How to Start an Amazon Business If you are Just a Beginner
Amazon is the largest third-party marketplace for buying goods online. In 2020, more than 200 thousand new sellers joined the marketplace. These sellers make up the majority of the market.
As a new seller, you might think this makes Amazon too competitive. But, despite the competition, new sellers can easily start up their own successful business on Amazon. Some are even starting from home and seeing the benefits of quitting their day job.
Whether you are a seasoned online seller or a beginner (and are thinking about quitting your job), selling on Amazon can present great opportunities for making money. By following the tips outlined in this article, you can make the most of this opportunity and find out how to start an Amazon business.
Table of contents
The Four Basic Amazon Business Models
There are four popular business models you can choose from as a new seller:
Online or retail arbitrage
Private label selling
So, what's the best business model for you to choose? That depends on your budget. Below, we'll break down the pros and cons of each model.
Retail or Online Arbitrage
Arbitrage is finding discounted products online or through physical retail and reselling them for a profit. Sellers can use the Amazon seller's app on their smartphone to look up products and easily find out whether they can make a short-term profit.
Arbitrage is a great way to start with little money available. You can learn many selling basics by using an online or retail arbitrage strategy. Consider it a practice run for a bigger business.
Budget: $100-500 in startup costs
You don’t need to invest a lot to get started
You don’t need to worry about advertising or promotion
It lets you earn quick money as compared to other business models
Requires a large time investment
You’ll have to compete with other buyers to find products at the store
Reliant upon the existence of other marketplaces
Dropshipping is when you give 100% of your product management to a third-party company. The company manages your inventory, shipments, and storage. The only thing you need to handle is making sales. Many dropshipping suppliers let you start for free. But, after the free period ends, keeping those supplies requires you to pay in order to continue using their services.
A similar model to dropshipping is print-on-demand, which you can do directly through the website with Merch By Amazon. This lets you create or upload unique designs you can add to t-shirts, mugs, and other products. Regardless of how you dropship, this is one of the least expensive opportunities on this list.
Budget: $0 to start (monthly costs may vary depending on your supplier)
You don’t need to manage anyinventory or shipments
You can start with no money in many cases
There are many suppliers available
You have little control over the quality of your products
There are usually incredibly small profit margins
You have to share the product listing with other sellers (making it more competitive)
Wholesale is when you buy products in bulk from known brands. Then you resell these products without the bulk discount to make money.
Wholesale companies are already well known, so you have to work less to get recognition. However, ordering these products in bulk means you have to pay more. So, you still have to work hard to compete.
Budget: $1,000 or more
You don’t have to market as hard for product awareness
Wholesalers sometimes provide you with resources to help with marketing
There is some solid profit margin potential if you purchase large quantities of stock
You often need approval from the brand seller
It requires a high upfront investment
Other wholesalers can also provide the same product
Private Label Products
Private label sellers buy products from third-party manufacturers and put their unique brand names on them. These brand sellers can take a product idea to fruition, often trademarking it to prevent other sellers from entering the market.
Sellers typically improve upon the designs of existing products. So, you don't have to reinvent the wheel, and you can purchase premade bulk products through private label sites, like Alibaba.
Budget: $3000 or more
Loyal customers can come back and recognize your brand name (after some work)
You don’t share the product listing, so it’s less competitive when customers get to your listing
Brand building puts you in a great position to sell accompanying products
The start-up costs can be pretty expensive
Negotiating with manufacturers requires a lot of work
You need to spend more on marketing to promote your product
The Four-Step Process to Starting an Amazon FBA Business (that's Actually Successful)
1. Product Research
There are over 25 thousand product categories on Amazon, and you can find sellers in each. But whether they sell beauty products or jewelry, the best sellers in those categories focus on research.
When starting your own business, research is incredibly important. Here are some tips when choosing products:
Instructions on how to choose the best product on Amazon (depending on your model)
Regardless of the category you choose, there is shared criteria among almost all successful products.
Product price between $15-100. Amazon FBA sellers must factor in paying fees for each sale. To ensure that costs don't eat up all of your profit, pick a product priced high enough to earn, but not so high that it doesn't move quickly. These prices apply to all models, but some might focus more on demand.
In-demand. Find products that generate at least 300 sales per month. These products are in-demand, but are low enough that they might not attract more competitive sellers.
Choose small/lightweight items. Lighter and smaller items have low shipping costs. Try to find products that weigh three pounds or less if you are just starting. This applies to all business models. This includes products like books, clothes, or plastic clips. If the delivery costs are cheap, the cost savings go to you.
Low competition. With private-label products, focus on subcategories with less reviews. A soft rule to follow is to stick with categories that have less than 100 reviews per product, but you might need to tweak this depending on your goals or selling model. Wholesalers, dropshippers, and arbitrage sellers should look for more reviews, which indicate popular products.
Few sellers. In dropshipping, arbitrage, or wholesale, it’s best to seek out products with a lower number of sellers. More than 20 sellers means you’ll have too much competition, and less than two sellers might mean not enough sales, having no other sellers means it isn’t a private label product (and is controlled by one person). Private label sellers don't need to worry about this as much, as they don't share their listings with others. PL sellers should still know how many sellers are in a general niche.
Be aware of gated products. These require additional licenses, certifications, or ownership in order to sell. AMZScout’s Dropshipping, Arbitrage, and Wholesale tool can help you identify which products have these limitations. This applies to all business models.
Be aware of seasonal products. When you’re first starting out, you’ll want to sell an item that is actively being sold, and not slow in the current season. Using historical sales data from AMZScout, you can find these moving products more easily. This applies to all business models.
Get niche ideas using the AMZScout Product Database
You can search for product ideas on Amazon, Etsy, eBay, social media, Shopify eCommerce sites, blogs, influencer pages, and farmer's markets, but this takes time.
The AMZScout Product Database streamlines your research by following these steps:
1. Go to the AMZScout Product Database.
2. Log in to your AMZScout seller account.
3. Set your product criteria. The search filters help you find your criteria. You can also use the ready-made options from the Product Selections tool for more proven results.
4. Get the results. Click Find Products to populate your results.
5. Choose your products. Pick products based on what you are most passionate about.
The Product Database provides a simple list of potential items to sell. You can use it with the next tool to find out the profitability of the items on your list and all potential products.
Find the profitability of products and niches with the AMZScout PRO Extension
The AMZScout PRO Extension will let you know how profitable a product or niche is, helping you determine whether it's worth selling.
1. Start by installing the AMZScout RPO Extension.
2. Open AMZScout PRO Extension.
Amazon.com will automatically open. From there, you can search based on what you found in the Product Database.
Click the AMZScout icon in the top-right corner to open the Extension. If you haven't already, you'll be prompted to create a free account.
3. Examine product/niche profitability. The top of the screen shows essential product information (like the net margin, estimated sales, and revenue) in a table.
4. Determine niche demand. Click Niche Score to view a market analysis for the niche.
5. Examine the demand. The Niche History lets you see historical data and how it fluctuates based on the season.
6. Analyze the product's potential. The Product Score can be found next to individual items, showing their demand, competition, profitability, and other important factors.
Using both tools, you'll have a comprehensive data set to better select a product. Next, you'll need to find someone who provides these products.
2. Finding Suppliers and Sourcing Products (Complete Guide)
After you create a list of products, you can start to find providers of those products. How you do this depends on your strategy.
Wholesalers need to contact known wholesale distributors to find the right fit. You'll negotiate with them on the best deal for both of you. The difficult part here is that wholesalers are often picky with their sellers, so newbies must provide a business plan, increasing their odds of success.
Dropshipping suppliers exist online, meaning you can do a simple Google search. Many big-name dropshipping suppliers (like Modalyst) have proven records. However, if you’re using a smaller provider, check their reputation online before using their services.
Online and retail arbitrage specialists don't always work with suppliers. However, some online arbitrage specialists resell products from Alibaba. Retail arbitrage specialists get supplies from locations they can drive to (like stores having a massive sale).
With private label sellers, you have two choices: finding a local manufacturer or seeking out private label manufacturers online. One option is to use the largest private label manufacturing site where you can import goods overseas: Alibaba.
Finding suppliers on Alibaba
Alibaba is an excellent site for finding inexpensive, high-quality manufacturers. It also integrates directly with AMZScout, making it a natural fit.
Here are a few ways you can find suppliers using AMZScout:
1. Search for products on the AMZScout PRO Extension.
2. Click on the PRO Extension's Find on Alibaba button.
3. From Alibaba.com, click Contact Supplier and start chatting with them about how you can buy their product.
Alibaba's full website will also let you find private-label products. The built-in search engine enables you to find manufacturers based on location (between like China and India), cost, and product sales.
What to do after finding a potential supplier
You don't want to jump straight to selling if you've found a few good potential suppliers. Instead, your goal should be to get the best possible rate.
You'll have a cross-section of how much your manufacturing should cost by talking with multiple suppliers. A rate comparison will give you some leverage while speaking to the manufacturer, providing you with footing when asking for a better bulk rate.
To get the best possible rate, you'll want to research the materials and manufacturing process.
The manufacturer should break down the materials they use in the description. Ideally, they should also provide you with a view of the factory (or already have one on the manufacturing listing). If the manufacturer is unwilling to share details about their process, that's a sign they aren't transparent, which might lead to problems.
Once you narrow down your options based on rate and willingness to work with you, order a sample from them. You'll have to pay for this sample, but your goal is to find a manufacturer that makes the best quality product.
A sample should survive overseas shipping, last through regular use, be safe to use, and maintain its appearance throughout. After using these products for a bit, you can be more confident that you've found a good manufacturer.
Shipping your products to an Amazon fulfillment center (only necessary for FBA sellers)
If you want to be an FBA seller, your next step is to send it to a nearby fulfillment center. Fulfillment centers are where Amazon handles the goods for you (or, they are fulfilled by Amazon). That way, you can focus more on marketing and product research.
FBA sellers have incredible advantages over non-FBA sellers (also known as FBM sellers). Typically, they get faster shipping, higher sales, and more visibility on Amazon. You'll just have to pay extra for the FBA fees.
Alternatively, if you want to choose to be a "fulfillment by merchant" seller, or one who does it themselves, you'll have to contend with storage, fulfillment, and hiring extra staff to handle those duties. The rental of a storage facility or warehouse can get expensive.
This brings us to a new aspect of picking your supplier: finding someone who knows Amazon. Fulfillment centers have detailed requirements. By having a supplier who knows their stuff, you won't have shipping delays and the potential of returned goods because Amazon can't approve them.
3. Creating an Amazon Seller Account
Step three could technically be step one or two. But it's important to know what you are selling before you start an account to sell it. Creating an Amazon account is pretty simple but also detailed.
To get started, sign up for an Amazon.com account. If you want, you can use your shopping account to get started.
Next, you'll fill out some basic information about yourself. You can connect this to your business entity if you want, but Amazon doesn't require you to have a business to become a seller.
What documents do you need?
Amazon requires you to provide a current photo ID, a payment card to make payments, and a way to connect to your bank to receive payments. You might need to provide Amazon with a copy of your latest bank statement during this step.
Amazon will require you to commit to two extra steps as well. The first is a video interview where you'll be asked to provide your photo ID and (possibly) a bank statement again.
Next, you'll receive a postcard with a code that confirms your physical address. But entering that code from your incomplete seller's account will let you verify your account.
At this point, you can begin to sell using one of two plans:
The individual plan. This costs nothing monthly, but requires $0.99 per sold unit. You also get less access to Amazon's advertising tools. It's fine for personal selling, but not as great at the professional level.
The professional plan. This costs $39.99 in monthly fees and requires no $0.99 product sales fee. You can access more advanced selling tools and unique Amazon programs (like Handmade or Launchpad).
If you sell more than 40 products, the professional plan is better. Otherwise, you can test it out for a month to see if you like the extra tools.
Once you pick your plan and finalize your account, you can begin to list your products.
4. Creating and Optimizing Product Listings
Creating your first listing can be an exciting step in your new business venture. But you'll want to do it right and not get ahead of yourself because of your excitement.
You don’t need to worry about this step if you are selling an existing product. Private label sellers always need to do this, while others might not need to.
Making the best product listing is called "listing optimization." This is just fancy terminology that means "making your listing better."
The basics, like high-quality product photographs, compelling titles, and correct grammar, are all essential. But, the other part of your optimization process is keyword research and implementation.
Keywords are what your target customer types into Amazon to find your product. While the built-in PPC tool for Amazon can help you with some keywords, it isn't built to optimize. This is mainly because Amazon doesn't provide data about how other sellers do it.
You can use AMZScout's Keyword Search and Reverse ASIN Lookup Tool to get this data and find out what your competitors are doing. Here's how you can get started:
1. Find the ASIN (Amazon Standard Identification Number) on your competitor's product page
2. Enter the ASIN in the search bar of the Reverse ASIN Lookup.
3. Specify how many words you want in your keyword. You can also leave this blank if you want all keyword lengths.
4. Select how much you want your search volume to be. You might want to target high or low-competition options.
5. View your keyword results.
Longer keywords, otherwise known as long-tail keywords, are usually better when describing your product. This is because the more words your keywords contain, the more detail they include. This is known as "keyword relevancy," which means your chosen keyword connects very well with the product you sell.
Long-tail keywords also have lower levels of competition because fewer sellers have that specific product description. They also include short-tail keywords that are one or two words, giving you dual-keyword ranking potential.
You'll also want to go through the complete listing optimization process found in this guide.
Taking inspiration from your competition
If you want to write the product listing, you'll want to take inspiration from your competitors. To do this, gather your competitor’s listings and see how they describe their products in order to reach top sales numbers.
For additional tips, you can use the Amazon Movers & Shakers sellers. These sellers might not always include the top brands, but have newer sellers with fast-moving products.
For example, look at this product listing for a cord organizer for inspiration. Currently, it's #2 on the Movers & Shakers list.
Here's what it does well:
Includes multiple keywords in the title
Uses product variation
Shows an image of the product and how to use it in the following images
Provides further reasons to buy it in the bullet points (and confirms what you get in the package)
Includes additional details and more high-quality images below
There are also some aspects they can improve on:
Title is overstuffed with keywords and doesn't look professional
Lack of consistency in their handle the bullet points
Typos are present throughout the listing
There is no brand name, so it won't retain customers well
Product listings like these offer a valuable lesson, and this product isn’t likely to last very long, based on the seller’s lack of attention to detail. But you can still take inspiration from this and other listings to make yours work well.
If you want, you can hire a freelancer to write it for you. Check out their previous work and blog to verify if they write well.
Conclusion - Is it Worth it to Start an Amazon Business?
With the right mindset and guidance, anyone can become a successful Amazon seller. But, if you need confirmation of its worth, here's a short list of reasons:
Solid profits. If you find the right product, you can make good money selling on Amazon.
Access to Amazon's customers: Amazon has over 150 million Prime accounts. This helps FBA sellers reach a massive market of potential buyers. Your products might even be delivered on the same day through an Amazon Flex courier.
No marketing experience is required. Amazon provides the traffic; you just need to point it in the right direction. You don't need any expertise to get started.
You can automate it. Amazon has several automated tools that can notify you of inventory shortages, reprice your products for competitiveness, help with bookkeeping, and manage the process using software. At the same time, you can focus on growing your business.
Regardless of your business model, you're sure to find great opportunities for profits. Use AMZScout's kit of tools to simplify your product research and selling strategy to give yourself a chance at business growth.