how selling on amazon works

How Does Selling On Amazon Work? (I Wish I’d Of Known This)

So yesterday i was speaking to a friend about my business and he asked: How does selling on Amazon work?

I thought, wow that’s actually a great question…

Probably the first question any beginner would ask if they wanted to start an Amazon business.

Instantly i’m sitting there thinking, I’ve got to write a blog post on this!

There are a few different ways to sell on Amazon. Whichever method you choose you are going to need to list your product/s on your chosen Amazon marketplace. Once your item/s sell you can either fulfill these orders yourself (Fulfilled By Merchant – FBM) or you can have Amazon store, pick and post the item out on your behalf (Fulfilled By Amazon – FBA).

Let’s look at this in a little more detail so you know everything there is to know.

I’m going to cover each of the questions my friend asked during this conversation, hopefully you find it useful!

If i’d of know these things when i started selling on Amazon, things would be very different!

 

How Does Selling On Amazon Work?

So how does selling on Amazon work, well once you’ve chosen your fulfillment model is quite simple.

The hardest part is finding the right products to sell on Amazon…

This takes time and skill, but once you understand the process it gets easier.

 

How Does Fulfilled By Merchant Work?

With the fulfilled by merchant (FBM) model it’s up to you to; store, pack and post orders out your orders as they come in.

Some of the biggest sellers in the world have huge FBM operations, pharmapacks is a great example!

pharmapacks inc

(Source: inc.com)

Pharmapacks have a lot of different physical locations where all day orders are prepped, packed and posted out to customers.

Personally i don’t follow the FBM business model, currently we run all of our products through the Fulfilled By Amazon program.

Each to their own, if you have the space and the infrastructure in place you can save on a big chunk of Amazons fees.

Pharmapacks and showing how the FBM business model should be done!

 

How Does Fulfilled By Amazon Work?

Ok so Fulfilled by Amazon is more commonly referred to as FBA.

This hands off business model allowed us to build our online business whilst all working full time jobs.

Your job is to source and then market the products… Amazon will deal with the distribution side of things.

With FBA, Amazon will store your products…

When an order comes in they will pick, pack and send it out to your customers all day long.

Amazon continue to send out products whilst all three of us sleep…

That’s pretty cool isn’t it.

With Amazon taking care of the fulfillment side of things you will pay more in fees…

But it does free up your time to work on growing your business.

As well as working “in” your business you need to make time to work “on” your business.

The following video explains how fulfillment by amazon works.

What’s The Difference In Amazon Fees?

Whichever fulfillment model you choose you will have to pay Amazon fees for selling on their website.

For this example, we will assume you are opting for the professional selling plan…

If you want to build a real business, you’ll need a professional plan.

The individual selling plan is of course an option, but only really suitable for people selling a few items a month.

So, you will have to pay a referral fee for every product you sell through the Amazon website.

This is a percentage and the amount will depend on the product and the category it’s in.

The referral fee is simply a fee for selling the product through Amazons powerful platform.

If you decide to make use of the Amazon FBA fulfillment program you’ll also be charged a fee for the fulfillment of your product.

The fulfillment fee will be a percentage of your sale price, usually it will be based on the products size and weight.

Before you commit to sourcing a product work out a full projection of your associated costs.

If you don’t, how will you know if you are going to make profit?

 

Will I Make Money Selling On Amazon?

It’s very difficult for me to say that you individually will make money selling on Amazon…

How could I possibly know this without knowing exactly what you were planning to do.

If you want to make money selling on amazon you are going to need to source the right sort of products.

Products that will make you profit, have enough demand and aren’t too competitive…

Don’t worry i’m going to show you how to find these sorts of products shortly.

If you do things in the right way you will definitely make money selling on Amazon!

There are lots of different ways to make money selling on Amazon…

You just need to know what you are doing.

Let me show you how you can work out all of your associated costs.

This way you can make sure that you are able to make money when selling a product on Amazon.

First things first, you need to decide on the Amazon marketplace you wish to sell on…

Then find the relevant Amazon fee calculator and fill in with the relevant details.

Let’s imagine that you want to sell this dog lead for $30.00 on Amazon’s US marketplace…

how does selling on amazon work

With this example I’ve assumed that we’d be selling this product through the Amazon FBA program.

So the referral fee for selling on Amazon is $4.50

The fulfillment fee for Amazon FBA is $4.92

In this scenario, selling the dog lead at $30 would bring us in $20.58 after Amazon fees.

That’s simply how Amazon fees work.

If you were to fulfill the items yourself you’d obviously save the $4.92 – You’d also be classed as FBM seller.

 

Is Selling On Amazon Worth It?

There is a very simple answer to this question in my opinion.

Yes it is definitely worth it.

It will depend on your actions and of course the products you pick, it is not a get rich quick scheme.

In my mind selling on Amazon is worth it if you are either making money or learning something from the process.

The answer to this question will depend on your objectives…

What are you trying to achieve from selling on Amazon?

If you are looking for a side hustle to earn some extra money, selling on Amazon can definitely help with that…

 Are you looking to escape the 9 – 5 and run your own online business? Amazon can help with that.

This is exactly what myself and two business partners did, we have been working for ourselves for well over two years now.

Before we started selling on Amazon we all had full time jobs…

By leveraging the fulfillment by Amazon business model we were able to quit our jobs to chase our dreams full time.

Now I’m not for one moment suggesting that you should quit your job…

We only decided to quit once we knew the business could support us each financially.

Anyway, maybe I’m biased but in my opinion selling on Amazon is definitely worth it.

The chances are i’m not very different to you, i just decided to get together with two friends and start an online business.

Your success on the platform will depend on your ability to pick the right products, there is no doubt about that.

If you’ve read this far, well done! Your reward will come shortly…

“What’s the reward?” I hear you ask…

Well, i’m going to guide you through my two favorite ways of finding profitable, in demand products to sell on Amazon.

Before we jump into these two methods let me cover a few more of the question my friend i asked…

I think you’ll find the answers useful.

 

What Can I Sell On Amazon?

When it comes to what you can sell you have a lot of different options.

The majority of things sold on the platform are physical and digital products.

We focus on selling our own range of private label products but could also consider selling the following:

  • Print on Demand Clothing and Accessories
  • KDP – Kindle Direct Publishing
  • Other Peoples Products (Online Arbitrage, Retail Arbitrage or Wholesale)

I’ve actually had experience with each of these different products but for the purpose of this article i’ll stick to the private label business model.

 

Where To Start Selling On Amazon?

When it comes to selling on Amazon where should you start?

Now i understand that this question can be interpreted in a number of ways…

First, let’s talk about the geography side of the question.

The Amazon US marketplaces by far the biggest, i’m sure that’s no surprise.

Amazon Germany is the second biggest, that comes as a surprise to some people when i tell them that.

In third place we have the United Kingdom…

If you are only just starting out I’d recommend starting with where you are based, if you live in the US start there.

 

How Do Beginners Start Selling On Amazon?

So where can you get started?

Well first things first you’ll need to decide which business model you want to follow…

As i say the majority of what we do now is private label.

Whatever you choose after setting up your business you’ll need to find the products you want to sell.

Before i reveal our tried and tested product research methods, i want to cover the different Amazon selling plans.

 

Which Amazon Selling Plan Should I Choose?

As a beginner you will have to decide which Amazon selling plan is right for you…

If you are building a serious business, you’ll want to opt for the professional plan.

 

Amazon Individual Selling Plan

If you go for this plan please be aware of the fact that you are only allow to sell up to 40 products a month.

Along with the usual fees you will also be charged $0.99 per item you sell…

You won’t have to pay the usual $39.99 monthly Amazon account fee which i suppose is a plus.

This selling plan is suitable for anyone that just wants to sell a few items laying around the house.

 

Amazon Professional  Selling Plan

If you are looking to sell more than 40 products a month you are best off going for the professional selling plan.

You’ll pay the usual referral fees per item sold, along with your monthly account fee.

If you are trying to build a serious Amazon business you’ll need the professional selling plan, that’s for sure.

 

How Can I Find Profitable Products To Sell On Amazon?

Ok so as promised i’m going to show you inside our product research method…

We find profitable products in a number of different ways.

I use software to speed up the process but you can do it manually IF you know what you are looking for.

Let’s talk about some of the key characteristics of a product that’s going to be good to sell on Amazon.

 

Keep It Simple

Consider selling simple products that aren’t too complicated…

Unless you have the experience or a big budget i’d avoid selling products like the following:

  • Electronics – You have to think about all of the potential risks, a lot more can go wrong with an electric product
  • Fragile – As a beginner i’d avoid products that are easily breakable
  • Large & Heavy – Bigger, heavier items are going to cost you more to store and more to ship

I’d avoid the above three product types, unless of course you have the experience or infrastructure to support it…

 

Popular But Not To Popular

This might sound like a weird one but as the popularity of a product increases so does the levels of competition.

As a beginner selling on Amazon i’d always avoid products that are within the top 100 of any main category.

First and foremost Amazon publishes all of these for everyone to see…

Even if a top 100 product is a relatively new concept you can almost guarantee that the competition will continue to pile in…

It can end up being a race to the bottom in terms of price point…

We want to look for items that are popular, but not too popular 😉

 

Minimum Levels Of Profit

When looking at potential product ideas try to consider the worst case scenario when it comes to profit margins.

I usually like to work out all of my associated selling costs, then add 15 – 20% to account for any changes in the market.

When looking at potential products i also like to aim for a minimum net profit of $5 per item.

If i sell 500 products a month, $5 is going to bag me $2500 profit.

Compare that against a product that will make me $2.50 net profit and you’ll know i have to sell twice as many to make the same level of profit.

Ok enough of that, i think I’ve gone on long enough…

Let me show you inside a couple of my product research methods.

 

Method #1 – Manual Dive (The Scuba Steve)

I don’t know why but whenever i’m sharing this method i have this image of a Scuba Diver named Steve pop into my head.

Very weird i know but to me it makes sense!

With this method we are deep diving into the Amazon ocean with nothing but a oxygen tank and a pair of goggles.

For this example let’s imagine that you sell within the US Amazon marketplace…

 

Step 1

The first thing we want to do is head over to a rival marketplace like the UK or Germany.

According to Statista Amazon Germany is the second biggest Amazon marketplace.

So let’s go for Amazon.de

Now head over to www.amazon.de and unless you can speak German change the language to one you can speak.

For me… It’s going to be English.

how selling on amazon works

Before you get started you are going to need to download a particular chrome extension.

Once you’ve signed up you’ll find the extension under “Market Intelligence”

I use a number of different chrome extensions but this is one I’ve been using a bit more recently.

Right once downloaded head onto Amazon Germany’s “Best Seller” section and start looking at different categories.

This is where you need to channel your inner Scuba Steve and start search for opportunities.

As you’ll see below I’ve clicked on the “Beauty Category”…

amazon germany beauty best sellers

What we are doing here is looking at some of the best selling products, to then cross reference over to our own marketplace to look for hidden opportunity.

Usually the products at the top will be very competitive (not always but sometimes) so scan through and wait until you like the look for something.

AH YES – It hasn’t taken me long and just like that I’ve got one…

ebusiness boss amazon product research

As you can see i have put a red box around the “Organic Soap Bags” on the right hand side…

I know the price doesn’t look too encouraging but as a product they look pretty simple and non fragile.

 

Step 2

Then i’ll head over to Amazon.com and search “Soap Bag”…

One click of the chrome extension and i’m given more data than i’d know what to do with!

viral launch market intelligence

 

Well well well, it looks like we have found something quite interesting.

With very little research we look to have found some interesting results…

I have highlighted one product of interest but there are a few product example we could use for guidance.

This is the product that caught my eye…

good amazon product idea

This product is bringing in over $14,000 a month according to viral launch.

If you are interested in learning more about viral launch click the link above and read through my review.

Anyway, back to the product, this is certainly an idea i’d shortlist.

You see I’ve picked this example of a reason…

I like that this seller has created a product that brings a market edge to the standard soap bags.

The seller has found that there is demand for a Soap Bag…

But they have served a particular market by dressing the product up as a military style bag.

I’d imagine this product would appeal to anyone that loves the great outdoors or the military of course.

This “Tactical Scrubber” is focused in on one market angle and as we can see, it is working.

Find a product and make it stand out to particular people…

You can use the above method over and over again to find different product opportunities.

It’s a manual method but one that i still use very regularly.

Hopefully now you are considering pulling on your Scuba suit and diving into the Amazon ocean.

I’ve created a video tutorial to teach you everything you need to know about this process (Watch The Video Below!)

The above thumbnail is ridiculous isn’t it, I’m not going to lie i do make myself laugh sometimes.

Anyway, let’s move onto the next method!

 

Method #2 – Deep Sea Expedition (The Submarine)

With this method you are going into the Amazon ocean with a submarine and a team full of deep dive specialists.

You are going to find a lot more, a lot quicker with this method… that’s just a fact.

I’d recommend this method to anyone really but especially for people with a limited amount of time.

This method would take far too long for me to explain with words…

The video below runs through the method in full.

Please take the time to watch the entire video, learning how to use this tool effectively can make all the difference to your success on Amazon.

 

Final Words – There Is No Time Like The Present

You’ve made it all the way to the end of the article, great work!

If you’ve read this article carefully and watched each tutorial i can almost guarantee you’ve learnt something that could change your circumstances.

But all of that knowledge isn’t going to make you money without you putting it into action.

Take what you’ve learnt from this article and get started.

If you are looking for additional help and training, consider subscribing to our YouTube channel…

What are you waiting for, get started!!

Now you know the basics you’ve got no excuse.

I’ve also written a pretty in depth article on how we actually got started, if you’re interested you can read here.

If you’ve got any questions let me know below.

More from me soon,

Nick

nick ebusiness boss

eBusiness Boss

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