One of the first and most frequent questions we hear from business owners is a version of “Hey Zanoma, how does my company even begin to get started selling on Amazon?”
Believe us, we get it, and we certainly understand the motivation. Both new and established brands are eager to create, nurture, and strengthen an Amazon presence and use it mainly as a tactic to leverage the incredibly large (and growing larger all the time) and enthusiastically loyal customer base that Amazon has built over the past 20-plus years.
And by now even cave dwellers understand that Amazon is consistently delivering remarkable customer traffic. In fact, during the fourth quarter of 2016 more than 70% of US consumers said that they planned to complete at least a portion of their holiday shopping on Amazon.
Why selling on Amazon is a viable option?
Amazon’s customer service and general ease of use are unparalleled. With a reported 63 million Prime members in the United States as of January 2017, Amazon Prime members now make up more than half of Amazon’s customer base. This is an increase of more than 20 million from the summer of 2015.
Amazon Prime and initiatives
Amazon Prime customers receive bells and whistles including exclusive video content, HBO programs, streaming music, free shipping, and personal photo storage. These are exclusive to Prime subscribers only and, in turn, those Prime customers have become hyper, hyper-active shoppers (and yes, that second, extra “hyper” was intentional). What does that mean and how does it translate? Prime customers spend about $1200 per year on average, almost tripling the roughly $500 per year for the non-Prime Amazon shoppers.
As we move into the first half of 2017, the fun only continues. Take, for example, the following list of Amazon initiatives and, in some cases, unsubstantiated bits of speculation:
- Rumors of a nationwide chain of Amazon Fresh grocery stores continue to heat up. Kroger, Albertsons, Wegmans and others must be quaking in their boots. Need we say anything more about Walmart following their desperate move to acquire Jet.com to jumpstart their e-commerce operations?
- Amazon Prime Now (offering FREE 2-hour delivery) is available in and around almost 30 major US cities.
- With the beta-launch of the high-tech Amazon Go convenience store last year in Seattle, where, get this, there are no checkout lines; Amazon is redefining and streamlining the bricks-and-mortar retail landscape it was supposedly bound and determined to decimate just a few years back.
Amazon Go convenience store
And while we’re on the topic of Amazon Go, which is, at the time of writing (March 2017) only open to “blue badgers” (aka Amazon employees). It has a game-changing approach in that there are no cashiers and as noted earlier, no checkout lines. To purchase their items at the Amazon Go store, shoppers simply need the Amazon Go app on their smartphone. As you walk into the store, your app is detected, and you begin the shopping experience. Once a shopper has selected items from his or her list, you’re essentially good to go.
Amazon’s fancy-pants smart tech carefully tracks the shoppers’ selections and then automatically bills that customer’s Amazon account. Amazon Go’s tech includes computer vision and machine learning and is smart enough to know whether an item was removed from the shelf and or if two shoppers reached for the same item at virtually the same time. This should take shoplifting out of the equation (unless the thief managed to grab your smartphone in the parking lot).
So, plenty of ammunition for investor and customer excitement. Remember that $1200 per year Prime spending data point? Wouldn’t it be fun and insightful if Amazon were to release similar info related to Prime member spending levels in Prime Now markets? Amazon has ALL that data; I’d be curious to see just how many more additional dollars are spent in and around those 30 cities.
Amazon: The Juggernaut
Amazon, oh Amazon, the e-commerce juggernaut. Amazon just continues to get stronger and more powerful. Their infrastructure “moat” gets deeper and more shark-infested and we all anticipate even more science fiction-inspired and as yet unimagined technology keying off of Amazon Web Services (AWS) and Alexa (their voice-activated Siri-like AI bot).
And the proof or evidence to Amazon’s increasing strength is not just in market cap dollars or artificial intelligence, but also in the trophy case. Year after year (and just like clockwork) Amazon is also named America’s most reputable company. At this stage, can anyone with a straight face really question this proven formula for success?
To put it simply, for many online, and soon, offline shoppers, Amazon will be, inevitably, the ONLY place they shop.
Antonio Sciuto, Executive Vice President and Chief Marketing Officer of Nestle, probably put it best last year when he said: “Amazon plays an amazing role in the US ecosystem, because it’s not only a retailer or media channel, but it is becoming the most important search engine in the US.”
So how do I get started selling on Amazon?
But back to the main question of this piece: “How do I get started?”. When it comes to staking a claim on Amazon, it’s important to first, and realistically, consider your company’s goal, accompanying retail strategies, your production capacity, and, finally, cost structures. While Amazon is indeed an amazing and dynamic marketplace, it’s not for every company and every situation, and we can explain why that is.
Key Questions to ask yourself before you begin:
- Are you the owner or manufacturer of the brand or product you’d like to sell on Amazon?
- Are you a retailer or distributor of the brand or product you’d like to sell on Amazon?
- If you answered yes to question 1, do you have the production capacity to quickly scale your inventory levels and react to Amazon customer demand?
- If you answered yes to question two, does your retailer agreement even authorize and/or allow you to sell on Amazon?
Your answers to these questions should serve to lead you down a logical decision path to one of two Amazon selling platforms – Amazon’s Vendor Central and/or Amazon Seller Central.
Amazon Vendor/Seller Central
If you’re the owner or manufacturer of the brand or product, Amazon Vendor Central/First Party (1P) is likely your best option. Amazon’s Vendor Central is where companies that enjoy a direct relationship with Amazon go to conduct their daily business after they’ve received a vendor invite.
Amazon Vendors sell products directly to Amazon. Amazon issues purchase orders to these vendors (usually every week, 52 weeks a year) and the vendors fulfill those purchase orders and ship their products directly to Amazon’s ever-growing assortment of mega-warehouses (in Amazon parlance, these are known as Fulfillment Centers).
In case you’re curious as to how you (as a customer) can quickly learn to spot a First Party offer, be on the lookout for the words “Ships from and sold by Amazon.com.”
In addition to the “Direct/First Party” selling platform which you now know is powered by Amazon Vendor Central, Amazon customers can also buy products that are owned and fulfilled by other Third Party seller and retailers. You can often see offers for those products right alongside the “Ships from and sold by Amazon” products and generally right below the “Other Sellers” section of the Amazon product detail page.
The benefit of Third Party sales for Amazon, besides increasing the total overall number of products listed within their website catalog, is that Amazon also takes a percentage of the sale even if they (Amazon) didn’t sell the item.
Amazon provides the selling platform, delivers the customer traffic numbers and also makes a nice profit. In many cases, Amazon fulfillment services also ship the product to the customer. This is the “Third Party” or “Marketplace” seller platform, and it’s proven to be an incredibly high-margin and very profitable business line for Amazon.
Third Party (3P) sellers and merchants conduct their daily business with Amazon via an interface dubbed “Seller Central”. On Amazon’s Seller Central platform, companies are able to utilize Amazon’s self-service tools to display their products on Amazon detail pages. In the Seller Central (3P) realm, Amazon takes a cut of the purchase price while enabling companies to create storefronts on their website. Again, sellers do this mainly to leverage all of that daily customer traffic, and it’s an effective tactic for Amazon to expand their product listings and to add some high-margin revenue to their bottom line.
The Bottom Line: Know the structure of your business
In summary, the answer to the big question of this piece (“How do I get started on Amazon?”) will be determined by both the structure of your business (manufacturer vs. distributor or retailer) as well as a combination of your goals and short-term needs. Please also understand that, in many cases, a hybrid model that leverages both 1P/Vendor Central and 3P/Seller Central is worthy of consideration.
Bottom line: The barrier to entry is much lower via Third Party/Seller Central, and therefore 3P may prove to be your company’s quickest path to a live and active detail page on Amazon. If you’re savvy enough to leverage the power of FBA (Fulfillment by Amazon) as a component of your Seller Central account, you can also take advantage of an Amazon Prime-eligible offer virtually right out of the gate.
We can help!
Don’t worry if you’re still a bit unclear on the necessary steps that all factor into how to get started. We are happy to help! The team at Zanoma has vast experience in all aspects of the Amazon Marketplace including both Vendor Central and Seller Central. We are comfortable working with potential clients, to initiate conversations, ask the necessary questions, consider all of the variables, and, ultimately, to review all pieces of necessary data to ensure that you make the most strategic decision based on the goals and fundamentals of your business.
Again, we’re eager to share our knowledge and experience so you and your brand can begin to take advantage of the world’s most powerful shopping search engine (aka Amazon.com).
Please explore our website for even more details about the work we do, who we work with, or to learn more Amazon Vendor Central and Amazon Seller Central.
Thanks for your time and happy selling on Amazon! If you have specific questions or would like to see a deep-dive on an Amazon-related topic for a future blog, please contact us today.