How to start an ecommerce business on Amazon?—A most sought-after question in this online business era. In today’s digital age, launching an ecommerce business has become a compelling avenue for aspiring entrepreneurs, and Amazon stands out as one of the premier platforms to make this dream a reality. With its vast customer base, robust infrastructure, and unparalleled reach, Amazon provides an incredible opportunity to tap into the global marketplace.
Whether you’re looking to supplement your income, pursue a passion project, or build a full-fledged enterprise, launching an e-commerce business on Amazon can be your gateway to a thriving online store. In this blog, we’ll walk you through the essential steps to get started, from setting up your account to scaling your operations. Stay tuned to unlock the secrets of successful selling on Amazon and turn your entrepreneurial dreams into reality.
Let’s dive in and learn how to start an ecommerce business on Amazon!
What Is E-Commerce Business?
The question may seem a bit childish to some of you, but trust us when we say this: it’s needed to make the whole blog more comprehensive for the readers.
E-commerce, or electronic commerce, involves trading goods and services online, functioning like a virtual city center or marketplace accessible via computers, tablets, and smartphones. Today, around 2.14 billion people worldwide engage in online shopping, with platforms like Amazon boasting over 200 million Prime members.
An e-commerce business can range from selling software and apparel to home goods and services, operating either solely online or in combination with physical stores. This digital approach allows businesses of all sizes to scale and reach a global customer base, with the USA and the UK at the forefront of the expanding market.
Amazon Marketplace
In this section, let’s explore a short briefing on Amazon—the brainchild of Jeff Bezos.
Amazon’s journey from a simple online bookstore in Jeff Bezos’s garage in 1994 to a global e-commerce titan is truly astounding. Starting off with selling books, it quickly captured markets across all 50 states and 45 countries, raking in $20,000 in weekly sales just a month after launching.
Though Amazon briefly dabbled in auctions in 1999 without much success, it didn’t stop there. It continued to innovate, notably being the first to offer third-party product liability protection—also holds a commanding position in the market, generating $278.50 billion from third-party sales in the year 2023.
Now, with an impressive market value of US $1.55 trillion and attracting 2.4 billion visitors in May 2022 alone, Amazon’s relentless focus on innovation and customer satisfaction solidifies its position as a dominant force in e-commerce.
Amazon’s Fulfillment Options
Amazon offers a variety of fulfillment options to meet different seller needs. Understanding these options can help you decide the best way to manage inventory and deliver your products to customers efficiently.
- Fulfillment by Amazon (FBA): Send your inventory to Amazon’s warehouse, which handles storage, packing, shipping, customer service, and returns. This option is ideal for sellers who prefer to focus on scaling their business rather than handling logistics.
- Fulfillment by Merchant (FBM): You maintain control over your stock and are responsible for packing and shipping orders directly to customers. This method suits sellers who have existing fulfillment processes or sell products that require special handling.
- Seller Fulfilled Prime (SFP): This option allows you to display the Prime badge on your listings while fulfilling orders from your own warehouse or preferred third-party logistics provider. To qualify, sellers must meet Amazon’s high delivery performance standards.
Each of these options has its advantages, depending on your business model, product type, and operational capabilities. Choosing the right fulfillment method is crucial for optimizing your operations and providing excellent customer service.
Why Amazon?
Starting an e-commerce business on Amazon can offer you unique advantages that can help accelerate your business forward. Amazon isn’t just a marketplace; it’s a launchpad for new businesses seeking rapid growth and wide exposure. Here’s why choosing Amazon could be a game-changer for your e-commerce venture:
Access Purchase-Ready Customers
Amazon hosts a huge base of customers who already know what they want to buy.
Established Trust
As a worldwide trusted name, Amazon lets you capitalize on its credibility to soothe any customer trust concerns.
Rapid Growth
In 2021, small and medium-sized businesses in the U.S. using Amazon’s platform achieved international sales exceeding $2 billion, exporting more than 225 million products. Additionally, Amazon customers bought about 3.9 billion products throughout the year, which averages to around 7,500 items every minute.
Fulfillment by Amazon (FBA)
Amazon’s FBA service handles the storage, packaging, and shipping for you, simplifying these complex e-commerce operations.
Visibility Boost
The vast search and recommendation system on Amazon can greatly enhance your product’s visibility and possibly increase sales.
Determine Your Selling Strategy
As a newcomer to Amazon, understanding the different business models is quite important. Each model offers unique benefits and requires specific considerations, helping you choose the best fit for your goals and resources. Here are the most prevalent Amazon business models:
Private Label Products
Sellers under this model source products from manufacturers, rebranding them with their own labels. This allows sellers to establish and protect their brand, potentially patenting their product to exclude competition.
Wholesale
This model involves purchasing products in bulk from well-known brands and reselling them at a marked-up price to make a profit.
Dropshipping
In this model, sellers list products without maintaining inventory. A third-party handles the goods, storage, and shipping, while the seller acts as an intermediary between the supplier and customer.
Retail or Online Arbitrage
This approach involves purchasing products at a discount from online or brick-and-mortar retailers and reselling them on Amazon for a profit. Sellers use the Amazon Seller app to identify profitable opportunities.
Requirements and Considerations Before Starting an E-commerce Business on Amazon
Before diving into an e-commerce business on Amazon, it’s essential to lay the groundwork properly and consider pre-preparations that are unavoidable. Here are key requirements and considerations that you shouldn’t take lightly:
- Business Formation: Set up your business legally. Decide on the structure of your business; whether it will be a sole proprietorship, partnership, limited liability company (LLC), or corporation—in case of US formation. You can also choose the UK, or UAE company formation. This affects your liability and taxes.
- Setting Up a Bank Account: Open a business bank account to keep your personal and business finances separate and manage your transactions professionally. It’s an important requirement that you must consider before going for an e-commerce business on Amazon.
- Legal Requirements: Ensure compliance with all legal standards, including obtaining necessary permits and licenses (e.g. Resale Certificate, Lease Agreement, etc.). You must adhere to local, state, and federal regulations relevant to online businesses.
- Tax Consideration: Understand the tax obligations associated with running an e-commerce business. This includes sales tax collection and remittance, and understanding how business taxes work for your chosen structure. And, of course, be aware of required government-issued national or tax ID numbers (e.g. SSN, EIN, ITIN, UTR, etc.).
- Business Planning & Product Selection: Develop a comprehensive business plan that outlines your business goals, target market, and detailed strategies for marketing and logistics. Choose products that have a proven market demand, are feasible to sell within Amazon’s guidelines, and align with your business capabilities and goals.
- Other Requirements: The other requirements you will need to consider before starting your Amazon business: a valid phone number, internationally chargeable credit card, registered agent, registered office address, etc.
Setting up an Amazon e-commerce business requires careful planning and attention to detail to ensure success and profitability.
How to Start an Ecommerce Business on Amazon
Starting an e-commerce business on Amazon is an exciting venture that can rapidly scale. Here are a few steps for you to learn how to dive into selling with Amazon US FBA:
Step 1: Research and Validate Your Business Idea to Identify Workable Products
What issue are you addressing, and who will be most interested in your solution? Not all ideas, even innovative ones, succeed without a solid customer base. To refine your product ideas, consider these prompts:
- What common issues do people encounter in your industry?
- Why do these problems exist?
- Which products could you offer to solve these issues?
- What recent trends could you leverage?
- What hobbies do you enjoy, and what products could enhance those activities?
These questions can help you identify a product that people will want to buy.
Now, some suggestions for this step:
Suggestion 1: Look for Ways to Enhance an Existing Product.
Read customer reviews to identify common issues with competitor products. Research costs to address these problems. For instance, market shatterproof glasses as both attractive and durable alternatives to traditional glassware prone to breakage.
Suggestion 2: Ask Possible Customers What Makes Them Annoyed or Upset.
Ask friends or a small group about problems with products they use, and how they handle these challenges. Offer to meet for coffee in exchange for their feedback on whether this issue is significant enough to spend money on a solution, focusing on their current solutions rather than proposing your product. This can help assess if there’s a market for your idea.
Suggestion 3: Identify opportunities through competitor analysis.
Before launching your e-commerce store, assess competitors by browsing Amazon for product categories that interest you. Focus on product features, pricing, customer reviews, and more to increase your chances of success.
Suggestion 4: Work with a Manufacturer
Finding the right manufacturer requires time and investment but is essential for those looking to establish a brand. Evaluate potential manufacturers by requesting samples, then select the best by testing small batches for quality and responsiveness. Also, consider having a backup supplier to mitigate any supply chain disruptions.
Step 3: Selecting an E-commerce Platform
Starting small on established sites like Facebook or your own website is advisable for new e-commerce sellers. You can enhance or switch platforms as your business grows, tailoring each to fit your capabilities and customer reach.
Suggestions in this step are:
Suggestion 1: Leverage Established E-commerce Platforms
By selling on established websites, you can tap into their existing traffic, gain insights from successful sellers, secure early reviews, and generate initial revenue without the upfront cost of your own site.
Suggestion 2: Embrace Social Selling
Social selling lets you interact with customers live, providing a dynamic shopping experience. Platforms like Amazon Live allow real-time engagement, where you can showcase products, answer questions, and offer tailored recommendations, strengthening customer relationships.
Suggestion 3: Selling in Amazon Stores
Amazon’s global reach encompasses over 300 million customers, providing a robust channel for both new and established businesses. Benefits of using Amazon include:
Speed: Quickly launch your store with minimal setup required.
Scalability and Efficiency: Leverage Amazon’s extensive infrastructure to focus on creating and selling products without needing to tackle every business challenge.
Global Reach: Your products can potentially reach audiences in over 100 countries.
Comprehensive E-commerce Support: Benefit from Amazon’s tools for payment processing, reviews, promotions, and A/B testing at scale.
SEO Advantages: Amazon’s product pages are optimized for search engines, helping your products rank well for relevant searches.
Market Presence: Amazon is a primary destination for product searches, making it an ideal platform for visibility.
Step 4: Launch Your Online Store and Populate with Products
Once you’ve pinpointed your products and identified your target market, it’s time to establish your online presence and start selling.
Suggestion 1: Setting Up Your Amazon Storefront
With the Amazon Stores builder, you can create a free, customized e-commerce storefront that delivers a smooth customer experience from browsing to payment. Brand owners can enhance their stores by enrolling in the Brand Registry, allowing them to utilize tools like A+ Content for enriched shopping experiences with lifestyle images, video content, and more.
Suggestion 2: Crafting Competitive Product Listings
List products individually with an Amazon Individual seller account or use a Professional account to bulk upload using the Inventory Loader template. This template fills in product specifics from existing ASINs, simplifying the listing process. Ensure product descriptions are complete and engaging, providing all necessary details for customers to make informed purchases. Accurate and compelling descriptions reduce returns and build your credibility.
Step 5: Boosting Your Business Through Strategic Marketing
Leveraging a variety of e-commerce marketing strategies can significantly enhance your business’s reach and growth. Implementing targeted marketing and promotional campaigns is essential for expanding your audience across different sales channels.
The array of promotional channels available can seem daunting. Here’s a concise overview of the marketing options at your disposal for e-commerce endeavors.
Now the suggestions:
Suggestion 1: Boosting Your Online Store’s Visibility on Amazon
Amazon store owners can amplify their presence with various advertising strategies. Sponsored products and brands enhance visibility directly on Amazon’s product pages and search results, reaching its vast audience. Lightning deals and coupons can accelerate sales and increase brand awareness, while strategic advertising can spike reviews and attract more buyers.
Suggestion 2: Social Media Strategy for Marketing
Consider if your target audience uses social media. Enhance brand visibility by integrating social media into your marketing. Develop a comprehensive strategy to engage users, collaborate with influencers, and share impactful content, starting with a solid plan for success.
Legal and Tax Considerations
Handling legal and tax obligations is quite important when starting an e-commerce business on Amazon. Here’s what you need to know:
- Legal Requirements: Ensure compliance with laws related to e-commerce, including consumer protection, data privacy, and intellectual property rights. Adhere to Amazon’s policies and guidelines to maintain your seller account in good standing.
- Tax Obligations: Understanding sales tax obligations is vital. If you’re using Amazon’s FBA service, Amazon may collect and remit sales tax for you, but you’re still responsible for accurate reporting. Register with state tax authorities where you have a tax nexus, typically triggered by physical presence or sales volume.
- Income Tax: Separate from sales tax, income tax is based on your profits and is payable to federal and possibly state governments. Utilize Amazon’s 1099-K form for sales over $600 to aid in accurate tax reporting.
Staying informed and compliant with these legal and tax considerations helps ensure your Amazon venture operates smoothly and remains financially sound.
Overwhelmed? Business Globalizer Is Here to Help!
If the whole process of starting an e-commerce business on Amazon seems to be overwhelming to you, it’s okay. Business Globalizer offers premium business consulting for you. Book an appointment and grasp everything about Amazon’s business easily.
Then we have specially tailored Amazon seller account approval service beside other marketplaces. If you don’t have a legal structure to start with—as it’s mandatory—we also offer company formation services in the US, UK, and UAE for now.
FAQ
Q1: Which One Is the Richest Marketplace in E-commerce?
Answer: Amazon holds the top position with a market value of US$1.55 trillion. Despite a challenging 2022, where its value dropped to US$869.7 billion, Amazon almost doubled its market value within a year, significantly outpacing its competitors in China.
Q2: What Are the Initial Steps to Start Selling on Amazon?
Answer: Begin by researching and validating your business idea. Next, source your products, choose an e-commerce platform like Amazon, set up your online store, and implement strategic marketing to promote your products.
Q3: What Are Amazon’s Fulfillment Options?
Answer: Amazon offers several fulfillment options including Fulfillment by Amazon (FBA), where Amazon handles storage, packing, and shipping; Fulfillment by Merchant (FBM), where you manage shipping and customer service; and Seller Fulfilled Prime (SFP), which allows sellers to display the Prime badge while fulfilling orders themselves.
Q4: How Can I Choose the Right Business Model for Selling on Amazon?
Answer: Evaluate the different models such as private labeling, wholesale, dropshipping, and retail or online arbitrage to determine which aligns best with your resources and goals. Consider factors like control over branding, capital requirements, and operational complexity.
Q5: What Are the Advantages of Using Amazon’s Fulfillment by Amazon (FBA) Service?
Answer: FBA simplifies logistics by handling storage, packaging, and shipping. It also offers the benefit of Amazon’s customer service and returns management, which can help scale your business efficiently.
Q6: How Do I Ensure My Product Listings Are Competitive on Amazon
Answer: Focus on crafting detailed and compelling product descriptions, utilize high-quality images, and ensure your listings are optimized for Amazon’s search algorithms. Also, consider using Amazon’s advertising tools to enhance visibility.
Q7: What Are Some Effective Marketing Strategies for an Amazon E-Commerce Business?
Answer: Leverage Amazon’s internal tools like sponsored products and brands for visibility. Additionally, use social media to engage with customers and influencers, run promotions, and implement email marketing campaigns to build customer loyalty and increase sales.
Q8: What Is Sales Tax Nexus?
Answer: Sales tax nexus refers to the specific relationship a business has with a state or local government that requires it to collect and pay sales tax. It represents the level of activity a business needs within a state before it must start collecting and submitting sales tax there.
Q9: How Much Does a Typical Amazon Seller Make?
Answer: Amazon reports that in 2022, sellers based in the U.S. averaged sales over $230,000. This average includes a range of sellers, from small, part-time individuals to large corporations that use Amazon as a significant sales platform.
Q10: What Is SFP or Seller Fulfilled Prime?
Anwser: Seller Fulfilled Prime lets you ship directly to domestic Prime customers from your own warehouse. By showing the Prime badge on your products, you agree to fulfill orders with one-day and two-day shipping at no extra cost to Prime members.
Final Words
That’s it. We are at the end of our blog on how to start an e-commerce business on Amazon. Embarking on your Amazon e-commerce journey opens the door to a world of opportunities. By following the steps laid out in this guide, you’re well on your way to transforming your ideas into a thriving online business.
Whether you’re crafting unique products or leveraging proven sellers, your path to success starts here. Ready to take the plunge and see where your entrepreneurial spirit can take you? Dive into the exciting world of Amazon today and start building your e-commerce empire. Let your journey to success begin now!
