Selling on #Amazon 101

#Amazon is the largest online retailer in the world. Its market capital hit the 1 trillion dollar mark last September. With an annual revenue of almost 200 billion dollars and operations in United States, the United Kingdom and Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China, India, Mexico, Singapore, and Turkey, when it comes to selling goods, no one can and should ignore Amazon.

We started doing business with Amazon in 2014. It was not a planned action, however, turned out to be the major milestone in my career and the main cause for the birth of #CoffeeTalks. We sell through Amazon in the US and the UK and these sales constitute majority of our company’s total revenue. 

For a newcomer, and if not analysed in depth and planned thoroughly, starting business with Amazon can be a daunting and potentially a loss-making experience. In the last four-years of working with Amazon, we made many mistakes. But we took this as the price that we had to pay to learn a great way of doing business. Eventually, doing business with Amazon turned out to be an indispensable part of our sales portfolio.

One of the advantages of selling through an #onlineretailer is that it gives you the freedom of time and place. Basically, all you need is a connection to the Internet! This means that with a decent laptop, you can manage your business from wherever you are on the planet, whether it be your home office, a hotel room, a cafeteria, or even a beach as long as you can maintain your work discipline.

There are two main ways for selling through Amazon:

1. #AmazonSellerCentral: this is open to anyone who wants to sell their product in the biggest market place ever existed, unless of course, you are not trying to sell drugs, arms or any other dodgy stuff. Simply google Amazon Seller Central in your country, go to their landing page, complete the registration process and crack on listing your products. 

In its simplest form, you will need to manage the logistics part of the sales process if you are selling through Amazon Seller Centre. This means that, whether you are using a professional third-party fulfilment company (which is our case), or part of your garage and hand carrying your deliveries to the nearest post office or drop-off point, you will need to put in place the necessary infrastructure to keep your stock domestically and fulfil the orders that will come through Amazon.

There is an alternative way; a complete fulfilment service by Amazon itself, which serves not only the orders coming through Amazon Seller Centre but also the ones you receive through your other channels such as your own online shop if you have one. Thanks to their enormous size of operations that entails highly efficient processes from warehousing to pick & pack and shipment, #AmazonFBA (Fulfilment by Amazon) is usually cheaper than hiring another third-party fulfilment company and offers other advantages such as a higher position on the Amazon listing page. To find out how much you can save by using the Amazon FBA service, google “Amazon FBA calculator”, This will link you to a very useful tool that will help you compare your prospective profit by using FBA as to the other means of fulfilment for a certain product. 

Whether you use the Amazon FBA service or manage your fulfilment requirements elsewhere, Amazon will charge you a referral fee for each item you sell through them. The referral fee changes according to the category your product belongs to (for instance, 8% for consumer electronics and 15% for kitchen appliances).

2. #AmazonVendorCentral: Although we have been selling through Amazon by making use of all their business models, Amazon Vendor Central has always been our favourite and the biggest income generator from Amazon.

The first time we came across with Amazon Vendor Central was in early 2014, while exhibiting at an exhibition in London, with the hope of finding a brick and mortar retailer to sell our coffee machines through. At one point, we were approached by a vendor manager from Amazon who asked us if we would be interested in selling “to” Amazon. We didn’t have the full conversation, she left her card and walked away.

After the exhibition, we continued our communication with the same vendor manager. She sent us the instructions to create our Vendor Central account. After that, we were pretty much on our own. 

The Vendor Central has a very rich library of documents, basically about everything, from how to submit products to purchase order management, fulfilment and invoicing, that one need to know to work with them. I would strongly advise the newcomers to make time for reading these documents thoroughly. Every mistake, and we made lots of them especially in the beginning, is charged back to you by Amazon in some form. 

Amazon Vendor Central is an invite-only business model, which means you should get the attention of Amazon in some way.

The main difference between Vendor Central and Seller Central is that, in the former model you sell to “Amazon” itself, not to the end customer. The product is listed at the very top and presented as, “sold and dispatched by Amazon”. You negotiate a wholesale price to Amazon and set a recommended retail price for them. Most of the time, they respect your recommended price and do not deviate much from it. But, the bottom-line is, they are free in setting whatever retail price they want to, which sometimes can be annoying for the seller.

With the Vendor Central model, Amazon makes money from the difference between their sales price and their purchase from you, like a traditional retailer. But, be aware that they also charge you various fees on monthly basis, such as for marketing, returns and logistics, based on the pre-agreed terms and volume you ship to them in each preceding month. Amazon negotiates these terms separately with each vendor. All in all, you have to take into account not only your sales price, but also all the rebates that will come later from Amazon, to calculate your net profitability. 

Above is a very broad introduction to selling through Amazon. If you would like to know more, you can contact me on alp@coffeetalks.co.uk. Obviously, we too, are still learning, but I will be glad to help you to get on board the Amazon business as much as I can.