Market forecasts anticipate strong eCommerce sales, coming in at 15.6% of total retail volume in 2023, with sellers seeing $1.137 trillion in revenue. Online sellers, dropshippers, and retailers of all types can expect even more growth next year, with a 10.5% market growth.
The strategies you adopt now and in the future will determine how much of that growth your business will see. Should you expand your product lines? Should you double or triple your marketing efforts to expand your reach? Or should you diversify your revenue streams and sell across more marketplaces? That last option is one of the best ways to both grow and stabilize your business, especially if you start selling on Amazon.
When you open an Amazon store, you gain access to an incredibly competitive but very active marketplace. You can try new products, streamline your sales operations, experiment with different strategies, and entrench your business in your niche. We'll take a brief look at how businesses can start selling on Amazon, whether it's your first foray into eCommerce or you're expanding your current business. Then we'll zero in on why selling on Amazon is so beneficial for businesses across virtually any retail niche.
What Does It Mean to Start Selling on Amazon?
Amazon is a marketplace where affiliated businesses and distinct third-party businesses can market and sell goods to B2B and B2C customers. Amazon sellers can access a wide variety of programs and sales resources to fuel their growth.
Some businesses use Amazon as a platform for lead generation and transactions but handle order fulfillment and customer service themselves; these are considered merchant fulfillment businesses. Other businesses use FBA, or Fulfillment By Amazon, which manages the fulfillment process so sellers can focus on marketing and vendor relationships.
Regardless of which business style you prefer, you operate as an independent third-party seller on the platform. You can choose what products to sell, what your business goals are, and how to manage customer service. You manage your business on your own; though, there are rules, regulations, and policies that Amazon uses to keep their marketplace safe.
How to Start Selling on Amazon: A Brief Overview
On the surface, selling on Amazon is simple: you can order your inventory, make it available through product pages where customers place orders, and then ship the orders to those customers. However, much like any business model, it becomes much more complex once you start to peel back the layers.
Before you jump in, read this quick overview of what the process of Amazon selling looks like. This can help you imagine the day-to-day operations you might manage as an Amazon seller, and you can gain a clearer view of the benefits that selling on Amazon can provide.
How to Find What People Want
The nature of Amazon, where consumers begin their shopping journey by searching for what they want, goes a long way in tipping sellers off to what customers want. Instead of having to go through the arduous and often less than conclusive effort of researching your intended market, using an Amazon tool can quickly and precisely tell you how many people are searching for a product each month. Armed with such a tool, you can confidently determine whether a product you want to sell has demand and more accurately forecast sales performance.
Related: Tips for Using Financing to Scale Your Amazon Business
On top of the incredible amount of insightful data that can be gleaned concerning Amazon products, even the simplest observation and analysis of current offerings yields valuable information about customers and competitors. All you have to do is search Amazon for a product you want to sell, and you can see exactly what products competitors are offering. This enables you to consider how you could differentiate your product and seek competitive advantage. It's almost like playing poker with an opponent when you can see their cards.
Deep Dive for Product Opportunities
Reading product reviews is also very important, as it will accomplish two things. First, read enough reviews across various products in a market, and you'll walk away with a good understanding of the different customer segments in the market and their unique needs in the space.
Second, many entrepreneurs would give an arm and a leg to know what customers like and don't like about a product, and that information is right out in the open on Amazon. Find out what customers like about your competitors' products, and make sure your product does the same; then consider what people don't like about other listings, and make sure you don't make those mistakes too.
Reviews also inform potential sellers of what's most important to customers in a product and what questions they may have, allowing the seller to highlight such elements and answer such questions when they build the listing for their own product.
Use the Platform's Resources to Guide Your Business Development
Returning to the BMC, the Amazon business model provides simple, upfront solutions to the matter of "Channels," "Key Partners," and "Cost/Revenue." As soon as you list a product on Amazon, you get instant exposure to potential customers. Thanks to Amazon's popularity, customers will come to you without the need to create brand awareness from thin air. In fact, to incentivize and aid new sellers, the platform even favors new listings for an initial period, boosting organic search result rankings.
On top of that, Amazon's marketing through sponsoring products is quite effective, and conversion rates on the platform are quite high. Product fulfillment, which is typically one of the most demanding sides of operating a business, is all taken care of with Amazon FBA (Fulfillment by Amazon). FBA provides entrepreneurs the ability to be hands-off in the sales process as soon as inventory is accepted at an Amazon warehouse, providing more time for other things and enabling scalability in a much more efficient way.
Finally, costs and revenues are clearly spelled out for sellers on the platform. Amazon provides charts that allow you to accurately determine what your Amazon-related costs would be before you even begin to look for a supplier.
6 Benefits of Selling Products on Amazon
Now that you have an idea of what selling on Amazon looks like on the ground level, you can better assess the pros and cons of adding this approach to your business strategy. Here are some of the most important benefits many sellers see:
1. Add Another Revenue Stream to Your Business
One of the most important questions you can ask yourself before making a major change to your business is, "Will this make me money?" Amazon is one of the most consistently reliable ways to make money for your business. 89% of sellers become profitable, with the average seller making thousands of dollars every month. Selling on Amazon can significantly increase your business's revenue by giving you access to a wide market of buyers.
Some of the more subtle benefits of adding another revenue stream to your business include:
- Diversification: Just like investors build up their portfolios with different types of assets to minimize the effects of volatility, diversifying your revenue streams protects your business from sudden plummets in marketplace popularity or shifting market trends.
- New Markets: Different buyers shop in different places, even if they otherwise have the same interests and buying habits. Some shoppers only trust Walmart for online purchases, while others don't mind third-party sites with adequate credit card protections. Still, others use Amazon as their default online store—if it's not there, they don't buy it. By starting to sell on Amazon, you open your business to a large market that was otherwise out of reach.
- Amazon Tools: Buyers can purchase one-time goods or buy goods through Amazon's 'Subscribe and Save' options. Additionally, many buyers have Amazon Prime, which incentivizes frequent shopping through a host of benefits. Use these exclusive opportunities to your business's advantage.
2. Gain Insight Into Consumer Trends
We touched on this briefly when exploring how selling on Amazon works. The site itself is a mine of information on consumer interests, buying and selling trends, pricing tactics, and more. When you're an Amazon seller, you get even more access to all of this information. You also have access to Amazon's analytics tools that give you in-depth insights into your own store's metrics, forecasted performance, and opportunities.
3. Increase Your Access to Potential Growth Capital
Many online sellers actively make financing and applying for growth capital part of their business strategy. Instead of waiting for profits to come in and your store to build organic momentum, you can fast-track growth by applying for growth capital that funds your marketing, inventory, and operational efforts.
Related: Beyond the Alternatives: How Onramp Compares to Amazon Lending
Consider the upcoming holiday shopping season. If you wait for revenue from October and November sales to roll in to fuel December marketing campaigns and product restocks, it's already too late. Other businesses will have already bought up the ad space and convinced shoppers to buy from them.
Having an Amazon store significantly increases your access to growth capital in two ways:
- You may be eligible to receive advanced funds from Amazon.
- You can use your Amazon store's sales volume and forecasted performance to apply for capital from third-party funding sources that are equipped to gauge your business's performance across multiple marketplaces. After all, Amazon finance programs only look at your Amazon-based performance, just like Walmart seller programs only look at your Walmart sales. The right third-party financing provider will look at your performance across all of your stores to give you more funding and fuel faster growth.
4. Explore Amazon's Fulfillment Options and Business Resources
If you love marketing and selling but dislike managing logistics and fulfillment, joining Amazon is even more beneficial. At least 73% of Amazon sellers use FBA to manage warehousing, shipping, and order fulfillment. Not only is this program incredibly robust and efficient, but it allows for a fully hands-off approach. You retain control of your vendors, product catalogs, and pricing, and Amazon handles a lot of the legwork in the background.
Amazon FBA fees are approximately 15% of the sales price, so sellers can still maintain healthy profit margins.
5. Establish Your Brand Through Multiple Channels
Amazon represents more than just another revenue stream; it's also a powerful marketing platform. You can get your brand and company name in front of shoppers through robust product pages, sponsored ad placements, and creating high-quality store pages.
Even if buyers don't immediately make a purchase from you, each of these interactions is a touchpoint with your company. When they later see your brand on banner ads, on your Shopify site, or across social media pages, they're much more likely to recognize your brand and be persuaded to buy something. Familiarity is an important concept in marketing, and getting your products in front of your buyers in as many different contexts as possible helps build that familiarity.
Stay Competitive Against Brands That Use Multiple Platforms
Another way to view this strategy is through the eyes of competitive analysis. Other eCommerce businesses in your niche are going to be applying this strategy, especially during the holidays. Their ads and products will be on Google, across social media, on Walmart, and all over dozens of channels. It's not just incredibly important to expand to gain more sales—it's essential to avoid disappearing from sight.
6. There's a Low Barrier to Entry—And the Rewards Can Be Very High
Creating an Amazon store is easy. You can quickly get approved, integrate your vendor and financial details, and start creating pages that get fast clicks and engagement. That's not to say selling on Amazon is a guaranteed route to profitability. But the legwork and administrative burden is very low, especially if you opt for Amazon FBA. When you want to grow your business for as little upfront cost or complication as possible, this is an excellent choice.
Transform Your Business With an Amazon Store and Growth Capital
Growing your business's reach is integral to staying competitive and profitable. Online retail is quickly becoming one of the biggest segments of the retail market, and the right strategies now can mean you're in the right position to meet new opportunities head-on.
At Onramp, we provide financing and growth capital so you can thrive across all of your marketplaces. Our innovative eCommerce-focused process allows us to assess your performance across multiple storefronts and give you access to the levels of funding your operation deserves—and then you can spend it as you see fit. Reach out today to start the process and get funds for your future Amazon store or current business operations.
