Amazon offers a number of ways through which online retailers can sell inventory, but choosing which program to use to sell on Amazon can be a challenge.

Keep in mind that managing accounts on Amazon takes time and knowledge on the part of the seller. Amazon has particular requirements for its Marketplace and a considerable amount of time and knowledge are necessary to manage these campaigns.

Still interested? Keep reading to learn how to list on the Amazon Marketplace and place ads on Amazon.

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1. What is the Amazon Marketplace?

The Amazon Marketplace is one of the most well-known marketing channels for online retailers. To list products on the Amazon Marketplace, sellers are required to set up an account, and send Amazon a product feed.

FREE GUIDE: The Amazon Consumer Survey 2017

As seen in the example below, Marketplace listings are the seller results that appear when a query is typed into the search box.

 

how to sell on the amazon marketplace

The Amazon Marketplace program does not link shoppers to a merchant’s site, as all transactions are performed on Amazon.com.


2. How Should I Sell on Amazon?

Below are the major ways you can sell on Amazon, and some qualifications to help you decide which selling option is best for your online store.

Sell TO Amazon

Selling to Amazon is an invite only program. Selling directly to Amazon grants Amazon ownership of your inventory, which they will market and sell to shoppers on Amazon.com.

How it works: Merchants or manufacturers sell their inventory (e.g. hats) to Amazon at wholesale rates. Once those items have been sent to Amazon, the seller is done with the products. Amazon pays for the inventory directly to the seller and maintains ownership of the products.

Amazon sells those products on the Marketplace (as Amazon) – choosing their own price and shipping options.

Amazon-seller-marketplace1

Benefits of Selling to Amazon

Selling to Amazon is an available option for manufacturers and virtually eliminates direct seller work including marketing, advertising, and even pricing.

Other benefits of Selling to Amazon include:

  • Avoid hassle of handling pricing, shipping and other logistics for product sales
  • Bulk purchases
  • Display and detail page functionality only available to Amazon (e.g.: subscribe n save)
  • Manufacturer Central inventory projection tools not available in Seller Central

 

Sell ON Amazon

A popular option for selling with Amazon is selling on Amazon.com.  Today more than half of total sales on Amazon come from third-party sellers.

How it Works: Sellers list their products on the Amazon Marketplace, and sell items as 3rd party sellers.

sell on amazon as a 3p

Selling on Amazon is generally more work than selling to Amazon, but is also comes with greater levels of control and the potential for higher margins. Sellers on the Marketplace control shipping, prices and optionally fulfillment.

sell on amazon 3p

Sellers who sell on the Amazon Marketplace have different fulfillment options to choose from. Sellers can choose whether they want to handle fulfillment or let Amazon sort, package and ship products through their own fulfillment centers.

As a third party seller selling on the Amazon Marketplace you have the option to use Amazon’s fulfillment services:

    • Fulfillment by Amazon (FBA) – Sellers leverage Amazon’s fulfillment for products sold on the Amazon Marketplace
    • Or sell using your own fulfillment (FBM) – Sellers handle fulfillment for their products sold on the Amazon Marketplace

 

FBAvs.FBM-Amazon-selling21

 

Amazon charges sellers to sell on the Amazon Marketplace based on what program they choose to sell through, and how much they sell.

 

FREE GUIDE: The Guide to Fulfillment by Amazon

 

Benefits of Selling on Amazon.com

  • Increase Exposure – Leverage millions of unique monthly visitors to get more people to your online store.
  • Leverage Marketplace Benefits- Amazon’s Marketplace is a shopping destination that is known for reliability, ease of online shopping and selection. Listing on the Marketplace allows sellers to capitalize on that branding.
  • Find New Customers- The Amazon Marketplace is huge. Sellers gain exposure to new and varied shoppers through the Marketplace- many of which would never encounter your online store otherwise.
  • Increase Sales- Shoppers on Amazon have come to the Marketplace with the explicit intent to purchase, or at the very least are looking to browse. Online search, advertising and other forms of online exposure do not guarantee that same bottom of the funnel-audience. Bottom Line- people on Amazon are more likely to buy.

 

Here is an overview of some of the features for each way you can sell on Amazon:

pros and cons of amazon 3p vs 1p

Sell ON Amazon vs. Sell TO Amazon?

Which program you choose to use to sell on Amazon depends on your store, fulfillment abilities, ROI goals, and many other variables.

Vendors who sell to Amazon avoid some headache with logistics, but are limited with their scope and ability to market products. Selling on Amazon is an option which is more suited to sellers who would sell to Amazon but want to take advantage of more exposure and other benefits of the Amazon Marketplace.

Switching from Selling to Amazon TO Selling ON Amazon

If you are already selling on Amazon and are considering selling to Amazon, consider some of the elements below:

  • Amazon FBA payments come in after 2 weeks, Amazon vendors often have to wait 90 days for payment
  • Selling to Amazon requires you set up an EDI
  • Vendors who sell to Amazon can sell in bulk (more revenue), but that often results in 20%-30% less revenue than your normal selling price
  • Vendors often lose the ability to control market price as Amazon will dictate price on the Marketplace and affect your MSRP.
  • Vendors run the risk of getting replaced by new ‘knock off’ vendors
  • Amazon dictates what they purchase from vendors, instead of FBA purchases driving shipments to Amazon

 

Here is a breakdown of some of the major considerations between selling to and on Amazon:

benefits and disadvantages of selling on amazon

 

3. Should I Use Fulfillment by Amazon?

There are millions of third party sellers on the Amazon Marketplace worldwide, generating more than 50% of Amazon’s total sales.

If you sell on Amazon, or are looking to sell on Amazon as a third party seller, one of the first decisions you need to make is whether to use Fullfillment by Amazon (FBA) or to handle your fulfillment in house (or by a service).

Using FBA can significantly impact your sales and fulfillment efficiency, but FBA may not be a good choice for your online store.

What is Fulfillment by Amazon (FBA)?

Fulfillment by Amazon, often referred to as FBA is a fulfillment choice for sellers on Amazon which allots fulfillment for sellers products to Amazon.

Amazon sells its own inventory on the marketplace alongside products from outside sellers. When a product from a third party merchant is purchased on Amazon, who ships that item depends on the fulfillment method selected by the retailer.

Check out Amazon’s explanation of how Fulfillment by Amazon works:

Amazon-FBA-Fulfillment

Merchants who choose to participate in FBA hand off fulfillment- packaging, sorting and shipping to Amazon. Amazon has more than 80 fulfillment centers in the US which handle fulfillment- both for itself and third party sellers.

Note: FBA is a fulfillment option which sellers can choose for any or all of their products. Sellers vary on the number of products they choose to fulfill (if any) using FBA, depending on their margins, product category, and related seller variables.

Why should I Use Fulfillment by Amazon?

Fulfillment by Amazon is a good option for merchants who are looking to increase shipping time and reduce time and money allotted to fulfillment.

Other FBA benefits for Amazon sellers include:

Less Business Operations– FBA eliminates fulfillment shipping efforts for sellers. Instead handling warehouse management & packaging (handling shipping, picking) and those associated fees, retailers can pass off those task to Amazon

Amazon Prime: Amazon Prime customers purchase more, and more frequently than traditional Amazon shoppers.

      • Using FBA increases product discover-ability as FBA products feature Prime shipping, and appear for Prime filtered searches.
      • Prime users and purchasers increase seasonally, and can add a boost around the holiday. Last Q4 more than 1 million people signed up for Amazon Prime in one week.
      • Conversions are more likely on detail pages that are prime eligible, which can increase sales for products you sell using FBA.

 

Customer Service & Returns:  Amazon handles customer service and returns with FBA orders, which is a perk for sellers who aren’t customer service specialists.

Shipping Speed: For online shoppers, FBA means quicker shipping rates, Amazon Prime eligible shipping, as well as 24/7 Customer Service and delivery tracking through Amazon. FBA products are shipped from Amazon, so they process faster and ship faster than products sent directly from the retailer. Amazon emphasizes customer service, so shoppers can rely on helpful assistance.

Buy Box Share: FBA impacts key factors in Buy Box share variables including shipping and seller rating. FBA is a good way to boost your chances of getting a share of the buy box for products where shipping or other Buy Box eligibility requirements might be hard to achieve.

Amazon Branding: FBA is fulfillment by Amazon. Amazon has worked hard to curate a brand around customer service and ease of online shopping. FBA aligns your store with that branding and lends that reputation to your store.

How Much Does FBA Cost?

Selling on Amazon charges a percent of total sale profits. In addition to those fees, FBA charges fees based on:

        • Item weight
        • Handling fees
        • Pick & pack
        • Storage costs (sq ft.)

For some sellers, FBA seems like an expensive option, but keep in mind FBA encompasses fees for all of fulfillment- costs including warehousing and shipping. Use Amazon’s Revenue Calculator to scope out whether your products will be profitable using FBA.

FBA Cost Considerations

Amazon Fulfillment impacts your margin for individual products, which arguably limits profitability. However, with the increase of total sale volume and exposure, FBA is likely a good investment for your online store. For example, you may make less money overall on a particular product such as a waterbottle, but you are likely to sell more waterbottles overall for a larger holistic profit.

Remember you’re not forced to use the FBA option for all of your products, so take the time to calculate which products are profitable to fulfill with FBA.

FBA may not be an option for your store depending on the competition surrounding your products, what products you sell, where your business is located, your margins, and other related variables.

FBA and Commingling

FBA products are sold by third-party merchants and need to be labeled and shipped to Amazon warehouses before Amazon can handling fulfillment using FBA. Amazon offers two labeling options for FBA, both which come with variables which may affect your profitability and time.

FBA Labeled Inventory- Require an individual label for each product sent to Amazon for FBA.

Stickerless/ Commingled FBA Inventory- Allow merchants to exclude an FBA label. Amazon will use product identifiers (e.g UPC) to group your products with similar commingled inventory.

Commingled Inventory requires less work with labeling, but groups your products with other sellers for faster shipping. Commingling issues can arise with damaged packaging and commingling fraud.

Consider both options and your products when choosing FBA labeling methods. Also, keep in mind you may want to choose one label method for a portion of your products.

Fulfillment by Amazon is a convenient fulfillment option which allows Amazon sellers to leverage Amazon’s resources to increase marketplace sales. Determine what your store budget, margin, and profitability is for Amazon as a whole and for specific products before deciding to leverage Fulfillment by Amazon.


4. What is the Cost to Sell on Amazon?

It’s free to list products on the Amazon Marketplace but sellers incur fees as a percentage of the overall sales they make, which vary based on their product categories.

Seller Amazon fees vary based on the seller program Marketplace sellers choose. Here are the two seller programs for Amazon:

amazon seller fees

Amazon also charges retailers a Referral Fee, Variable Closing Fee which is subtracted from the overall sale (including selling price, shipping and other charges such as gift wrap).If you sell more than 40 products a month then the Pro Merchant Program is a no-brainer.

Amazon Marketplace Selling Fees: Referral and Variable Closing Fees

Amazon selling fees for a given product boil down to this formula:

Amazon-selling-fee-formula2
 

Note: Merchants who pay a monthly subscription fee of $39.99 to be a Pro Merchant Subscriber DO NOT have to pay the Amazon Marketplace $0.99 per item fee (good for merchants selling well over 40 products a month).

Amazon Selling Fees: Referral Fee

The Amazon Marketplace Referral Fee is essentially a percentage of your total item price (and gift wrap charges if applicable) that Amazon collects based on its CPA model.

For example, if you sell an automotive accessory on the marketplace for $85.99, Amazon will keep $10.32 (12%) of that revenue as referral fees.

Here’s how much Amazon will take out of your individual product sales for different product types:

  • Amazon Kindle – 15%
  • Automotive Parts and Accessories (not including Tires & Wheels) – 12%
  • Tires & Wheels – 10%
  • Baby Products (not including Baby Apparel) – 15%
  • Books – 15%
  • Cameras and Photos – 8%
  • Consumer Electronics – 8%
  • Electronics Accessories – 15% for items under $100 (item price + gift wrap charge); 8% for over $100; minimum referral fee of $1.00
  • Entertainment Collectibles – 20% for items under $100 (item price + gift wrap charge); 10% for items $100-$1000; 6% for items greater than $1000; minimum referral fee of $1.00
  • Home & Garden Products (including Lawn & Garden, Pool Supplies, and Pet Supplies) – 15%
  • Industrial & Scientific Products (including Food Service and Janitorial & Sanitation) – 12%
  • Kindle Accessories – 25%
  • Music – 15%
  • Office Products – 15%
  • Personal Computers – 6%
  • Shoes, Handbags, and Sunglasses – 15%
  • Software & Computer Games – 15%
  • Sporting Goods – 15%
  • Sports Collectibles – 20% for items under $100 (item price + gift wrap charge); 10% for items $100-$1000; 6% for items greater than $1000; minimum referral fee of $1.00
  • Tools & Home Improvement Items – 12%
  • Toys – 15%
  • Unlocked Cell Phones – 8%
  • Videos, DVDs, and Blu-Rays – 15%
  • Video games – 15%
  • Video game consoles – 8%
  • Watches – 15%
  • Any other products – 15%

 

Note: The minimum $1.00 referral fee for electronic accessories, entertainment collectibles, and sports collectibles are void for merchants that pay the $0.99/ sold item fee (non-Pro Merchant Subscribers).

Amazon Selling Fees: Variable Closing Fees

The Amazon Marketplace variable closing fees are fixed for media products and vary for non-media products.  These fees pertain to the shipping details of your sold product.

Let’s take a look at the rates:

Amazon Variable Closing Fees for Media:

*For domestic standard shipping, domestic expedited, and international shipping, except where indicated.

  • Books – $1.35
  • Music – $1.35
  • Software & Computer Games – $1.35 for domestic standard and expedited shipping; N/A for international
  • Videos & DVDs – $1.35
  • Video Games – $1.35 for domestic standard and expedited shipping; N/A for international
  • Video Game consoles – $1.35 for domestic standard and expedited shipping; N/A for international

 

Amazon Variable Fees for Non-Media Products:

  • Domestic Standard Shipping: $0.45 + $0.05/lb
  • Domestic Expedited: $0.65 + $0.10/lb
  • International: N/A

 

Amazon Selling Fees for a Sold Book [Example]:

Now that you know the Amazon selling fee structure, let’s look at an Amazon fee example. Imagine you’re a book merchant who just sold Harry Potter and the Sorcerer’s Stone for $15.99. Suppose the customer paid $3.99 for shipping and NO gift wrapping. Assuming that you’re not a Pro Merchant subscriber, here’s how Amazon will deposit your revenue:

Amazon-selling-fees-example2
 

Don’t let these fees scare you.

Amazon is a major source of traffic for online retailers and is competitive with other marketplace rates. Being aware of and understanding the Amazon selling fee structure is the first step on your way to managing a Marketplace campaign effectively.


5. How Do I Advertise on Amazon?

Amazon has expanded the reach of its Amazon’s Sponsored Products program- an advertising outlet for Amazon sellers which
increases visibility for Buy Box items.

Amazon Sponsored Products has been an Amazon ad option which boosts visibility on the Amazon marketplace since 2012, but this year Amazon updated the program (login required) with Campaign Manager features including automatic targeting, easier Seller Central usability, and most notably more visibility on Amazon search and product pages.

Amazon Sponsored Products elevates Marketplace seller products that are Buy Box eligible on search and product pages with an additional cost per click fee.

Amazon Sponsored Products highlights product ads for Amazon Buy Box eligible products on Amazon search.

Amazon-sponsored-products-SERP-placement

Sponsored Products Ads can populate at the bottom of Amazon search results:

Or alongside Amazon SERPs:

Amazon-sponsored-products-SERP-placement1-1

And on detail pages:

Amazon-Sponsored-Products-product-pages

Amazon Sponsored Products ad placements on are only available for products which are winning the Buy Box– and lead directly to the product detail page where your product is featured.

Frequently compared to Google AdWords ads for its keyword ad population, Sponsored Products populate on search and product pages based on seller determined keywords and max bid per click metrics.

Amazon uses keywords, bids and search relevancy to display ads.

With Google’s Automatic targeting update (09/2014), sellers can skip the process of selecting keywords. However, Automatic Targeting removes the higher level of control associated with Manual Targeting, which should be considered if you choose to utilize Automatic Targeting.

Amazon Sponsored Products Eligibility

Compared to Amazon Product Ads, Amazon Sponsored Products setup is much if you can vs. how you can. That is, Amazon Sponsored Products are only available for sellers who are Sponsored Products eligible.

Sellers looking to boost product visibility on Amazon with Sponsored Products must choose products which are Buy Box eligible. In addition, Sponsored Products is only available in 6 countries and across 30 categories currently.

Amazon Sponsored Products Best Practices

    • The major benefit of Sponsored Products for Amazon sellers is gaining visibility on Amazon’s competitive and product dense marketplace. With that in mind, its key sellers leveraging Sponsored Products to optimize existing product information on Amazon. Consistently audit and optimize your product information with Buy Box variables in mind (e.g. product price, image, shipping,etc.)

 

    • Continue to work to achieve a higher Buy Box share for individual products and more products across your inventory. Specifically, try and get increased Buy Box ownership for your top selling items.

 

    • Sponsored Products run based on your daily budget and ad bids- audit your campaign strategy regularly for higher ROI and to avoid clicks which aren’t converting.

 

    • Just like AdWords ads on Google search, Sponsored Products are limited in how much real estate they occupy on Amazon. Refine the variables which do appear (product image, title, price, star rating, etc.) to get the most out of your ads.

 

Consider your online store variables – what you sell, your margins, advertising budget, etc. alongside the variables for selling on the Amazon Marketplace, through Amazon Sponsored Products.

Remember no advertising campaign or sales channel is a substitute for consistent elbow grease, competitive pricing, and quality product.

Pro-Tip: In 2015, Amazon discontinued their Product Ads, you can read more about the announcement here.

*This post was updated by Tara Johnson, Content Specialist at CPC Strategy in May 2017

 

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About the AuthorMary Weinstein is the Director of Content at CPC Strategy, and an expert in Retail Search, Google Shopping and Digital Marketing. A NY native, Mary spends her time educating online merchants, hiking and drinking copious amounts of coffee. You can also find her work on SEW, SEMRush, MOZ and Practical Ecommerce. See all posts by this author here.