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Selling on Amazon

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Amazon is no longer an insider tip when it comes to buying and selling products online. After all, the marketplace offers both buyers and retailers a number of advantages. However, this article will focus on selling: What opportunities does Amazon offer for sellers? How can the platform be used as profitably as possible? What should be considered when selling on Amazon? All questions around the topic "Selling on Amazon" will be clarified below.

Why should you sell on Amazon?

As a marketplace, Amazon offers the advantage that retailers and customers are brought together directly. This means that customers have a wide range of choices, while sellers have a large audience for their products right from the start, which would have to be painstakingly built up if they had their own online store. To be precise, Amazon already had over 44 million customers in Germany in 2016, of which 17 million have a Prime account own. There were over 64,000 registered sellers that year, making Amazon's reach hard to beat.

In addition, more and more people are starting their product search directly on Amazon instead of using search engines such as Google. In 2016, in Germany 34% of the product searches launched on Amazon. As the number of users and the range of products on offer is constantly increasing, this proportion will certainly continue to rise. If a potential customer starts their search directly on Amazon and finds what they are looking for there, they will not even notice your external online store if you are not represented on the marketplace. It is therefore clear that your presence on Amazon is playing an increasingly important role.

Furthermore, thanks to the high reach, the conversion rate is also correspondingly high at an average of around 10%. The payment process also runs conveniently via Amazon, so you don't have to worry about it yourself. Amazon is generally easy to use for sellers and can take some of the work off your hands or make it easier.

What options are there for selling on Amazon?

Amazon Seller Central

Seller Central offers an easy way for merchants to sell their products on the Amazon marketplace as third-party sellers. Basically, anyone can register for the basic account free of charge and start selling after completing the most important settings and details. For sellers who have more than 40 orders per month, however, the professional seller account can be worthwhile. However, using this account is associated with a monthly fee of 39 euros.

Amazon handles the payment processing and pays the seller at predefined intervals. This means that both buyers and sellers can rely on secure payment processing. As a seller, you can also advertise through "sponsored products" and thus increase the visibility of your products. The payment model for these advertisements is CPC (cost-per-click). Amazon also offers a suitable analysis tool for this. You also have the opportunity to analyze the demand for goods and receive important feedback from your customers.

In general, the seller is relatively free with Seller Central and can handle the sale of his goods independently. However, those who are interested also have the option, FBA (Fulfillment by Amazon). In this case, some tasks, such as shipping and storage of the goods as well as returns, are taken over by Amazon. In addition, your customers can then access Amazon's customer service. According to Amazon itself, many customers prefer sales that are processed via FBA. Those who use FBA also have the option of offering products with Amazon Prime.

However, Seller Central also has a few disadvantages. As it is the easiest way to use Amazon, the marketing opportunities are limited. Amazon offers various ways to advertise products, but here they are limited to sponsored products. In addition, setting prices yourself (which can also be an advantage) is difficult in competitive situations. If you want to have a chance of winning the Buy Box, you will not be able to avoid using re-pricing tools.

In principle, however, Seller Central is a great way to run smaller stores on Amazon and maintain control over your own products and prices. If you also use FBA and possibly the option of sponsored products, you will certainly reach and appeal to a large number of potential customers.

Amazon Vendor Central

First of all, not every Amazon merchant can sell directly via Vendor Central, as an invitation from Amazon is required. Amazon must therefore first become aware of corresponding Seller Central merchants and classify them as promising. If you accept, Amazon will regularly buy an inventory of your products and become a seller of your goods itself. For this reason, Vendor Central is primarily aimed at manufacturers and well-known brands. As already mentioned, customers prefer products that are shipped by Amazon. However, trust in products that are also sold by Amazon is even higher. Using Vendor Central can therefore further increase your potential customers' willingness to buy.

Another advantage is that you can display the content on your product detail pages on so-called A+ Content can be expanded. You now have the option of adding more detailed product descriptions as well as additional images and videos to make your listing more appealing. You also have additional marketing options with Vendor Central, as you can now use Amazon Advertising and Amazon Marketing Services. This allows you to advertise your products in a variety of ways. What's more, your products are now Prime-qualified at no extra cost.

However, before you decide to accept Amazon's invitation, you should also consider the disadvantages, as it is not possible to easily leave the program and return to Seller Central. On the one hand, you give up a great deal of control by accepting. For example, Amazon can now set the price of the goods according to your wishes. In addition, the Vendor Central Program In the long term, this leads to a strong dependency on Amazon, as all requirements must be met if you don't want to miss out on the profit. The analysis options of Seller Central are also lost with this program. If you still want insights, you have to be prepared for additional costs. There is also no longer any direct customer contact, which means that customer feedback is lost as a source of information.

Amazon Vendor Central can therefore be well worthwhile in order to generate significantly more sales and improve discoverability. In this case, however, you should have no problem handing over control to Amazon and becoming a supplier of goods rather than a retailer.

Amazon Vendor Express

Vendor Express is basically a "slimmed-down" version of Vendor Central. Whether you want to use it is up to you, because an invitation from Amazon is not necessary. This means that smaller retailers or sellers of new products who do not receive an invitation from Amazon can also take advantage of some of the benefits of Vendor Central and have their products purchased by Amazon. Registration for Vendor Express is free of charge. The advantages are similar to those of Vendor Central. The sale is now handled by Amazon, which will increase the visibility of the product as well as the buying interest of customers. Qualification for Prime also takes place in this way. The focus can therefore be exclusively on the manufacture and delivery of products to Amazon.

The biggest difference to Vendor Central is that A+ Content is not available for Vendor Express. This fact prevents many merchants from making use of Vendor Express as A+ content is one of the decisive criteria for many. Of course, the same disadvantages apply here as for Vendor Central. There is a significant loss of control over the goods, as you no longer sell them yourself. You are also no less dependent on Amazon.

Vendor Express is therefore recommended for those retailers who would like to benefit from Vendor Central but have not yet received an invitation. In this case, however, it should also be accepted that no A+ content is available in comparison to Vendor Central.

What types of sellers are there on Amazon?

Seller of private labels (Buy Box)

Sellers of private labels, also known as resellers, have to deal with a lot of competition on Amazon, as they are not the only ones offering the product. By far the most sales are made by the retailer who wins the Buy Box. The Buy Box is located on Product detail pages on the right, where users add their desired products to the shopping cart. Hardly any customers bother to check which sellers still offer the product, but make the purchase directly via the Buy Box. This means that other sellers of the product receive little or no attention, while the winner receives almost all orders.

As a reseller, you should definitely work on winning the Buy Box for yourself. Amazon selects sellers for the Buy Box according to its own algorithm, which takes many different criteria into account. In general, you should make sure that you get the best ratings by satisfying customers. You can achieve this through helpful customer support, fast deliveries and fair prices, among other things. Strikingly positive reviews of the retailer always have a positive effect on the Buy Box chances. Here are four more factors that are decisive for the Buy Box:

  • Low price: Amazon tries to find the best balance between low price and good seller statistics. This means that your price does not necessarily have to be the lowest if you have good ratings. However, it should also not be too high in comparison.
  • Use Amazon FBA (Fulfillment by Amazon): Amazon knows that customers have a higher level of trust and are therefore more willing to buy when shipping is handled by Amazon. This is why FBA sellers are given preferential treatment in the Buy Box selection.
  • Amazon Prime: Those who use FBA also have the opportunity to benefit from Amazon Prime. Customers who have a Prime account naturally prefer to order Prime-qualified products in order to take advantage of their Prime benefits. This is also taken into account in the Buy Box.
  • Delivery time: You should try to offer the fastest possible shipping. Amazon is of course interested in customer satisfaction and therefore prefers sellers who deliver products as quickly as possible.

Own brand sellers (Amazon SEO)

Anyone who produces and sells their own brand does not have to worry about the Buy Box, as there is no competition in this area. Own-brand sellers, on the other hand, need to work on making their own products visible, as a full 90% of Amazon users only look at the first page of results. This contains 16 results in the desktop version and only 14 in the mobile version. In order to receive as many orders as possible, it is therefore essential to work on getting into the first 16 - or even better, the first 14 - results. To achieve this, you must Search engine optimization (SEO) on Amazon. The Amazon algorithm takes into account 35 different ranking factors that can be optimized. The most important ones are listed below:

  • Relevance to the search query: During a search, Amazon first filters out those products that are relevant to the search query. Your product description should therefore contain important keywords that potential customers could search for.
  • Sales: This is a factor that you can only influence indirectly at first and that takes some time. However, the more sales you can generate over time, the higher your product will be ranked.
  • Conversion rate: Similar to sales, the higher the conversion rate for a particular keyword, the higher you will rank for that keyword.
  • CTR (click-through rate): The same applies here. A high CTR for a keyword leads to a higher ranking for the corresponding keyword.

Since, apart from the first point, all the aspects mentioned depend on the customer, here are some tips on how you can increase the figures mentioned:

  • Attractive preview images: Choose advantageous images for your products on which they can be easily and clearly recognized. They should motivate the customer to click on the result.
  • Fair price: Make sure that you don't set the price too high and that there aren't too many cheaper competing products.
  • Shipping costs: Amazon customers naturally prefer to order free of shipping costs.
  • Amazon Prime: If possible, offer your products with Amazon Prime. Prime shipping greatly increases the conversion rate and is also a valuable ranking factor.
  • Product ratings: It is important that your customers are satisfied with your products and leave positive reviews. It is obvious that products with good reviews are much more likely to be viewed and purchased.
  • Seller ratings: Attention should also be paid to seller ratings. Offer your customers satisfactory support and ensure the fastest possible delivery times.

If you pay attention to these aspects, both your conversion rate and your CTR will increase, which will ultimately automatically generate more sales.

What shipping methods are there (FBM vs. FBA)?

FBM

FBM stands for Fulfillment by Merchant and means that the seller handles the entire order process, including storage and shipping of the goods, independently. They also take care of customer support themselves. FBM offers the advantage of full control over the shipping process. Sellers have the opportunity to pack their products safely and in the best possible way. If Amazon takes care of shipping the goods (FBA), the products are packed by Amazon employees and the seller no longer has any influence over this. Of course, Amazon is also not interested in delivering damaged goods to customers, but the seller has clearly individual options for adapting the packaging to the product.

One disadvantage of FBM is that the independent processing of orders does involve quite a bit of work. Anyone who has been running their own online store for a long time and has the right staff will probably have no problems with shipping goods, whereas smaller or new retailers can quickly become overwhelmed by this work. What's more, customers have more confidence in shipping via Amazon and therefore prefer it, so FBA sellers represent major competition.

FBA

FBA means Fulfillment by Amazon. With this model, Amazon takes care of the shipping of your goods for a fee. These are then stored in an Amazon warehouse and packed and shipped by Amazon employees. In this case, Amazon also takes care of customer support. The biggest advantage of FBA is probably that a lot of work can be transferred to Amazon. In addition, many customers prefer shipping through Amazon. Another advantage of FBA is that you can offer your products with Prime if they qualify. Most Prime users also want to use Prime shipping, after all they pay money for the membership, and are therefore reluctant to use products with conventional shipping. If you offer your products with Prime, you can also include the large proportion of Prime members in your customer base.

With FBA, you hand over control of the packaging of your products to Amazon. If you decide to use FBA, let Amazon know as precisely as possible which products are involved and whether there is anything to consider when packing them. There is also a monthly fee for storage in Amazon's logistics centers. It is therefore important to weigh up whether the additional costs are worth it.

Which shipping model is better?

As you can see, both shipping models have their advantages and disadvantages, so it cannot be said that one is more recommendable than the other. If you are already familiar with shipping goods and are experienced with the work involved, you can basically save yourself the additional costs for FBA and handle the processing of orders yourself. This is also recommended for those who would like to retain control over the packaging of their goods and value direct customer contact.

However, FBA can be particularly worthwhile for new retailers. Although you have to pay the monthly fee, you can then benefit from the trust that customers place in Amazon shipping and possibly also from Amazon Prime. This often makes it easier to generate initial sales and establish yourself as a trustworthy store. In addition, the work involved in shipping the goods can be transferred to Amazon.

What criteria must be met in order to sell successfully on Amazon?

Especially if you decide against FBA or the two vendor programs and want to sell your products independently, you will first have to work on gaining the trust of your customers and making them aware of you. Here you can find out which criteria play a role here:

  • Seller ratings: Trust in sellers who have few or no reviews is not particularly high. Sellers with very poor ratings are basically not trusted at all. Therefore, make sure you satisfy your customers by accommodating them in the event of problems and keeping your promised delivery times in order to receive positive reviews.
  • Product reviews: Of course, trust in the product should also be promoted. If you package your products yourself, do it carefully and safely. Defective or poorly packaged products inevitably lead to bad reviews, which can be avoided. Pay attention to the promised delivery time and choose product images that correspond to the actual appearance of the product. Bad reviews due to excessive deviations can also be easily avoided.
  • Competitive prices: Of course, your price should not be too high, but even significantly lower prices than those of the competition can lead to mistrust and suggest poor quality. Therefore, choose a low but reasonable price that appeals to customers.
  • External store: Do you have an (online) store outside of Amazon? Then also refer to it on Amazon. Especially if you don't yet have any or very few reviews, you can gain the trust of your potential customers this way. All the better if there are already positive reviews of your store and your products outside of Amazon.

The beginning is of course the most difficult, as customers first have to build up trust in your store. The whole process will therefore take some time. However, if you focus on these aspects, your positive ratings and reviews will certainly increase quickly. Trust will grow so that FBA and Prime sellers as well as Amazon itself will no longer be too much of a competitor.

Tobias Dziuba

My name is Tobias and I am the founder and managing director of the Amazon agency Adsmasters GmbH based in Düsseldorf.

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