It is no secret that Amazon is one of the biggest online shopping platforms in the world, offering sellers access to millions of potential buyers and unparalleled visibility in the global virtual market. In this lesson we’ll be discussing the Amazon marketplace, its advantages and the two different approaches to selling on the platform.
What Is Amazon Marketplace?
Simply put, it is the platform dedicated to ecommerce sellers where they can promote and sell their products on Amazon. In other words, it is the online shopping portal’s seller interface.
To the online shopper, it makes no difference since both Amazon products and third-party seller’s products appear on the same domain: Amazon.com. However, every time a buyer makes a purchase from Amazon Marketplace, the payment goes to the third-party seller to whom the product belongs, after deducting a portion of the sales revenue as commission for using the platform.
So in a nutshell, Amazon marketplace offers business owners to promote and sell their products online on one of the most popular and widely used ecommerce platforms in the world; Amazon.
How does Amazon Marketplace work?
The following is a simplified 4-step process that describes how Amazon marketplace works:
- Start by registering an account on Amazon Seller Central. This is the portal or the dashboard through which you manage your professional Amazon retailer account. It allows you to put up an unlimited number of products for users to find. In return for the services, you are charged with a monthly subscription fee that amounts as well as a commission for each sale.
- Once you register your account, you may add product sheets for your retailer menu in the Amazon marketplace.
- Use your Amazon seller central portal to manage orders, optimise your marketing and customise how your products are showcased.
- Dispatch orders for delivery. You can manage this yourself or allow the platform to do it on your behalf. This is known as the FBA (Fulfillment By Amazon) option. In other words, you can minimise the need for storage and physical on-site warehouses in exchange for a percentage of the sales.
How Do You Sell Products on Amazon?
There are two ways you can sell on Amazon:
Amazon Vendor Central
Here, you get to sell your products directly to Amazon, which then sells it online through Amazon.com. The company buys the products from you at wholesale rates. The program has invite-only access and caters to wholesalers and producers rather than retailers.
Amazon Seller Central
This is ideal for retailers who’d like to sell online directly to customers through the Amazon platform. As previously mentioned, Amazon charges a share of the profits on each sale in exchange for allowing ecommerce sellers to list, promote, manage and sell products on the site.
The Vendor Central option actually allows producers and wholesalers to market and sell inventory in bulk, without having to worry about marketing and the logistics of delivery.
In short, business owners who use Amazon Seller Central maintain ownership of their products unlike members of Amazon Vendor Central.
Inventory and Fulfillment
When you register as a member at the Amazon Marketplace and start out as an ecommerce seller, there are two ways you can choose to manage inventory and delivery.
FBM (Fulfillment By Merchant)
This is the default status where the seller takes care of inventory management, storage, shipping, delivery and customer care. It gives you more control over your business. In this case you’d only be using the platform as a medium to attract customers, promote your products and make sales.
Benefits of FBM include:
Inventory access and ownership.
You’d have total control over your product even while you market it on Amazon. Any concerns can be addressed at the source itself which can help you cut back on some of the loss.
FBA services aren’t free. Managing your own inventory the traditional route saves up on the storage and fulfillment charges when you choose to sell through FBM.
Profit margins are relatively lesser when you have to pay another party for storage and fulfillment. FBM allows you to retain a higher percentage of the profits while also using the platform as a gateway to find customers for your product.
Some stores are approved by Amazon based on excellent performance. They are called Seller-Fulfilled Prime. They increase visibility for your brand and boost sales while allowing you to retain profit margins that you’d otherwise have to give up for storage and fulfillment costs.
FBA (Fulfilled by Amazon)
On the other hand, you can go with the FBA option (Fulfilled by Amazon) where ecommerce sellers can ship their goods to Amazon-owned fulfillment centres. The company takes care of the rest. This includes getting customer confirmation, product packaging, shipping and delivery.
FBA brings the brand trust associated with a large corporate giant like Amazon. More customers are likely to buy online when they know that a reputed brand takes care of storage, packaging and delivery.
Benefits of choosing FBA
The program considerably saves hours of work for third-party ecommerce sellers who are looking for ways to get their products out to customers without losing too much capital in the process.
Attracts Prime members.
Prime customers are willing to pay more to get products faster. This is why the FBA program offers free shipping for Prime members.
Boost in Sales
The platform understandably gives preference to FBA products over others in its algorithm. So if you’re looking for ways to increase sales through Amazon, FBA is an ideal way to do it.
Ecommerce sellers in the start-up phase often have trouble dealing with new customers. You may be short-staffed or running low on time to manage customer queries and confirmation procedures. FBA helps solve that problem by managing all of that for you.
This is a consignment program where ecommerce sellers can promote and sell media products such as books, music and DVD through the platform. You need only ship your products directly to Amazon.
Difference between Amazon.com and Amazon Marketplace
Let’s help you differentiate between Amazon and Amazon Marketplace so no future confusion remains.
Whereas Amazon.com is a giant online retailer corporation, Amazon marketplace is a network of third-party online sellers who use the domain to sell their own products.
Amazon.com is the ecommerce platform that can be accessed as a website and as an application on any smart device. Amazon marketplace is the interface that allows third-party ecommerce sellers to list, promote and sell their products on the Amazon website. Products sold on Amazon through Amazon marketplace are owned by third-party sellers.
Another key difference is that Amazon-owned products will always be new whereas third-party ecommerce sellers can sell both new and old products on the site through Amazon Marketplace.
A key point to note is that when you shop on Amazon, you’re actually browsing through Amazon’s own product inventory mixed in with a product inventory of individual third-party sellers. It’s just that the ecommerce seller market isn’t instantly recognizable from Amazon products because both markets are integrated into the platform.
This is the reason why customers have a very wide range of the same products to choose from. It also keeps the price range in check, with multiple sellers competing with each other as well as with Amazon-owned products.
When you sell a product as a third-party retailer on Amazon through Amazon marketplace, you retain most of the profits except for a portion that goes to Amazon as a service charge for using the platform. On the other hand, All Amazon-owned products sold on the site go straight to Amazon.
Third-party sellers on Amazon marketplace can cash in on the platform’s widespread popularity and far-reaching customer base of millions across the world. Any business owner, regardless of size or space can add, list, manage, promote and sell their products on the Amazon Marketplace once they create an Amazon Seller Central account or an Amazon Vendor Central Account.
What is Amazon Listing?
These are your product listings on the website that typically include two types of information.
This will be the generic product-related information for common brands listed across the platform. For instance, the same product information displays for a particular brand of mobile phone cases, even if the sellers are different.
This is where the user can access product information that’s specific to the seller, such as item number, price, shipping method etc.
Benefits of using Amazon Marketplace
Easy to set up
Setting up an account as a seller on Amazon Marketplace is pretty simple and straightforward.
The website, infrastructure and customer base already exist, at scale and across the globe. You’d just be tapping into it with your own offerings as an ecommerce seller.
Unique products get boosted significantly
As Amazon takes care of the complicated task of logistics, small businesses with unique propositions are able to focus more on improving their products and engaging with customers better. This in turn leads to a rise in demand for quality products.
Incentive to make better products
A great deal of investment that would usually be expended on setting up infrastructure and delivery chain systems can be channelled into building a superior product for the market.
It also encourages brands to build better products that justify a greater profit margin, since a hefty portion of it will be going to Amazon.
Imperative to join for growth
Amazon has managed to uniquely position itself as the go-to online service for ecommerce shopping. Small businesses now have to compare the relative benefits of building their own local consumer base from scratch as opposed to using an already established, globally recognized ecommerce platform.
Amazon Marketplace has undeniably become a force to be reckoned with in today’ world of ecommerce. Small-to medium business owners looking for opportunities to grow online should definitely look into the potential the platform offers and weigh the pros and cons of becoming a member. Whether or not you’d like to team up with Amazon for future growth or would rather manage and sustain yourself independently, it is well worth considering.