said that using the e-commerce platform has helped streamline their business and improved their work/life balance:
“Selling on Amazon seemed like a gentle introduction to running our own business. From the start it felt like a safer way of expanding, and it helped us check that we had a solid product that customers liked.” – Lente Designs
“As we expanded internationally, it was becoming increasingly difficult for our small team to cope with the volume of orders. Fulfillment by Amazon gave me the chance to expand my business, as well as some breathing space.” – Ravi Daryanani of TTfone
“I love the fact that while enjoying spending time with my family, I am still able to run the business. This truly is the life-work balance I had always dreamed of.” – Zamir Cajee, iQualTech
Ready to start selling on Amazon? Find out everything you need to know about how to start a business here.