How Selling on Amazon Works for Beginners (2023)
by Hoz
Selling on Amazon is a hot topic right now.
But here's the thing...
It’s not a fad. In fact, it’s been a hot topic for years now, and it’s getting hotter every year. And that's because Amazon's growth and revenue are up year on year.
If you're thinking about selling on Amazon, or wondering how this whole business model based around Amazon works, then know that you haven't missed the boat. Far from in, in fact. The Amazon marketplace is still growing! And that means there's plenty of room for new sellers to jump into FBA and private label.
In this post, I'm going to cover the most common Amazon FBA questions on how selling on Amazon works. If you're a beginner, these are the things you need to know. Consider this an Amazon FBA for dummies crash course, an overview, your very own A to Z of selling on Amazon.
If, on the other hand, you're already selling on Amazon, then you'll find more advanced questions to help you with the day to day running of your Amazon business in my FBA resources page.
I'm also going to throw in a few resources for you, like some Amazon FBA step by step tutorials and guides covering specific topics in more detail.
Things like:
And, there's a video too, where I cover over a dozen FAQs about selling on Amazon.
Ok, let's start from the very beginning...
What is Amazon FBA?
FBA stands for Fulfilled by Amazon. That means Amazon takes care of getting the order to the customer (the order is fulfilled by Amazon). This includes picking and packing the product and then delivering it to the customer’s door. In order to do this efficiently, Amazon stores seller's products in their own warehouses.
For you, as an FBA seller, this means that you can actually run a business (even a one-person business, just like I do) and sell products on the Amazon website and have Amazon deliver those products for you so you don’t have to take care of all the logistics.
It's almost like drop shipping, but with an extra step. Instead of the supplier shipping the product to the customer, you ship the product to Amazon and they do the rest.
Can I sell on Amazon without FBA?
Yes. You can fulfill your own orders if you want to. In this case, you stock your own products and list them in Amazon. When a customer buys your product on the Amazon website, you'll receive an email from Amazon with the customer's details and shipping address, so you can ship the item out to the customer.
Can you really make money with Amazon FBA? I mean, can you get rich, or at least make a living?
Yes you can make money, like many FBA sellers do, and you can even get rich, like some sellers have done. However, people who make a fortune selling on Amazon (or anywhere else) tend to be business savvy, or exceptionally good at something, and very hard working. They're not beginners who somehow got lucky. Quite the opposite: they look after their businesses and do the right things to ensure growth.
Is Amazon FBA dead? Am I too late to get started?
No, it’s not dead. This question really is about over saturation (are there too many sellers already). Some people think they’ve missed the boat and that maybe it’s too late to join Amazon and start making money because they think that the entire marketplace is covered by the sellers who are already there. But this is not the case.
Here's why:
Amazon offers a whole range of services, but we’re talking specifically and only about the Amazon marketplace where people go on and buy products from sellers. That side of Amazon makes ridiculous amounts of money every year, and the profits keep on growing every year.
According to Macrotrends*, here's how much revenue Amazon made these past few years:
Amazon annual net income for 2018 was $10.073B, a 232.11% increase from 2017.
Amazon annual net income for 2017 was $3.033B, a 27.92% increase from 2016.
Amazon annual net income for 2016 was $2.371B, a 297.82% increase from 2015.
* reference: Macrotrends.com
You can visit Macrotrends to get more recent - and this year's - figures.
So here's my point:
Last year there were people asking is Amazon FBA dead, and are they too late, and is it oversaturated. Well, twelve months later, several more billion dollars has been generated in that marketplace.
And here’s the thing:
A few billion sellers have not joined Amazon in twelve months! That means the supply and demand is stacked wildly on the odds of the sellers because there are millions upon millions of Amazon customers shopping on the amazon website and there is a significantly lower number of sellers to serve those buyers.
That alone should tell you that no, it’s not too late to sell on amazon.
Here's how it works:
Prime customers get same day or next day free delivery. For Amazon to accomplish this, they stock the products in their warehouses, so sellers on the FBA program benefit from prime customers.
And here's the key to keeping that growth going: Amazon advertise Prime Day aggressively in order to get new people to join Amazon prime.
According to Statista, there were 105 million prime customers in the US alone in June 2019.
*reference: Statista.com
That's 105 million people to serve, probably several times a week if my personal buying habits are anything to go by.
Also, keep in mind that Amazon customers do not have to be Prime customers in order to buy products from Amazon FBA sellers. Prime customers are the ones who benefit from FBA, but all customer can buy all products – including those sold by FBA sellers.
That means you're not just serving 105 million customers... you're serving a much bigger number.
If that seems like an oversaturated market to you, then take a look at the next question:
How many Amazon FBA sellers are there?
Sellerapp* estimates the number of active sellers on Amazon to be over 2.5 million in 2019.
*reference: Sellerapp.com
That means, the number of people selling on Amazon is significantly lower than the number of people buying on Amazon. How is that for a healthy supply and demand balance?
How does selling on Amazon FBA work?
Here's an overview:
You sign up for a free seller account on Amazon.
you provide some ID.
you create a listing to list your product.
you choose whether you want Amazon to stock your products, which means Amazon will take care of delivering each order (FBA: fulfilled by Amazon) or whether you want to stock your own products and you take care of shipping each order out to the customers (FBM: fulfilled by merchant).
Amazon takes a small fee out of each sale, just like eBay does, which is how this business model works.
Amazon charge FBA sellers a storage fee for products that have been in an Amazon warehouse for over 365 days. The trick then is not to stock too much inventory in Amazon. There are ways around this, which you can read about in my Stung by Amazon Storage Fees post.
If you wish to advertise your products in Amazon via sponsored ads, you can upgrade your seller account to a Pro seller account. This has a monthly fee of $39.99 at the time of this writing. That monthly charge gives you access to the advertising platform.
What do I need to start selling on Amazon FBA?
A product and a bank account. that's about it, really. You can overthink this and grind to a halt trying to prepare everything you imagine you need, but the only thing you need to get started is something to sell and a bank account to receive payments and to pay your Amazon fees.
Do you need a business license to sell on Amazon FBA?
No. If you have your own business you can use the business to trade on Amazon, but you don’t need a company to sell on Amazon, you can simply sell as a sole trader if you don't have your own business.
How do I sign up to Amazon FBA as a seller?
The signup process is quick and easy:
you go to the seller central page here.
Amazon's sign up process is straight forward and they list all the Amazon FBA requirements on the page, as you complete your registration.
Essentially:
you upload some information about yourself (name, address, bank details, etc).
you choose a selling plan (free or pro).
you create a listing for your product.
Once your details are checked over, you’ll hopefully have your account activated.
Do I need a credit card for Amazon FBA?
You need to have a debit or credit card to sign up to Amazon FBA. This provides Amazon with a way to take any due payments, such as seller fees, etc. Visa and Mastercard are accepted, and others may be too (check on the website).
How much money do I need for Amazon FBA?
This really depends on you. As with any business venture, the more money you can invest into Amazon FBA, the better and easier things are going to be. For example, with more money you can buy more inventory, which you can then sell on Amazon.
How do I start an Amazon fba business with little money?
If you're on a tight budget, then just know that I've been there many times myself.I won't sugar-coat this: it's much harder, obviously. Less money means you can only buy less stock, and probably at a higher price than you would if you were placing a large order. So, you can expect your Amazon FBA journey to be slower than it otherwise would be.
How much does it cost to sell on Amazon? What are the marketplace fees?
Right now it costs around $40 or £40 per month to have a professional account, which gives you access not just to the marketplace but also to the advertising platform.
But there’s also a basic account that doesn’t have any fees but doesn’t give you access to the advertising platform. With a basic account, you still have access to the marketplace so you can list your products and make sales.
Here are some handy links to Seller fees and costs:
Seller fees UK: https://services.amazon.co.uk/services/sell-online/pricing.html
Seller fees US: https://services.amazon.com/selling/pricing.html
TIP: if you live elsewhere, just do a search online for ‘Amazon seller fees’.
What to sell on Amazon to make money? What are good products to sell?
This is a great question and the answer is actually simpler than you think.
The fact is that people need plenty of products day to day so I can tell you almost anything that would make a good product to sell on Amazon.
For example:
a comb
a toothbrush
a set of pens
So almost every product is a good product to sell.
But there is a process for selecting good products to sell on Amazon, because you need to take into account the strength of your competition. There may be a lot of competitors selling the same product that you’re trying to sell and they may be doing a better job of the packaging and branding, and even the price point, which means that you’ll have a harder time selling that particular product.
The most important question when doing product research is: can you make the product more attractive? Can you make a better job of selling it than your competition?
This doesn’t mean that you have to be a great salesperson. You don’t actually need any sales experience to become an Amazon seller; you just need to know how to study the competition and how to do a good job of presenting your product.
Here’s my process for how to find great products to sell on Amazon.
What are the best selling products on Amazon?
This is another good question. The good news is that Amazon actually make this information public. They tell you every month which are the best selling products.
All you need to do is search online for Amazon best sellers list and wherever you are in the world, you’ll get your local or your nearest Amazon website and you’ll be able to see on that website what the best selling products are.
Search for: amazon Best sellers
Can you sell used items on Amazon FBA?
Yes you can in some categories, although I haven't done so personally. The obvious advantage of selling new products is being able to create a brand around a product, whereas if you're selling used items, your inventory may change all the time.
Here's Amazon's UK page for 'selling your stuff on Amazon'
Do you need a website for Amazon FBA?
No, you don't need a website to start with. However, it's advisable to set yourself at least landing page and a domain name with email, for branding purposes and to look professional in your application to seller central to become a seller in Amazon's marketplace.
Can I sell books on Amazon FBA?
Amazon have a dedicated marketplace for self published authors and traditional authors, called KDP (Kindle Direct Publishing). You can sign up for a free account and uploads your books, making them available for sale.
How do I list a new product on Amazon FBA?
Log into your seller central account
Go to the Dashboard
Click on Inventory.
Click on Add A Product.
Click on Create A New Product Listing.
For step by step information on how to create a listing, check Amazon's guide
More Amazon FBA questions answered in this video...
Here's a video I recorded to answer over a dozen more common questions that people thinking about selling on Amazon ask:
What do you need to sell on Amazon and 13 other questions for those looking to start as FBA sellers...
Wrapping it up and more resources for you:
First of all, congratulations for making it this far! By now, you have amassed quite a bit of knowledge on how Amazon works. If your goal is to create a successful Amazon FBA home business, then it's starts here, by getting to know the basics.
To help you along the way, I will list below other resources, such as Amazon FBA tutorials and step by step guides that walk you through setting up your Amazon business the right way.