10 Things You Should Know Prior To Selling on Amazon
The opportunity to sell on Amazon
Selling on Amazon is one of the best opportunities for people who are looking to start a business or side hustle. Amazon sellers make up more than half of the sales on Amazon’s marketplace. New Amazon sellers (1-2 years experience) may be taking home up to $42,000/year in profit. More than half of Amazon sellers have reached $100,000 in lifetime sales and 22% of them have reached $1,000,000 in sales.
Although these numbers can be promising, there are several things new sellers should know about Amazon prior to starting selling. Although I can keep giving out statistics on how great Amazon is for sellers, I’m going to cover the aspects of Amazon that are directly correlated to your success. These 10 things will help you avoid common pitfalls and maximize the chances of success on Amazon.
1. Thoroughly Complete Your Seller Application
There’s no point of getting excited about selling on Amazon if you cannot get approved to sell. Amazon has a lot more stringent process for new sellers in comparison to other marketplaces. Amazon requires a lot of personal and business information prior to any new account getting approved.
It’s important to provide the right information in the format that Amazon requested to avoid a rejected application. Some of the information Amazon may request includes phone number, address, banking information and tax information. You must do this correctly or Amazon will reject your application. If Amazon rejects your application, it makes it a lot more difficult to get approved. Do the seller application thoroughly and correctly to avoid a rejected application. To learn more about how to complete your seller application, check out this blog.
2. Follow Amazon’s guidelines
Amazon has many guidelines for sellers to follow in applications, shipping, communicating with customers and more. There are so many ways that an Amazon seller account can get shut down. It’s important to follow all of Amazon’s guidelines to avoid getting your account suspended.
The customers on Amazon are Amazon’s customers not yours. Amazon will let you know that quickly with suspending your account if you violate any of their guidelines. This is one of the cons of selling on Amazon. There’s a lot of things you need to avoid to keep your Amazon account. Make sure you follow all the guidelines that Amazon lays out in order to keep your selling privileges on Amazon.
3. Focus on key actions that grow your business
Everyone knows the feeling you get when you set out a big goal and start working on it. There are so many ways sellers waste their time on things that don’t make money for their Amazon business. The single most important factor for success when selling on Amazon is focus. You need to be laser focused on what exactly makes you money. For most sellers it’s finding good selling products and shipping products to Amazon. If you spend an hour that is not related to finding good products or shipping products to Amazon, your business is not growing.
I know that there are many distractions, but you can literally learn everything you need to know as you go. The most important thing is that you start and keep repeatedly doing actions that make sales. Anything outside of that is wasting your time.
4. You need to invest time and money
This is not a popular opinion, but yes you need to invest time and money to make your Amazon business grow. You may hear about gurus on beaches doing Amazon from their laptops, but that definitely will not work for you as an Amazon seller. No one starts off on Amazon as an expert, it takes time and money to learn what works. The more time and money you have at your disposal, the higher your chance will be to succeed on Amazon.
You can always start small, but as your business grows you will need more time and money to reach the scale you want. For business strategies like private label, you will need a lot of money and time before your product succeeds. To learn more about private label on Amazon, check out this blog here.
5. Separate personal and business activities
This isn’t necessarily a must, but it will make your life much easier. The last thing you want is your Amazon sales eaten up by some subscription you forgot to cancel or an automatic payment. When you’re first adding your banking info on your Amazon account, you need to choose the right one. This is because it will be very hard to change later on. Getting a separate account for your personal spending is crucial to see how your business is actually doing. Keeping personal and business checking accounts is almost a necessity once your Amazon business reaches a certain scale.
6. Use FBA
When selling on Amazon, I always recommend new sellers use FBA. FBA means fulfilled by Amazon; it’s basically where you send products to Amazon and they will handle all of the customer service. With FBA, all sellers need to focus on is finding and sending products into Amazon warehouses. If sellers start with FBM, fulfilled by merchant, they are solely responsible for customer service and shipping.
Since there’s no shipping history with new sellers, getting a late shipment or too many cancelled orders will get your account suspended. There’s no reason to do this when you can have Amazon ship directly to the customer and handle all of the customer service. All new sellers should use FBA because it’s more convenient and prevents any suspension related issues.
7. Join a group
Joining a group or community of like-minded Amazon sellers can be one of the best decisions new sellers can make. Selling on Amazon can often be lonely. If you are surrounded by positive people who are on the same mission as you, it makes it much easier to succeed. Joining a community will allow you to learn from others and avoid their mistakes. There are many platforms where you can find high quality groups of Amazon sellers. Some places you can find seller communities include:
- Facebook groups
- Course memberships
- Amazon Seller Forums
Joining one or more of these communities will give you insight into what sellers are doing and you can get news that’s important to your business.
8. Reinvest in your business
When you first start out selling on Amazon, it can be fun to make a few hundred dollars. It’s important to reinvest those profits back into your business or your business will never grow. Sellers who don’t take their business seriously will often waste their profits and now they’re back again at step one.
Momentum is huge for Amazon sellers. Seeing growth and reinvesting back into your Amazon business can catapult your business to the next level. All of the 6 or 7 figure Amazon businesses you see are at that level because the seller reinvested back into the business early on.
9. Always check for profitability
Sales do not equal profits. I cannot emphasize this enough. The sales you make on Amazon do not represent how well your business is doing. You need to account for all the Amazon fees, your business expenses, etc. to get a real feel of how your business is doing.
Let’s explore this example:
A business on Amazon generates $40,000 in sales in year one. From a glance, this looks great! Once you actually dissect the business, the actual profits can be seen. Assuming 35% of that $40,000 is pure profit, the seller actually made $14,000 in profit that year. If a person was working at this full-time, there time could’ve been much better spent working a 9-5 job.
This isn’t meant to discourage sellers, but this highlights the real importance of calculating profit. Even though the seller made $14,000 in profit that year, they’ve probably learned enough to double their business in the following year.
I know taxes are not the most fun thing in the world, but you have to do them for your Amazon business to avoid IRS issues later on. When doing taxes as an Amazon seller, you’ll likely need to use the 1099-k form. Any seller that does over $20,000 in gross sales or over 200 transactions will need to fill out the 1099-k form. The 1099-k form can be accessed through Amazon Seller Central.
If you have a registered business, you’ll likely need to do the Schedule C tax form. Make sure to include all of your deductibles on there; you can include basically any payments made towards your Amazon seller business. Doing your taxes correctly is huge while growing your business because any issues will complicate things in the future. Any payments you’ll have to make to the IRS will directly slow down the growth of your business. Be proactive and take care of this each year during tax season.
These are some of the most important things you should know prior to selling on Amazon. Once you have a solid foundation for your business and take care of the housekeeping stuff, Amazon is a fun business to be in. Seeing your business grow is one of the most satisfying feelings because of how much effort it takes to get it off the ground. Feel free to check out my new Amazon monthly reports where I will journal a new Amazon seller business from scratch. I’ll share everything that occurs as well as all the sales metrics.