I have very little experience selling in other marketplaces, so I can’t comment too much on their effectiveness. However, there are some clear distinctions and advantages that selling on Amazon provides. If you are new to online selling, it is good to understand all of the marketplaces so you can see firsthand how Amazon has changed the game.
There are several options in terms of marketplaces for online sellers to list inventory. The retail flipping model is successful across all marketplaces, but only Amazon creates such a lucrative opportunity and here’s why:
# The Brand Amazon
eBay was once the big shot in the online selling game, but Amazon has since taken over. Don’t get me wrong, eBay is good for certain things such as selling hard to find items, vintage collections, and memorabilia. However, when it comes to brand image, Amazon instills the most confidence in buyers with their customer service based culture. Although both marketplaces allow third-party sellers to list and sell their items, Amazon’s emphasis on customer satisfaction to strengthen their brand has helped them become the premier online marketplace.
# Premium Price
Backed by their superior brand, sellers on Amazon can expect to earn higher profits because customers are willing to pay more for the Amazon experience. I’ve even seen several professional sellers profit by purchasing items off eBay and reselling on Amazon. You do not want to position yourself in a marketplace where you won’t earn top dollar. This means that those eBay sellers aren’t achieving the full profit of their arbitrage.
# Search Engine Optimized
While some buyers peruse the Internet, most people that intend to make a purchase know exactly what product they seek. They will Google the item they seek and go with the first listing that provides that product. Amazon realized the power behind being first in the search rankings, and have designed their website so these search engines favor their listings. Therefore, by selling your items on Amazon, you gain the most exposure possible. You will not have to spend one cent on marketing, ever.
*Recently, according to Forrester Research, Amazon has surpassed Google to become the number one starting point for online shoppers when looking for an item.
So not only will your product listings show up first in Google, but shoppers are now more apt to start their shopping search from within Amazon itself. No wonder their stock price has skyrocketed with a current valuation in the $200 range.
# Unlimited Growth Potential for your Business
“Their fulfillment service called Fulfillment by Amazon (FBA) is where the magic happens.”
Fulfillment by Amazon is a new service offered by Amazon and has instantly become their competitive advantage as an online marketplace, and using FBA will become your competitive advantage over other third-party sellers. FBA is an all-inclusive fulfillment service that works in unison with your Amazon seller account. You send them your entire inventory, they store and manage your inventory, and then they will ship your inventory to buyers when something is purchased, all on your behalf – all you have to do is send Amazon all of your products.
By utilizing this service, Amazon is now much more than just your online marketplace. They become your entire business – your warehouse, fulfillment house, customer service, and insurance plan. Let’s go through a quick case study approach to what Amazon’s FBA program can do for your business before we break down the specifics.
# Hypothetical Example
You make your first sale! Amazon notifies you that customer “xyz” has placed the order and payment is confirmed. You box up your item, print off the shipping label, and take it to post office the following day. Congrats, you’ve made your first sale!
Six weeks later, you’re selling 15 items a day on average. You have to box up, print shipping labels, and deliver all 15 items to the post office. Doable? Yes. But what happens when you hit 30 items a day, 50, 100? You become handcuffed by your own business.
There’s not enough time in the day to do all this and you have to hire help. Or you decide to take it on yourself, but that leaves no one to hit the retail stores looking for new inventory. Not only that, but you’re dealing with returns now. You start receiving negative customer feedback because something was damaged. You’re overworked and it’s your own business!
Using Fulfillment by Amazon (FBA) eliminates most headaches that online sellers once faced, and allows them to focus on the important step in the three-step formula in the coming chapter, which is finding profitable inventory to sell.
# The FBA Process
By opting into FBA, you are making the conscious choice to allow Amazon to handle all of your orders, rather than yourself.
- You send your entire inventory to one of Amazon’s warehouses where they will check each item in.
- Once they’ve checked in your items, the items become available for sale on the Amazon marketplace.
- Once an item sells, Amazon fulfills the order – they process the transaction, pick and pack the item, and ship out to your customer.
- They also become your dedicated customer service center for any returns, refunds, and customer feedback.
This entire process is handled by Amazon, but managed by you when you sign into your seller account. You make all of the business decisions such as pricing your inventory, adding product descriptions, and important aspects that should be left to you. FBA will simply do all the grunt work, leaving you with time to monitor all the business decisions that ultimately affect your profit margin.
# Benefits of FBA
We’ve touched on the basics of FBA and the important takeaways. There is a lot more behind to Amazon’s Fulfillment program, but as long as you understand what it is and how it benefits your business, you’re on your way to become a profitable seller on Amazon.
Let’s quickly look at the two main benefits of enlisting in Amazon’s FBA service.
1 Saves Time
Instead of shipping every item sold, you just send your entire inventory to Amazon in bulk. They will sort your items and mark them as ready for sale. You don’t have to deal directly with customers. All returns, shipping offerings, promotional rebates, etc. is handled by Amazon and can be tweaked by you in the backend.
2 Increased Profits
When you free up your time, you can buy more products. When you buy more products, you increase revenue. When you increase revenue, you increase profit.
3 How Much Does it Cost?
You are probably thinking that this FBA service must cost an arm and a leg. So did I, especially when my friend told us of all the headaches FBA has saved him. However, It’s FREE to opt in to. That’s right, FREE.
Once you have set up your seller account, you will have the option to enlist in this program. Any of the costs associated with FBA are variable costs, meaning you will only be charged for costs incurred once an item is sold. There are two costs that you will incur: monthly storage costs and fulfillment costs.
Storage costs: Currently it only costs $0.45/month per cubic sq. ft. to store your items with Amazon, with an increased rate of $0.60 during the holiday months.
Fulfillment costs: These costs vary for each product depending on the size, weight, and type of product and are charged to you only when a product is sold.
Both of these costs are standard costs for online sellers already, so you would be spending money for both of these services anyways. Amazon is such an efficient company that these costs are drastically low compared to other solutions or doing it oneself.
You should now understand why Amazon is the best choice for your online marketplace and the benefits of using their FBA service. We will go into further detail and instruction in leveraging all of Amazon’s offerings when going through the Three Step Formula. In summary:
- Currently, Amazon is the best online marketplace for third party sellers
- Branding, Premium Pricing, and Search Engine Optimization continues to make Amazon the #1 online retail destination, all of which you can leverage.
- Amazon’s FBA service is the competitive advantage you will need to build a powerful, efficient business.
Now you are prepped to become an Amazon third party seller. With Amazon as your online marketplace and the fulfillment services at your disposal, you are ready to learn the Three Step Formula to becoming a profitable Retail Flipper.