Amazon Sellers Review: Huge User Base + Fulfillment Services

Amazon Sellers Review: Huge User Base + Fulfillment Services

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This is the 4th article in our eCommerce Decoding Series. For more information on selling online, check out our Shopify Review and Etsy Review.

Many sellers often use Amazon or other online marketplaces in addition to selling on their online store. This allows sellers to capture customers who aren’t looking specifically for their store, but are looking for a product that they happen to sell. Amazon is popular for it’s enormous base of buyers. Amazon.com had over 73M unique views last month, and that number reached over 90M views during peak shopping season in December.

But is a huge online marketplace the right distribution method for your business? To help you decide, the following contains information about selling on Amazon — including pricing, setting up a seller account, payments and added features of Amazon Seller Central.

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Pricing

One pitfall to using Amazon.com is the fees. The first item I listed on Amazon was an article of clothing for $30. My total fees on Amazon for selling that one product are $6.16, meaning I receive $23.84 for each product sold, and Amazon takes over 20% of my revenue. Etsy, on the other hand, would charge me $1.05 for my product + the $0.20 listing fee — add the 3% + $0.25 payment processing fee and you end up with at least $27.60 for each product sold.

Here is the breakdown of selling fees on Amazon.com:

  • Per item fees: the individual selling plan, recommended for those selling less than 40 items, charges $0.99 for each item sold.
  • Shipping fees: if you choose to have Amazon fulfill your orders for you, you will be charged for order fulfillment and storage. Otherwise, this will be a a shipping fee calculated by Amazon. The fulfillment fees vary by item sold (i.e. media, non-media, oversized items, etc.), and you can view the rates here.
  • Referral fees: each product that you sell on Amazon.com will have a refer fee, or a fee charged by Amazon for “referring” customers to you. The fee ranges from 6-45% depending on the item and the volume sold per month. See here for more information on referral fees.
  • Variable closing fees: determined based on whether your product is a media or non-media product, and whether the buyer is domestic or international.

Here’s a comparison of Amazon.com to the rest of the ecommerce products we have reviewed thus far.

Starter Basic Professional Unlimited
Shopify
(Payment processing fee not included)
$14/mo $29/mo $79/mo $179/mo
BigCommerce
(Payment processing fee not included)
None $29.95/mo + 1.5% transaction fee $79.95/mo Custom Price
Etsy $0.20 per item listed, 3.5% transaction fee per order
+ Payment processing fee (3% + $0.25 in the U.S.)
Amazon Individual account – free
Added fees: per item fee ($0.99/each sold item), referral fees (6-45% of item cost), and variable closing fees ($0.50 – $1.35)
*Payment processing fees included in above fees
Professional account – $39.99/mo
Added fees: referral fees (6-45% of item cost), and variable closing fees ($0.50 – $1.35)
*Payment processing fees included in above fees

Setup

I have created a (fictitious) clothing business based out of Menlo Park. My goal is to sell apparel on Amazon.com. Amazon has 2 options for selling products: to sell as a professional or to sell as an individual. Because I have fewer than 40 items, I will sign up for the Individual account. Amazon suggests that business with more than 40 items use the Professional account. Your business must be incorporated to use the Professional account.

After choosing the Individual account, I am prompted for my email address, then my name or business name (if I choose to register as a Professional).

Then I am asked to give my business details.

Amazon would like to verify my identity. First they ask for my mobile number, then they send a PIN to my cell phone that I must verify.

If you choose a Professional Account for your business, the next step is to verify your tax information. Because I have an Individual account, I can skip this part and proceed to adding my products.

Adding a Product

The first step when adding a new product is classifying the product. If your item is produced by a manufacturer other than yourself, you will have to identify that here, and categorize it in the appropriate place.

The first bit of information to add once your items have been categorized is the product name and manufacturer info. If you do not input an Stock Keeping Unit(SKU) for your item, Amazon will generate one for you. The SKU number helps sellers better identify which product has been sold when a customer makes a purchase. Amazon recommends that their sellers do not completely depend on the SKU for inventory management.

Next, Amazon asks for pricing shipping information about the product being offered, followed by images.

Next is adding descriptions and keywords. Take the time to think about what your potential customers will search for when they are looking for products like yours, and select keywords and attributes that match that search to maximize your visibility.

Once you have filled out all the necessary information, the product will show up on your seller dashboard. Once you are ready to activate the product, it will be visible on Amazon in 15 minutes.

The Amazon Seller Dashboard

The Amazon Seller Dashboard allows me to organize my items by many different categories, including the product name, date created, availability, and price. I can also view the fees I will be charged for each product I sell.

Amazon has a new inventory management dashboard in the works. The new Manage Inventory page is visually more inviting, it includes an image column so that you can see your product, and is better optimized for inventory updates. Here’s what the Beta preview looks like.

One observation worth mentioning about the Amazon seller dashboard is that it seems to be geared towards making management easier for the sellers who offer many products.

Payments

One of the easiest aspect of selling on Amazon is handling payments. After a customer makes a purchase, the sellers must confirm that the order has been shipped, and Amazon Payments will process the payment from the customer, take all the appropriate fees, and credit your seller account the remaining proceeds. The seller must make sure to provide valid bank account information, and funds will then be transferred from the seller account to the bank account every two weeks. Read more about how getting paid works here.

Bonus: Amazon Buy Box

Some items on Amazon are sold by multiple sellers. If you are selling one of those products, you might hear about the “Buy Box” which is the box on the side of the product details page which features the “Add to Cart” button.

To be featured in the Buy Box, the seller must meet certain performance-based requirements, then they must then compete with all other eligible sellers for the spot. You can read more about how the Buy Box works here.

Final Verdict

Selling on Amazon as an Individual is very easy to set up. The payment process is simple and sellers have the option to have Amazon take care of their fulfillment process as well. If you have many different products to sell, Amazon’s Manage Inventory page can make juggling orders and keeping track of inventory much easier.

Amazon, however, does not offer any customization. There is no way to make your products stand out by changing the look and feel of your pages. This means a greater emphasis on your searchable attributes and product categories to make sure your products are seen in a customer’s search.

Amazon is also surprisingly expensive. Using the individual account, it looks like the total charge in fees for each of my products is about 18-20%.

If you are considering Amazon Sellers or any online Marketplace as a distribution option, really put some thought into whether marketing your product yourself might be more cost-effective. This can be done using your own website, or other websites like Etsy or Artfire. Marketing isn’t always cheap, but it may save you a pretty significant percentage of revenue that would otherwise be lost if you chose to sell on Amazon.

Overall, Amazon is an okay option for businesses looking to sell many different items, especially if your business would benefit from a third-party fulfillment service.

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About the Author — Lydia serves as Content Manager for Nav, which provides business owners with simple tools to build business credit and access to lending options based on their credit scores and needs.

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