How to Succeed as an Amazon Reseller in 2023
If you‘re considering selling products as an Amazon reseller, this in-depth guide will explain how the program works, key steps for getting started, costs involved, tips for managing your business, and strategies used by the top sellers.
As an experienced Amazon seller myself, I‘ll provide valuable insider advice to help you evaluate if reselling on Amazon is right for you, and how to build a successful business if you move forward.
Let‘s dive in!
Overview of the Amazon Reseller Program
The Amazon reseller program allows entrepreneurs to purchase inventory wholesale or from retail stores and then resell those products on Amazon‘s marketplace.
As a reseller, you list products in Amazon‘s catalog, ship items to their warehouses, and leverage their storage, fulfillment and customer service infrastructure. Amazon handles collecting payment, processing orders, and issuing refunds.
It‘s an appealing model since you gain instant access to Amazon‘s hundreds of millions of customers. But competition is fierce, with over 2 million active resellers on the platform.
With the right strategy though, reselling through Amazon can become a highly lucrative business. In 2021 alone, first-party (Amazon direct) and third-party (reseller) sales totaled $617 billion! [1]
How to Get Started as an Amazon Reseller
If you want to tap into the huge revenue potential, here are the key steps to launch your own Amazon reseller business:
Choose Between Individual and Professional Seller Accounts
You first need to register for a seller account, which is free. There are two main options:
Individual account
- Best for new sellers fulfilling <40 orders per month
- $0.99 fee per item sold
- Basic selling tools and reporting
Professional account
- For established sellers fulfilling >40 orders per month
- $39.99/month subscription fee
- Advanced tools and capabilities
I recommend Professional accounts for most sellers because the time savings from features like bulk listing and expanded analytics far outweigh the small monthly fee.
Select a Profitable Product Niche
Conduct thorough product research to find lucrative niches that fit your interests and expertise.
I suggest using tools like Jungle Scout‘s Product Database to analyze factors like:
- Estimated sales volume and revenue potential
- Competition levels
- Average pricing
- Opportunity to differentiate
It often works best to start small in a specialized niche rather than selling a broad range of products.
Source Reliable Suppliers and Inventory
Securing quality inventory at low wholesale prices is crucial for generating strong profit margins.
Great supplier sources include liquidation sites, Alibaba, Made-in-USA wholesalers, local stores with surplus inventory, and manufacturers.
I recommend starting with small test orders to validate suppliers before spending big. Prioritize building relationships with suppliers over simply chasing the lowest prices.
Create Optimized Listings
Write compelling listing titles and enhance entries with detailed descriptions, bullet points, high-quality photos, comparison tables, videos and other content.
Making listings shine helps drive conversions and sales. I routinely A/B test listings to identify improvements.
Ship Inventory to Amazon Fulfillment Centers
Send your inventory to Amazon FBA warehouses, carefully packaged and labeled. This enables Amazon to handle fulfillment and customer service.
Amazon has over 175 fulfillment centers worldwide, which provides extensive geographical reach. [2]
Manage Your Business and Inventory
Registering as a seller is just the first step. Ongoing tasks include:
- Monitoring inventory levels and sales in Seller Central
- Adjusting prices to remain competitive
- Promoting products through advertising and marketing
- Providing excellent customer service
- Analyzing performance and costs to optimize profit
This work is essential for growth and success over the long-term.
Costs and Fees for Amazon Resellers
When weighing whether to sell on Amazon, it‘s important to thoroughly understand the various fees involved with the reseller program:
Referral Fees
Amazon earns referral fees on each sale, which are a percentage of the total sales price paid by the customer.
Referral fee rates vary by product category:
- Books, DVDs, Music – 15%
- Electronics – 8%
- Home Improvement – 15%
- Kitchen – 15%
- Sports – 15%
- Tools – 15%
- Toys – 15%
- Video Games – 15%
- Watches – 12%
The minimum referral fee is $0.30 per item sold.
Based on my product mix, I budget an average of 12% of sales for referral fees.
FBA (Fulfillment) Fees
For sellers using Fulfillment by Amazon, there are fees for storage space, order processing, and shipping. These include:
- Inventory storage fees based on product size and volume
- Order fulfillment fees per unit ($2-$5 range is typical)
- Potential monthly inventory management fees
- Shipping and delivery costs
FBA fees vary significantly by product dimensions, weight, and category. Larger and heavier products come with much higher fulfillment costs overall.
Subscription Fees
Professional seller accounts have a $39.99 monthly subscription fee. Individual sellers pay $0.99 per item.
Other Potential Fees
Other fees that may apply:
- Closing Fee – $1.80 per media item (books, DVDs, etc)
- Return Processing – About 20% of the referral fee is deducted for refunds
Estimated Overhead
As you can see, fees add up quickly. Here is a rough breakdown of overhead:
- Referral fees: 10-15% of sales
- FBA fees: 15-30% of sales
- Subscription: $40-80/month
- Other: ~5% of sales
So for a $50,000/month seller on Amazon, overhead runs around $8,000-$12,000 per month.
Tight margins make efficient operations and cost control vital for profitability as a reseller.
Inventory Management Tips and Strategy
Managing inventory is an ongoing balancing act for Amazon resellers. You want sufficient stock to meet sales demand without getting stuck with slow-moving products.
Here are my top tips for optimizing inventory management:
- Review inventory reports and forecasts daily to spot trends. Stock up on fast-moving products.
- Set reorder points so you automatically get notified when stock is low. Don‘t wait until it‘s out-of-stock.
- Take advantage of volume discounts from suppliers when replenishing inventory. But don‘t over-order.
- Remove slow sellers from FBA during low-volume months to reduce storage fees.
- Use the First In First Out (FIFO) method to process older inventory first.
- Destroy, donate or liquidate aged, damaged and obsolete inventory. Don‘t let it accumulate.
- Consider using Amazon‘s MCF (Multi-Channel Fulfillment) to consolidate inventory.
- During peak sales periods, use FBA‘s inventory placement service to push stock to high-demand regions faster.
The inventory turnover rate is one of the most important metrics to monitor. The higher the better.
Shoot for at least a 3-5x turnover rate annually in most niches. [3]
Handling Returns and Refunds
Accepting returns and quickly resolving refunds is expected on Amazon. As a seller, you want to minimize losses from returns and fraud.
Here are some best practices:
- Closely review return claims. Push back on invalid reasons with clear evidence.
- Enable Amazon‘s automated return program where possible. This simplifies processing.
- Restock returned items in good condition. Don‘t refund until you receive the product.
- Destroy and discard fraudulent, used or damaged returns. Do not resell products in poor condition.
- Monitor return rate trends for high-risk products. Consider removing ones with excessive abuse.
- Compare your return rates to similar listings and identify if your policies need adjustment.
I aim for a return rate under 5% in most categories. Higher than 10% warrants investigation into root causes. [4]
Amazon Reseller Marketing Strategies
Marketing is crucial for differentiation and driving sales. Options for promoting products include:
- Optimized listing content – enticing titles, detailed text, helpful images
- Enhanced Brand Content – additional videos and images
- Promotions and coupons
- Sponsored product ads
- Amazon DSP ads
- Early reviewer program
- Amazon stores
- External traffic sources – email, social media, affiliates
I find sponsored product ads to be one of the most cost-effective ways to increase sales.
Start with an initial budget of $100-$200 per month for each top listing. Monitor performance and increase budgets for profitable campaigns achieving a 50% ACoS (advertising cost of sales) or better. [5]
Keys for Long-Term Success on Amazon
Sustaining an Amazon reselling business takes significant effort. Based on my experience, these tips are critical:
- Continue expanding your product catalog – don‘t become complacent.
- Stay obsessively focused on customers and providing amazing service.
- Monitor competitor actions and position competitively.
- Keep testing new marketing initiatives and creatives.
- Maintain lean operations and keep a hawk eye on costs and cash flow.
- Develop contingency plans for account suspensions, algorithm changes, or fee adjustments.
- Consider expanding to other sales channels beyond just Amazon. Don‘t put all eggs in one basket.
- Keep researching new tools and strategies. Don‘t get stuck in a rut just doing what worked previously.
On Amazon, standing still means falling behind. You need to continually evolve and optimize to grow over the long-haul.
Pros and Cons of Reselling on Amazon
Let‘s recap the key advantages and disadvantages:
Pros
- Access to hundreds of millions of buyers
- Fulfillment and customer service infrastructure
- Useful analytics for product research
- Flexible pricing, promotion and branding options
- Ability to scale up rapidly
- High brand recognition and trust
Cons
- Fierce competition and tight margins
- Account suspension risks
- Constant monitoring and management required
- Potential flooding of your niche
- Rule changes or fee hikes can quickly impact profitability
- It‘s harder than it looks – significant effort required for success!
Weigh these factors carefully in your own decision to start reselling on Amazon.
For sellers willing to put in the work, the huge audience makes it appealing. But it‘s certainly not a passive source of income!
Conclusion
I hope this detailed guide provided an insightful overview of selling on Amazon as a reseller. The program provides immense opportunity, but also requires dedication to thrive.
Choose a focused niche, secure reliable suppliers, create standout listings, provide amazing customer service, and manage the business diligently. Learning is ongoing.
If you commit to continuously honing your craft as an Amazon seller, the financial rewards can be tremendous.
Let me know if you have any other questions! I‘m always happy to share more insights from my experience as an Amazon seller.