“In the US alone, Amazon has over 95 million monthly unique visitors.
- Comscore study, July 2014
While Amazon offers a significant market reach opportunity for brands, sales don’t immediately occur as soon as you slap up a product page. It’s critical to understand the basics of the Amazon marketplace, how selling on Amazon works, and the different types of Amazon seller accounts.
SELLING ON AMAZON - IS IT RIGHT FOR YOUR BRAND?
A big question that most brands have is around Amazon’s selling fees. Will selling on Amazon be a profitable exercise for your brand? How do the costs of selling on the Amazon marketplace compare with selling your products to Distributors or through your own online store? Often, selling directly to customers through the Amazon marketplace is more profitable than selling on a wholesale basis to distributors or stores - but it’s critical to first understand the economics of selling on Amazon.
It’s also important to consider the current competitive landscape for products in your category. Validating demand from customers, determining if your products offer significant value relative to competitors, and the overall number and strength of substitute products in the marketplace are things to consider. (We can help you identify the competitive landscape with a free Market Analysis report - Contact us to get your report!)
Selling on amazon is perfect for:
Hardware startups, new product innovations, and brands who had their products crowdfunded (for example through Kickstarter or Indiegogo) find Amazon a great place to take advantage of the momentum built through their campaign, and start making sales immediately. Because Amazon can handle order fulfillment and customer service, it frees up time to focus on developing new products, building partnerships, and other higher-value activities.
Companies who produce their own products or work with an OEM manufacturer to make unique products also benefit from selling on Amazon.
Capture more margin on each sale, but without the headaches involved with dealing with customers directly. See how Bobsled Marketing has helped manufacturers to sell on Amazon.
THE AMAZON MARKETPLACE
There are 3 main ways to sell on Amazon.
Vendor program (Vendor Express, Vendor Central)
This is where the brand has a wholesale relationship with Amazon. Amazon makes Purchase Orders (PO) based on market demand, the brand fulfills the PO, and Amazon then basically handles the rest. Freight and shipping, customer service, even building your product detail pages. However, you’ll be selling to Amazon at a wholesale rate (often a 50% discount on the selling price), and there are some other disadvantages to Amazon’s Vendor program.
Merchant-Fulfilled or Seller-Fulfilled
In this program, brands fulfill orders from customers directly. You pay a percentage “referral fee” on each sale for the benefit of accessing Amazon’s customer base and for them to process the sale.
You ship the order out to the customer, and handle any customer service yourself.
Amazon has recently opened up the Seller Fulfilled Prime program, which allows Sellers with excellent performance metrics to have their products be Prime-eligible.
Fulfilled By Amazon (FBA) is where Amazon takes care of storing your inventory, as well as fulfilling individual customers orders. This program is hugely beneficial for international companies who don’t otherwise have a presence in the US, companies who don’t yet have a robust order fulfillment capability, or brands that could benefit from lightening the load of their existing fulfillment team.
Other benefits of using Amazon FBA to sell your products online:
Your products become Prime-eligible.
Amazon handles the majority of customer service (shipping updates, returns & exchanges).
No set-up fees - pay when your products sell (see our fee breakdown).
Amazon has many warehouses in the US - almost one per State. Plus they have a large network of warehouses in the UK, Europe, and Japan - allowing you to use their award-winning order fulfillment and customer service capabilities like they are your own!