There tends to be a lot of stories about success on Amazon FBA but no one likes to share the story of failure. The main cause of failure is shallowness. Many sellers jump in before they even read Amazon guidelines because starting your business on Amazon is a simple process but scaling it up, on the other hand, requires some thought. So, here are the basic things to know before start selling on Amazon.
I have a lot of beginner questions about some pretty basic stuff. If no one has told you about an Amazon selling tutorial, then start here Selling on Amazon.com, read it twice and you will learn basically everything you need to know about selling on FBA and do not forget their Frequently Asked Questions before you ask someone else.
My honest advice: read and learn every single rule out there if you want longevity for selling on Amazon. Just don’t give them a reason for a suspension.
Why is this so important? Well, Amazon is brutal when it comes to their policies but still, people just skip their guides and search help on some other places. Example: you will forget to label your boxes as the team left, then you get one warning, then you will put the FNSKU on the box and Amazon will assume the box is just one unit, here comes second warning, but after that, they might ban your account and never tell you why. You probably already read “I WAS BANNED FROM AMAZON FOR NO REASON” – no, there was a reason they just didn’t do their homework. Amazon has one of the best logistics systems in the world and they seek to maximize efficiency. Since the customer-relations aspect of the transaction is carried out by Amazon, they want to make sure that everything is carried out perfectly.
So, once again This is Your Bible for selling on Amazon READ IT!!!!
Things you will read…If a product has an opening greater than one inch by one inch, it must be placed in a sealed bag, if you are selling items as a set, there must be a label stating “Sold as Set”, or “This is a Set – Do Not Separate”, filling up extra space in a box with shredded paper is prohibited etc, etc.
Selling on Amazon Guide
- What can I sell on Amazon?
Do you have permission to sell your product? There are certain categories on Amazon that need permission to sell. Amazon has a very strict policy on selling and some categories require approval for selling. Many popular categories (Watches, Jewelry, Clothing & Accessories…) are restricted for new sellers. Only products in certain categories can be listed without specific permission from Amazon – these categories are:
- Baby Products (Excluding Apparel)
- Camera & Photo
- Cell Phones (but you must meet certain requirements)
- Electronics (Accessories)
- Electronics (Consumer)
- Health & Personal Care
- Home & Garden
- Musical Instruments
- Office Products
- Personal Computers
- Tools & Home Improvement
- Toys & Games (may be restricted for holiday selling)
- Video Games & Video Game Consoles
2. Collecting reviews
Amazon recently cracked down and ended its system of incentivized reviews and has removed all such posts from the website. When you start selling on Amazon, you need initial reviews but you should know that Review Facebook groups are a one-way ticket to suspension.
3. It’s not as easy as it looks.
Amazon isn’t a get rich quick scheme. Amazon FBA is a business just like any other which means sourcing, employee management, accounting, admin, etc. Actually, expect hard work and many sleepless nights on the road to success.
4. Be aware of the Amazon fees
When you sign up on Amazon as a seller, you can choose a Selling plan: An individual (Plan on selling fewer than 40 items a month) or professional seller (Plan on selling more than 40 items a month). As an individual seller, you get a free subscription but must pay referral and closing fees and an extra $0.99 fee for every product you sell. As a professional seller, you will have more access to Amazon resources (Professional Sellers may apply for permission to sell in gated categories) and will pay a subscription fee of $39.99 a month no matter how many products you sell, plus other referral and closing fees.
Depending on the size of a product, you will also pay a series of fees for order handling, picking & packing, weight handling, and storage. To estimate how much it will cost you per unit, use the Fulfillment by Amazon Revenue Calculator.
5. I’m an International Seller, Can I Sell
Yes, you can. If you register to sell on Amazon.com from a country outside of the United States, you need to provide a bank account in a country supported by Amazon. Currently, Amazon supports bank accounts in the Eurozone, United Kingdom, United States, and many other countries. Click here to see the list of supported countries.
NOTE: Amazon will pay you in your local currency, not USD. Even if you have a USD account – Amazon terms “Disbursements can only be made in the home currency of the country where the bank account is located. For example, if your bank account is in the UK, then disbursements can only be made in GBP, even if your bank account is capable of accepting deposits in both GBP and EUR currencies.”
Yes, you are guessing – Amazon has a poor conversion rate back to your home country’s currency and will eat into your profits.
If your country isn’t on the list then you need to open Payoneer account. Registration is simple and Payoneer allows you to withdraw your payments directly to your local bank account. Payoneer is working with Amazon for local currency disbursements, but only for countries that are not supported by Amazon eg. China, Turkey, Serbia, Vietnam etc.
6. The World Doesn’t Need a New Rubber Placemat
Try to find something more niche. Tip: search obscure items, something about no one is thinking about e.g. do not think about the guitar, think about of a part of the guitar.
Are you an international seller? Wonderful…Team up with a local brand or company who has a great product but doesn’t sell on Amazon. Convince them you’re the guy to sell it on there.
7. Registering for More Than One Account
Permanent ban!!! Simple, one seller account per Amazon seller – everything else is Amazon policy violation.
8. Pointing Amazon Customers to Your Website
Say bye, bye to your Amazon account. You will get caught and guess what, you’ll get banned.
9. Including Sales Promotion or Coupons in Your Product Title
Listing suspension and probably account suspension as collateral.
10. Amazon Pays Every 2 weeks
When you sell an item on Amazon, payment is made by direct deposit to your checking account every 14 days. This is important to know if you are using the revenue from your sales to replenish your inventory.
NOTE: Amazon does not accept Paypal.
11. You Can’t Predict Sales From a Best Seller Rank
BSR (Best Seller Rank) changes every two hours and if you catch the product at the wrong time it can be different by a couple hundred or even thousands from the previous day.
12. Economic Profit Matters Not Profit Margin
Once your business grows, it’s the economic profit that matters and that factors in operating costs that often get glossed over or completely ignored by smaller sellers.
Consider this example: you rent a stand that sells ice cream for $1. Ice cream costs you 20¢.
Your marginal profit on each ice cream is 75¢.
You sell 100 ice creams per day.
Your revenue is $100, and your COGS (cost of goods sold) is $20.
Your gross profit is $80.
You have more costs – $50 a day to rent an ice cream machine.
Now, your net profit is $30 and your operating margin = $30 / $100 = 30%
Then let us consider that you spent ten hours selling ice cream when you could have been at your regular job earning $8 an hour but you miss an opportunity to earn $64.
Your economic profit is $30 – $64 = –$34. You have an economic loss.
13. I am an international seller – do I pay income tax in the USA?
If you don’t have your own people on the ground in the US, you don’t have to pay US income tax. So, if you live outside the US and sell on Amazon FBA (or otherwise using third-party fulfillment), then there’s no US income tax to pay.
You pay in your home country.
14. Are there any Alibaba like website for finding American manufacturers?
ThomasNet is the closest thing I’ve found so far.
15. How long does it take to get your first sale?
Between 15 minutes and 15 months :), but on the average it takes 2 or 3 days for sales to occur naturally.
16. How to Scale Your Amazon Business
Never take a paycheck and keep reinvesting your money. If you have cash you will succeed.
17. What Kind of Product Will Most Likely Fail?
Silicone-based kitchen product. Friendly advice: stay the hell away from easy to source silicone products from China. It’s the low-hanging fruit that every one that is fresh out of the “Amazon PL Training Classes” will navigate to and quickly become saturated.
18. I want to do FBA in the EU, any tips/advice on the import process/VAT handling?
Once again, read the Amazon guide and use providers they recommend.
19. Are you Shipping Something FRAGILE?
If you’re ordering anything fragile at all ask your supplier if they offer upgraded, heavy-duty mail order packaging. You’ll be glad you did.
20. How do I increase chances for success in Amazon business?
Most people probably set themselves up for insane competition by just focusing on the general rules for selling on Amazon.
- Light and small product
- Can be shipped by air
- Sourcing price between $1-$5
Well, all of those things that made it easy for you will also be easy to someone else. For a new competitor, there is very little risk of dropping $2500 on product+marketing in the hopes of finding a winner.
If your product costs $10-15/unit and needs to come in via Ocean Freight to be competitive, you’ll see the competition dwindle considerably. You are not going to find the same amount of competition because people aren’t willing to “risk” that much on a private label when there are cheaper investments.
21. How Much Money Do I Need To Start Selling on Amazon?
You can start with $500 (you can read How I started an Amazon FBA business for about $500) but there are many mistakes you can make and with only $500 you are going to really struggle to cover your start-up costs. That’s why I recommend roughly $2000 to Start Selling on Amazon.
PS. Don’t tell anyone you are selling on Amazon, people will give you funny looks. They will look at you like on a kid who sells stamps on eBay.
PS2. Do not ask another seller what they sell on Amazon, that’s like asking a man what his wife is like in bed 🙂