How expanding your retail business to Amazon can increase your profits and sales with little or no investment.
If you are like most retail stores, the size of your market is limited by your location.
If you are in a busy shopping mall, you get thousands of potential customers walking by your store every day. But if you are in a small town, your market is limited to your population and any others you can pull in with advertising.
Obviously, a retail store on a busy street in Manhattan or Los Angeles gets a ton of walk-by traffic due to the high population of those cities. But how would you like to have a retail store in a city of 60 million people? Because that is what you get when you sell on Amazon.
Of course, Amazon is just one part of a strong online strategy (read more e-commerce tips here), but with more than 60 million visitors a year and the average visitor spending several minutes on the site, Amazon can make a big difference to your bottom line. And unlike a store where you get a lot of browsers, when people come to Amazon they are usually looking for something specific – in other words, they are shopping.
This is a mega opportunity for almost any retail merchant. I know retailers that more than doubled their business in one year and only hired one part-time employee to help them do it.
Most retail store owners think in terms of setting up a website –and that is a good idea, as local folks often check the web for nearby businesses when they are looking for something. But let’s face it. In terms of selling merchandise, websites are no longer the Mecca they used to be. That is because all of the large online shopping sites like Amazon.com, Sears.com, Wal-Mart.com and others that now dominate Google search results. If you have a small website where you offer your products it can be virtually impossible for your customers to find you in search results unless you are selling an extremely unusual niche product.
But Amazon is different. Have you even noticed that if you Google a product search, a listing for that product often comes up on Amazon first? Here is an example. I Googled ‘Bamix stick blender’ and look what came up in the first few listings.
Why People Shop on Amazon.com
Amazon is simply the single most trusted shopping site on the Internet. Buyers know that Amazon stands behind every sale, whether Amazon or a third party seller like you or me sells the item. Amazon has a liberal return policy, they ship on time, and you can find virtually any standard retail item on Amazon in 25 different categories.
In 2014 Amazon did over $88 billion in sales. What is not generally known is that almost 40% of that went to third party sellers who sell on Amazon as independent merchants.
Lets look at that Bamix Stick Blender again – but this time on Amazon.com.
If you click on the title, you will see that this stick blender is sold by Amazon, but if you look where it says “More Buying Choices,” you will see there are 22 other offers. Each of those is an independent seller selling the same item. (Note: 22 is such a high number because the sales rank of this product is so high that it sells several units a day. You can see that right under the price it says, “Only 7 left in stock.” Those seven will probably be gone tomorrow and one of the other sellers will move into that number one spot). I am one of those sellers and I sell about a dozen of this model each month. On most products on Amazon you will only see a few sellers and this means you get to share the buy box (the number one selling position that comes up when you click on the product title to look at the offering).
If you happen to be a kitchen store, one of those sellers could be you.
How Amazon.com Works
There are two ways to sell on Amazon: Merchant Fulfilled (MF) and FBA (Fulfillment by Amazon). An MF seller is someone who lists the product on Amazon and when it sells you ship it to the customer. An FBA seller is one who sends their merchandise into Amazon in bulk and when it sells, Amazon handles all the shipping and customer service.
Most retail store owners prefer to sell Merchant Fulfilled because you can simply list items you have in stock and ship it to a customer when it sells. If you operate a retail store, the problem with FBA when you sell on Amazon is you have to invest in additional inventory to send into Amazon. Having said that, I think it’s only fair to point out that goods in FBA tend to sell much faster than merchant fulfilled goods, so the investment could very well be worth the while as you will turn your inventory over much faster.
Listing a Product on Amazon.com
Listing a product on Amazon is very easy and for many products takes less than 30 to 45 seconds. If the products you are selling are already listed on Amazon, all you do is enter the UPC code number of the product, and Amazon will find the listing and open a form. The only information you have to enter is the price and quantity, then check a box if the item is new or used and set the start selling date. Hit the “Complete” button at the bottom of the page and your item will be available for sale on Amazon within 15 minutes.
If a product is not listed, it takes a little more time to sell on Amazon. Amazon will bring up a form where you will type in the title of the item, the UPC (or EAN or ISBN) code, write a description, upload a photograph and fill in some more details such as the size and weight of the product, the department (men’s, women’s, child’s, etc.) and depending on the type of product they will ask you some more questions. For example if you are selling jewelry they will ask you what it is made of and what type of stones (if any) are in the piece. Obviously hardware or sports and outdoor items have different questions.
Once you have done about ten listings, you can get very fast at it. I find I can create a unique listing in 5 or 6 minutes.
Obviously, there is a cost to sell on Amazon. There are two types of sellers on Amazon: Basic sellers and Pro Merchants.
The selling fees for a Basic seller are 15% + 99¢ per item. There are no listing fees.
The selling fee for a Pro Merchant is just the 15% without the 99¢ extra. However, it costs $39 per month to become a Pro Merchant. So if you are selling more than 40 items a month, which is not that difficult, it is actually cheaper to pay the $39 and save the extra 99¢ fee on each item sold.
Amazon calculates a shipping estimate for each item based on size and weight and this (and any sales tax) are paid by the customer. Amazon collects the sales tax for you and sends it to you, but it is your responsibility to pay it.
If you are an FBA seller the fees are higher because Amazon charges you for storage, pick and pack and a weight-based handling fee.
Amazon vs. eBay
Some retail store owners sell on eBay. I also sell on eBay, but I can tell you that my Amazon sales dwarf my eBay sales. I list many of the same items on both sites and I will typically sell 6 or 7 on Amazon for each one that sells on eBay.
That is pretty much it. Adding the Amazon sales channel to your existing retail business can bring in additional sales and profits. If it adds 20% to 30% to your business you can probably do that all on your own with no additional help. But if you want to grow it larger you may want to invest in a part-time employee. A 20-hour per week employee can allow you to scale your business to the point where it almost matches your existing sales.
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By Skip McGrath
Skip is an Amazon expert and coach who also publishes a free twice-monthly newsletter for eBay and Amazon sellers that contains articles with news, tips and tricks for selling on these platforms.