How to Start an Amazon Business in the USA
E-commerce platform has been a powerhouse in its industry from last many decades. Nowadays, it has become more popular, and trending as 80% of the Americans have opted the idea of shopping online. As per a survey, almost about 20% rise is figured out in the revenue collection year on year from the e-commerce websites.
When it comes to making money and earning more profits, E-commerce is a lucrative space. In the world of e-commerce, the selling has become as easy as buying.
Traditionally, in the e-commerce industry, the emphasis was laid on the viewpoint of the buyer by their shopping experience. But, now technology is also working to the advantage of the seller instead of only promoting seamless buying. As an example, if someone is a traditional, “brick and mortar” store, and then one can start an e-commerce website or a store from scratch or can take advantage of marketplaces available at the already existing and trending e-commerce websites like Amazon, Etsy, etc.
Undoubtedly, the most dominant and most significant player in the lucrative e-commerce space is Amazon. It provides some enormous opportunities for sellers among the world’s largest e-commerce websites, and one can offer their products for sale through Amazon website to gain access to their vast reach, marketplace and the technology.
We’ve put together this complete guide for starting an Amazon business considering the opportunities and pitfalls to selling on Amazon. Thus, one can maximize the chances of creating a thriving Amazon business.
This Amazon business guide comprises all the information one requires for starting the Amazon business. Read further to know more.
Understanding the World of the Amazon Business
So, what is explicitly an Amazon seller? In simple words, they are corporations and people who source the goods. And then they sell their goods on Amazon at a specific profit. There are basically two main types of Amazon businesses:
Sold by Amazon” Sellers
The Sellers who source, secures, stocks and ship the goods along with the customer service management and returns. These sellers use Amazon for their products listing, getting exposure, selling them and taking the payments. These are also known as “Sold by Amazon” sellers.
Amazon FBA Sellers
The Sellers who source and secure their products themselves but afterward send them to an Amazon warehouse for the whole process of storing, selling, handling the payments, and shipping.
Amazon handles all queries related to customer service and returns. These sellers are known to be “Fulfilled by Amazon (FBA)” sellers.
The concept of “Sold by Amazon” sellers is less expensive as compared to the “Fulfilled by Amazon” sellers since Amazon is responsible for storing, ship, customer service, and returns and Amazon charge these services. Comparatively, while starting an Amazon business, the “Sold by Amazon” sellers takes care of their logistics, customer service, and storage, which in the end becomes more costly. Thus, approximately 80% of Amazon sellers use the “Fulfilled By Amazon” service for their products.
Usually, Amazon sellers source their products from extensive supplier marketplaces like Wholesale Central, Alibaba, Salehoo, and more.
Key Amazon Business and Background Data and Statistics
Are you thinking to start an Amazon business? Or Do you want to know why someone would choose to sell through Amazon? Here are some of their astonishing statistics you must know.
According to the recent industry survey, Amazon is the leading e-retailer in the United States with close to 178 billion U.S. dollars in net sales of the year 2017. Also, there are more than 310 million active customer accounts reported worldwide. If we talk about the mobile commerce, the Amazon app via smartphone is reported to be the second-most preferred purchase channel of Amazon buyers in the United States.
Approximately 80% of the people in the US make their purchases via Amazon.com. So, starting an Amazon business is also a good choice as the recent survey says that more than 15% of sellers who sells via Amazon.com sells more than $1,000,000 of products in a year. Though rest of the sellers also opts the other channels rather than the Amazon, for selling off their products.
Understand Your Amazon Business Market
Whenever there is a competition thing become more complicated and challenging. And for getting successful on the online market like Amazon figuring out the right buyers and selling the right products to them, at the right price is essential. By the growth in the success of Amazon platform, every niche, and product has to find a unique selling point to sustain its position in the market. So, it is vital that before you think of starting Amazon business, know what customer demands more, and how you can make your niche and its services recognizable.
What Your Amazon Business Customers Are Looking For?
Most of the Amazon buyers have their reasons for motivation to purchase the products. It may be any of the parameters like price, quality, the speed of the delivery and the essential thing out of all is the reviews about the products and services which may affect the buyers choice a lot.
- Price: For all the Amazon sellers, it is a critical thing to know that the buyers usually compares the cost of their product with the prices of the traditional stores as well as other online shopping platforms. Price your items keenly, as the buyers opt to choose online shopping through the Amazon if they offer the right prices.
- Quality: Customer satisfaction is the most challenging and critical aspect. Pricing the products low never means that one can expect the quality of the product to be cheap. Remember that quality is the parameter on which the customer does not compromise.
- Speed: This parameter is worth considering. Customers seek timely delivery of their products. If the seller qualifies the FBA, it is more beneficial as the Amazon itself take the special care of the speed of the shipments.
- Reviews: Starting a business is easy, but sustaining the place and grow in the industry is difficult. Today, good reviews are the ranking parameter of any business. It grabs the trust of the customers and gives them a reason and assurance to buy your product.
Is Amazon Business Entrepreneurship For You?
To become a master administrator of Amazon business, knowing Amazon’s regulations and policies is essential. Starting an Amazon business is challenging as there are several e-commerce startups issue like marketing, managing distribution and acquiring sales, etc. And when it comes to earning the profits, the margins be razor-thin against creating, buying inventories to maintain a business to make it successful against a very competitive landscape.
What Are the Main Skills, Expertise, and Experience to Be a Successful Amazon Entrepreneur?
Create a best business strategy using the skill set for being a successful Amazon business owner. It involves the skills -strong research abilities to find the right suppliers, products and customers. Excellent forecasting abilities are required to work out cash flow, foreign currency exchange profit, and margins.
Also, giving great attention to detail is the skill set to understand the changing trends in the market. It ensures enough stock and inventory. Out of all flexibility plays an essential role to adapt to other changes and updates in the business. Also, an Amazon listing relies on copywriting, headline writing and call to actions, so significant portion of the time provided.
What Are the Main Challenges for an Amazon Seller Entrepreneur?
Amazon seller entrepreneur is likely to face specific issues mentioned below:
- Dealing with Competition: Tweaking the stock levels and selling prices is the strategy of the most entrepreneurs. In case, the competition is selling the same product and service in the similar market. For this, one needs to get always updated with the trends the competitors are following.
- Running a Successful Business With Thin Profit Margins: Sine Amazon seller space is very aggressive, a combination of foreign exchange rates, price pressure along with the customer expectations should meet the constantly pressurized profit margins. One must be able to pay business costs from those margins. Hence an in-depth knowledge of numbers is required.
- Cash Flow and Inventory Management: Judgment of the cash flows is critical due to the thin profit margins to have enough inventory for meeting the customer demands in future. It is even essential to building in your seasonal demand cycles.
- Marketing and Promotion: The style of marketing of the products and services makes a big difference to your success. One can buy ads on Amazon itself or can choose the social media marketing tools and affiliate marketing platform.
What Does a Day in the Life of an Amazon Seller Entrepreneur Look Like?
If you are starting an Amazon business, each day productivity is countable. Here is a brief overview:
To see that the products are doing well in the market, review the sales in comparison with the previous day, week and month sales:
- To plan the future sales look at the current inventory and stock levels.
- Keep a track with your suppliers to arrange timely payments.
- It is important to keep exploring for the new opportunities to expand the business into a different marketplace.
- Be good in maths and numbers or hire a professional to calculate the profit margins and selling prices. This ensures the proper payments of all your business expenses.
- Issues or Requests flagged by Amazon are to dealt with appropriately.
Now that if you have made up your mind to start an Amazon business, also, look for the additional guidance to understand Amazon business more deeply to know if it is the right choice for you. Start conducting market research to build up a business strategy and that too requires a specific business structure.
Choose the Right Business Structure and Register Your Amazon Business
To start an Amazon business, you have to choose the right business structure or “legal entity.” There are four main business structures in the US:
- Sole Proprietorship: This business structure is least secured and not much formal type. Since it does not provide the legal protections, it is not a much-recommended type of the structure. It is a default business structure.
- Limited Liability Company or LLC: It is the most inexpensive and straightforward type of business structure. The setup and maintenance of an LLC are much more convenient as compared to the business structures. It provides legal protection to personal finances and assets.
- Series LLC: This type of LLC entity availability is state specific. It creates “mini” LLCs, under the umbrella of a master LLC each with their limited liability and separate assets.
- S Corporation: This business structure is a bit complex structure, and it is usually not recommended for a smaller organization.
- C Corporation: This is also a complex business structure like the S Corporation but is merely a larger structure than that. This type of business structure is taxed separately from the business owners.
Setup & Maintain Your Amazon Business
After the legal creation of your Amazon business, few things must be in place:
- Business Location: The success of any business also depends on environmental factors. So, if you are about to start an Amazon business make a proper plan before the set up that you will be working from home, office or you will be using a shared working space. It is recommended to start an Amazon business from your home unless you don’t require to store the products.
- Permits & Licenses: There are specific rules, regulations, and legalities for starting an Amazon business. So before the business setup take the expert advice.
- Finances & Taxes: To keep the Amazon business all in place, it is vital that you are aware of the tax obligations of your business. It is advisable to hire a professional who can guide you through the whole process and who can maintain your business account.
- Equipment: For starting an Amazon business, any specialized equipments are not required unless someone needs to ship the products.
- Processes: An efficient means for ordering stock, managing inventory, dealing with suppliers, market research comparing with the competitors are required to run your business efficiently and effectively.
- Software: There are many software applications which are explicitly designed to help Amazon sellers. The use of these software enables you to manage and market your business.
- Employees: Always keep a business plan ready by the future growth requirements of your Amazon business. As it keeps on changing with time. Hiring professional advisors and employees must be on-board when the business starts rising.
- Business Maintenance: Always be aware of reporting the annual reports timely once a year or renew the licenses( state, federal, regional and city business ) basis the rules and regulations by the specific country. Creating a business checklist helps grow the business in a best possible way.
How may IncParadise help you?
In the E-commerce world, starting an Amazon business is a fairly complex concept. It is crucial to consider the essential key points we have covered above for making a business plan. Once you are ready with your business set-up plan, head over to the IncParadise to have your business registered and incorporated.