As Amazon continues to dominate the world of eCommerce, more small businesses are turning to the AMZ Marketplace as an additional sales channel. Many regular individuals with little or no business experience have started an online business. With over 300 million registered users as of 2021, it isn’t surprising that sellers want to start selling on the platform. If you are an aspiring seller who wants to know how to use Amazon for business, this article is for you.
It isn’t hard to guess why aspiring sellers are interested in learning how to use Amazon for business. The platform grants access to an enormous customer base that third-party sellers cannot reach on their own. With greater visibility and traffic comes higher sales and revenue. Furthermore, the e-commerce titan has made it easier for anyone to be their partner and start their business online. Through its FBA program, third-party sellers have an opportunity to make money without working hard on fulfillment.
When people talk about using AMZ for their business, they typically refer to being a third-party seller. You might have heard that third-party sellers account for more than half of the sales on the AMZ Marketplace. But do you know that’s not the only method of selling on the AMZ platform?
In this article, we’ll guide you on the various ways you can make money using AMZ for your business.
How to Use Amazon For Selling: Two Models
There are many ways to make money on AMZ. You can earn money on the platform without selling anything. Through AMZ’s Affiliate marketing feature, you can promote products and make a commission for each successful sale. Although for this article, we’ll focus only on making money by selling products on the website.
Generally speaking, there are two main ways to use AMZ for your business: as a vendor or as a seller. Although seller and vendor mean the same thing in layman’s terms, they mean different things on the platform.
Let’s take a look at these two models of selling on the AMZ platform.
Amazon Vendors (also called first-party sellers) usually sell their products directly to AMZ through a platform called Vendor Central. Put differently, AMZ buys goods in wholesale quantities from Vendors, who are usually large manufacturers or distributors. These vendors function as suppliers and transport their inventory to AMZ’s warehouse. AMZ pays Vendors upfront for their bulk purchases.
After the sale, AMZ is deemed to be the owner and acquires all rights associated with the products. They will then market and sell the products directly to customers, using the AMZ brand image. Products supplied by Vendors usually have the phrase “ships from and sold by Amazon” included in their listing.
Vendors can make a lot of money by directly supplying AMZ with goods. Because you don’t have to compete with AMZ, you don’t have to worry about losing customers. Also, since AMZ has one of the biggest customer bases ever, you won’t run out of potential people to sell to. You just make sure that you send products consistently to AMZ and they will do the rest.
Do you want to use AMZ for your business without having to handle the hassles of selling, marketing, and logistics? Then the Vendor program is the way to go. However, the Vendor program is not open to everyone as it is invite-only, so you may be limited in that regard.
Even if you know how to use Amazon for business as a vendor, you can’t do it without an invitation. Also, you need to have a huge capital before you can even get invited as a direct supplier for AMZ. Usually, it’s the big manufacturers with huge factories that get in this program. For these reasons, most people prefer becoming a third-party seller instead.
So you want to know how to use Amazon for business, but not as a direct vendor to them? Then this option is the one for you. By becoming a third-party seller, you have more flexibility when it comes to your selling method. You also don’t need to have an upfront capital as huge as the ones for direct vendors.
The option of becoming a third-party seller is more popular, particularly because it is a lot easier. The third-party sellers sell directly to customers on the Marketplace through a platform called Seller Central. As a seller, you own your inventory, have control over your prices, and can market your products as you deem fit. You also have two options when it comes to fulfilling customers’ orders: Fulfillment-by-Amazon (FBA) or Fulfillment-by-Merchant (FBM).
Under the FBA model, you send your inventory to a Fulfillment Center for storage. AMZ then handles picking, packing, and shipping of orders, and customer service for you. Essentially, AMZ employees do all the heavy lifting so that you can focus on other crucial aspects of your business. However, AMZ doesn’t provide these services for free. A fee usually referred to as FBA Fees, is taken from your earnings to pay for this.
Alternatively, you can choose to fulfill orders yourself with the Fulfillment-by-Merchant (FBM) model. This means you are solely responsible for storing your inventory, picking, packing, and shipping orders, and customer service. While you don’t have to pay AMZ any fee, it may cost more in terms of time and labor. You will also need to secure the services of a reliable delivery company so that your margins do not suffer. This is because shipping for orders fulfilled by AMZ is fast and in some cases, free. So to compete with FBA sellers, you have to guarantee the same level of efficiency.
Different Selling Models For Third-Party Sellers
There are several different selling models that sellers can use to succeed in the platform. This is how to use Amazon for business if you want to sell products. To help you out, we have listed some of the most popular ones below.
The word “retail arbitrage” might sound confusing and intimidating at first. But in actuality, the layman’s term for this is just “reselling”. When you adopt retail arbitrage, what you need to do is locate a discount store and purchase items there for cheap. Walmart, mom-and-pop shops, Costco, or even online marketplaces such as eBay can be your option here.
People who are just starting to learn how to use Amazon for business often use retail arbitrage as their method. It is cheap to start, easy to execute, and profitable. If you can find cheap products to resell in your AMZ store, it can bring you a lot of money.
However, you leave your fate completely up to the retail stores with this selling model. If they run out of stock or they decide to pull out the products you are reselling, you have no choice. You don’t have control over your prices since you are not purchasing straight from a manufacturer. You can’t negotiate your prices, thus you can’t lower them down too.
Wholesale selling is how to use Amazon for business if you want to go direct to the source or manufacturer. What you do is you buy in bulk directly from the manufacturer and drastically lower down your cost of purchase. In a market as competitive as AMZ, keeping your costs of acquisition low is key to making good profits. Since wholesalers source their products direct from the manufacturer, no more middlemen add up to the cost.
Another positive thing with wholesale selling is that you can negotiate with the supplier to get exclusivity. By getting an exclusive contract to sell as an authorized reseller, you won’t have problems competing with other sellers in your niche.
The big downside in wholesale selling is the need for huge upfront capital. You will be purchasing your products in bulk, which means need to have a big upfront capital to cover initial costs. You will be buying tens of thousands of products as a wholesale seller. If you don’t have a big capital to start, it will be difficult for you to get started on this platform.
Want to know how to use Amazon for business even if you don’t have big storage or warehouse to keep your inventory? Easy! Just use the dropshipping method.
In dropshipping, a seller acts as a middleman between the customer and the direct source or manufacturer. It is the direct manufacturer who fulfills the customers’ orders. All you have to do is send the customer to them to get the process started.
This is how dropshipping works. First, you need to post your product online. When a customer buys this product, you’ll contact your supplier and forward this order to them. Your supplier will now fulfill this order and ship the item to the buyer. But instead of using their name, the supplier will ship the product under your name. When your customer receives his or her product, your name will be the one written on the package. So by acting as a middleman and putting your profits on top, you can make money even without an inventory.
Overseas B2C websites such as Aliexpress.com can be a popular source for your dropshipping products. However, the time frame to receive the products is quite long since they will be coming overseas. This could lead to buyer’s remorse or negative feedback from impatient buyers. Another disadvantage is that you won’t have enough time to perform personal quality checks with dropshipping. Since the product is shipped straight to the buyer from the manufacturer, you can’t check for defects or damage. This can lead to you getting lots of negative reviews if you don’t choose your supplier well.
You can set up an Amazon small business using any of the aforementioned selling models. However, after setting up your business, you will have to carry out some tasks if you want to make a profit. So, what should you do as an Amazon small business owner who wants to build a profitable business?
What You Need To Do As A Seller
Sellers bear responsibility for all the major aspects of running their Amazon small business. This means their success is largely dependent on some crucial factors, which include:
- Finding and sourcing profitable and quality products
- Pricing competitively and profitably
- Keyword research for product listing optimization
- PPC Campaign management
- Competitive analysis
- Logistics (unless you use FBA)
If you handle these aspects well, especially with the use of seller tools, then you are bound to have a successful online business. You can also monitor your business performance on your Seller Central account.
How To Use Amazon For Business Without Selling?
Many people who don’t have enough capital but still want to earn money online often ask this. They want to know how to use Amazon for business without selling anything. And the answer is straightforward – just use affiliate marketing!
AMZ’s Affiliate Marketing Program allows you to earn money even without selling a single product. All you have to do is promote a product on your website using links and banners. You can write articles, blog posts, or make videos showing the pros and cons of using these products. Within your content, you can use your affiliate links. Whenever a customer purchases a product on AMZ using your link, you’ll get a commission for promoting the product.
With the AMZ Affiliate program, you don’t have to learn how to use Amazon for business as a seller or vendor. All you need is to write great, informative, and helpful content. You’ll get commissions even without selling anything.
Should You Be A Seller or a Vendor?
Ease of Set-Up
As mentioned earlier, you have to receive an invite from AMZ to become a Vendor. On the other hand, becoming a Seller is open to anyone. All you need to do is create a Seller account and supply the required information. So, if you want to start your business in no time, then becoming a Seller is the better option.
Ease of Doing Business
The Vendor business model is simple. Your business tasks are mainly fulfilling purchase orders, billing AMZ, and avoiding chargebacks. The Seller model, on the other hand, is more complex. In addition to other day-to-day tasks, you will be responsible for handling logistics for order fulfillment (unless you use FBA). Also, sales reconciliation, managing inventory, and taxation compliance. So if you want a business model that does not require much time and effort, then the Vendor program is your best bet.
Level of control
Sellers have sole control over their retail pricing and can set competitive product prices as they wish. On the other hand, vendors have no control over their retail pricing. AMZ can adjust the product prices at any time, and often will, in a bid to match lower prices offered by other sellers. This can negatively impact your profit margins. Sellers also have more control over their inventory and customer communication than Vendors.
Sales Volume Potential
Vendors tend to have higher sales volume than Sellers. Their product listings indicate that their products are from AMZ. Because of this, potential customers are more inclined to purchase them due to their trust in the platform.
If you were wondering how to use Amazon for your business, you’re certainly armed with more information now. You can start an online business either as a Vendor or a Seller. The Vendor program is invite-only and better suited for large manufacturers or suppliers. As a small business owner or an individual looking to diversify your income stream, becoming a Seller is a more suitable option.
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