Amazon is the world’s largest marketplace, offering third party sellers a chance to participate in more than $150 billion in annual sales. But unlike marketplaces of the past or more open-ended markets like eBay, Amazon has a number of rules and regulations you’ll need to follow before you are even approved as a seller on the site.
To help you prepare for the process of setting up an Amazon Seller Account, we’ve outlined four things you need to know to get started.
1. Should You Become an Amazon Merchant?
The first question isn’t even about how to sell on Amazon, but whether you should at all. While Amazon’s marketplace is immense and incredibly active, there are certain types of sellers that perform better on the site than others, and certain situations that may make it less beneficial to open your account.
So, who does best?
Those people who can sell items Amazon doesn’t carry on their own. This can fall into one of three categories:
- Unique Items – If you manufacture goods that aren’t in larger distribution channels (or craft homemade items from your home), Amazon offers an opportunity to leverage a massive platform and push your products out to the masses.
- Niche Items – Are the items you sell extremely hard to find otherwise or only desirable among a small userbase? Amazon is less likely to carry these items, so you can capture the market for them if there is limited competition.
- Used or Refurbed Items – If you sell used items, refurbished goods or other non-new items, there is a huge opportunity for you in a lot of categories on Amazon.
Amazon shouldn’t be your only outlet, either. People will do their research and look up your company name, especially for used items. Have a brand that has been established and can be evaluated before someone makes a buying decision.
2. Fulfillment by Amazon
Another area that Amazon is able to outperform its competitors in recruiting third party vendors is their Fulfillment by Amazon (FBA) program. Merchants can send goods to Amazon fulfillment centers to be stocked, so that when a user buys them, it can be shipped out through the Prime program. Users can get goods faster, leveraging Amazon’s logistics infrastructure, and you can focus on what you do best and not worry about shipping and handling.
FBA is a major benefit for the right vendors but has several requirements you should read up on before you start the process of signing up.
3. Shipping Requirements
If you opt not to become an FBA seller, or if you cannot for some other reason, there will be some restrictions for first time users. You won’t be allowed to offer two-day shipping until your account has established a strong history of good user reviews and reliable shipping windows.
At the same time, it’s incredibly important to ensure all of your product details are accurate, including the shipping materials you will use for the items. Amazon’s shipping calculations are automated based on size and location, so inaccuracies here can lead to lost revenue.
4. Sales Tax Collection
In the early days of Amazon as a third-party marketplace, sales tax collection wasn’t a major concern. These days, it is something almost all vendors need to be aware of and prepared for.
Since the June 2018 Supreme Court decision in South Dakota v. Wayfair, Inc, an increasing number of states have implemented affiliate nexus laws that require all sellers to collect sales tax on their sales, regardless of vendor location. Amazon was already working with many states that had laws before the ruling to do so and was collecting sales tax in all states where fulfillment centers were located (establishing physical nexus).
In some ways, this simplifies things somewhat as the infrastructure is already there. However, because of the implementation of marketplace facilitator laws that require Amazon to collect sales tax on the behalf of many of their third-party vendors, it’s important for you to know which states require collection and which don’t, and which states will require registration for sales tax collection.
Even if you only sell goods on Amazon, there is a good chance these new laws will affect you, so do your research before you start your account.
Leveraging Amazon’s Platform to Grow Your eCommerce Business
There are few tools as powerful and with as great a reach as Amazon.com. If you own an eCommerce site or are launching a new company that sells unique, DIY, or specialty goods, becoming an Amazon marketplace seller is a prime way to grow your reach overnight and start growing your business. Just make sure you are fully aware of what this will require, what costs may be associated, and what your reporting and collection requirements will entail.