In the previous lesson, we talked about the Amazon marketplace and the myriad ways in which the platform has become a go-to for ecommerce sellers to grow and expand their business across markets and find new customers.
A lot of eCommerce sellers feel apprehensive at this point. It is understandable since Amazon has grown to become a highly competitive platform for online sellers from all over the world. However, even as the number of sellers keeps going up, so does the revenue rate, meaning the number of sales you can make and customers you can reach is also increasing.
In this article, we’ll take a look at how Amazon sellers make money, the different pricing models that exist along with the general cash flow and profit margins that third-party ecommerce business owners make using the platform.
What are the two types of Amazon seller plans?
Before we get into sales and profits, we need to take a look at the two major types of Amazon FBA plans that eCommerce sellers can avail. Let’s give you a straightforward review of both seller models before we discuss how much money a typical Amazon seller can make.
Individual Seller Plan and Professional Seller Plan
The individual seller plan is ideal for beginners or start-up business owners, who sell an average of 40 or less products per month. The professional seller plan is highly preferable for more seasoned business owners who experience a trend of selling more than 40 units on average each month.
The individual seller plan doesn’t come with a monthly subscription plan. Rather, Amazon charges goods at a $0.99 per item sold basis.
The professional seller plan, on the other hand, includes a $39.99 monthly subscription fee in exchange for and covering an unlimited number of goods. It also comes with a host of other additional benefits aimed at seasoned ecommerce sellers who have a fair grasp of the market and a solid footing in business. These include inventory management, order management, promotions and gifts etc.
Understanding the difference
Let’s take a proper look at both seller plans. Let’s say you were an individual seller who averages 25-35 products a month at best. Assuming you’d like to test how business is doing before you fully commit, you might prefer a less riskier option. This is essentially what the individual seller plan is: a less risky option for beginning ecommerce sellers.
Now consider the case of an accomplished ecommerce owner looking for a way to expand the business. If you already average more than 40 products a month, then it’s fair to say that $39.99 is just slightly less than the least number of sales scenarios if the items were individually priced.(40 x 0.99 = 39.60).
However, in the case of a professional seller plan, the cash flow margins become a lot more bigger and the gap widens as the number of products sold increase. Why? Because the subscription fee is fixed and doesn’t change with sales.
So we could say that the Individual seller plan is best suited for beginners keen on testing Amazon marketplace. The professional seller plan is aptly suited for ecommerce owners who already have a successfully running business operation or have goods priced high enough to afford the subscription fee.
If you’re going to choose the professional seller option, you’d better be going in with a growth mindset and be ready to implement strategies to sustain your business as it gets bigger. It is designed for sellers focused and actively engaged in building the business and running it regularly.
How much do Amazon FBA sellers make?
A key reason why ecommerce sellers prefer the Amazon FBA program is because it simplifies the process and takes a huge load off the business owner’s shoulders. You only have to worry about setting up your listing and getting your product to Amazon warehouses nearby.
However, there are several extra charges that come with each sale you make on Amazon. These could be referral fees, shipping costs, special fees etc.
Deducting all of the above and the subscription charges/individual item charges, most new Amazon sellers make somewhere between $25,000 to $800,000, depending on a variety of factors. There are a lot of variables involved which make it difficult to give a precise amount, obviously. However, the above mentioned range gives you a rough idea of how sellers are doing.
Around half of Amazon sales are from third-party sellers who use the Amazon Marketplace platform. A study revealed that more than 60% of new Amazon sellers were able to increase profits in 2020. The same study showed that more than 80% of the sellers were willing to keep using the platform to increase their income..
How much do Amazon sellers make?
People sell on Amazon for a variety of reasons. Some look at it as a way to earn more passive income. Other, more successful sellers make the transition from 9-5 corporate workers to full-time online business owners. Regardless of their reasons, selling on Amazon has become an essential income for many business owners.
What are the average monthly sales and profits for Amazon sellers?
Based on data from various studies, here are a few projected sales outcomes from Amazon ecommerce sellers.
An average Amazon seller can make a minimum of $1000 in monthly sales. More successful vendors have been able to do exceptionally well, with sales ranging from $200,000 – $250,000. However, these are the exceptions, not the norm.
Which is why a healthy expectation can be set at $1000 at the very least, and a maximum of $25,000. This is assuming that you own a small-scale business and plan to grow from there. A lot also depends on how popular your product is, shipping costs, where your customers are based and pricing ranges.
One study revealed that close to 70% of Amazon sellers had profit margins higher than 10% of their sales in 2020.. This is inclusive of all platform-related fees and charges. If your product is in relatively high-demand and you haven’t overpriced it, you can reasonably expect a profit margin ranging from 5%-15% at the very least. Profit margins can exceed 20% and go way higher provided that there are favorable conditions.
How long it takes sellers to start earning profits
A large majority of Amazon sellers (More than 60%) are able to profit from their sales within the first year itself. More than 50% of new sellers were able to make relatively good profit margins during 2019 and 2020.
An overwhelming majority of existing Amazon sellers (more than 80%) have continued to use the platform for their businesses.
Tips to boost sales on Amazon
So far we’ve talked about what you can expect to accomplish by selling on Amazon. Now that you have a general idea of how much Amazon sellers make on average, let’s move on to the various tips and techniques you can use to increase sales on the platform. Remember, these are just a few guidelines that can help inform your strategy.
Amazon is a globally accessible platform with over millions of users. So it’s no surprise that there’s relentless competition out there for just about every product imaginable. Smart pricing is a key factor that can help influence customers and make your brand stand out.
It is important that the price you set seems reasonable, reflects the worth of your product, doesn’t compromise too much on profit margins but doesn’t make what you’re selling too cheap either. A lot of customers feel hesitant about the quality assurance of online shopping. Make sure that you cater to your audience but don’t undersell your product.
Remember, a good pricing strategy is also about raising the price sometimes. In the end, your goal isn’t solely to make the highest number of sales, but the best possible revenue.
Optimise the Title and Product Description
A poorly written product listing can cost you a lot of sales and revenue if you’re not careful. Selling online isn’t just about listing your product. It involves making your proposition look attractive enough that it makes customers want to check it out.
Potential buyers are easily turned away by simple yet basic mistakes such as spelling errors, grammatically incorrect sentences, and just bad copy in general. You definitely need to avoid lengthy descriptions. Big walls of text won’t do you any favors because buyers typically skim through them.
Keep your USPs at the forefront and make sure your writing is brief, crisp and clear. Above all, try to avoid any possible confusions about the nature of the product,
Using bullet points to list features and benefits is a good way to keep things straightforward. Another thing you can do is use catchy yet accurate messaging. Also try using other formatting tricks such as bold text, capital letters etc. to highlight key sections.
Mobile appearance matters
Ecommerce sellers often forget that most customers shop on their smartphones. Optimising your listing to stand out and attract viewers is very important. Your title is your highlight. The more attention-grabbing it is, the higher your leads will be.
Try not to stuff too many unnecessary details into the title. You can save all that for when they finally click on it. Your goal with the title should be to get them interested and take action.
At the same time, the title is where the keywords are emphasised so make sure you’re using generic but accurate terms that customers are actually searching for. This is where you’ll need to do keyword research and try out variations of long-tail keywords.
Promotions on Amazon help a great deal in making your brand stand out. Customers are always on the lookout for better deals. If you have too many funds tied up into your inventory that remains unsold, you could try going with a lightning deal to boost sales and clear out leftover stock.
Not only does this help you gain an edge in the market, it also helps you rank higher. The more frequently customers access and review your product catalogue, the higher up you appear on the search results.
Optimize across devices
A lot of thought and effort goes into getting customers interested in your product. There are way more smartphone users than desktop users who prefer ease of access and convenience.
It’s important that you test how your product listing appears on different devices. Try to think from the customer’s perspective about the impression it makes. Get feedback from others on whether the title is clear and attractive enough.
Getting bad reviews can be tough. However, they also give you an idea about what customers want and what they are looking for. Use feedback, even the most overtly critical ones, as a way to constructively remodel and reshape how you sell your product. Find out and list the major concerns your buyers have and use it to improve what you sell and how you sell it.
Keywords to drive traffic growth
Popular search terms are a gateway into the customer’s mind. There are a plethora of keyword and SEO tools out there that help you research and find out what keywords are trending.
Find long-tail keyword variations for your product that help you drive unprecedented traffic.. Get familiar with the different features and specs that your customers are looking for. Eg: size, budget, color etc.
Check where you rank on important keyword-based search lists. Most importantly, find ways to use the right keywords in a way that doesn’t compromise your sales copy. Paid promotions can be great for certain businesses. However, its best to try and boost your relevance organically first and see how far up you can grow.
Sync Inventory Across Platforms
Most online business owners don’t limit themselves to a single platform. They sell across different portals to maximise sales as much as possible. Syncing all your product inventory across different platforms such as Amazon and others can be a great way to keep track of overall sales. You’re also able to maintain a consistent tone throughout your descriptions and make changes effortlessly.
There are many good third-party software providers that help you sync ecommerce store, websites and shopping platforms across the board. This way, your entire inventory is viewed as part of a cohesive whole.
Experiment and Evolve
Winning on ecommerce platforms like Amazon is all about experimentation. Be sure to check reviews and test different images and product descriptions to see which ones click. You could even conduct polls from time to time and see what makes your product attractive to most users and how you can improve.
You can promote your brand outside the platform too. This is where you’ll have access to a different and almost entirely new audience. There are plenty of online shoppers who aren’t shopping on Amazon.
Showcasing your product by casting your net far and wide is one of the surefire ways to gain a bigger consumer base. It also helps tremendously with increasing brand exposure – which is very important for a business in the start-up phase.
Promotions can include exclusive promo codes offered on a non-Amazon social media platform where you offer customers a certain percentage off when they make the purchase by clicking on the link. Not only do these extra sales increase your monthly revenue gains, they also help boost your ranking on Amazon, organically.
Eye-catching Product Photos
Product photography is one of the most worthwhile things you can invest in, if you’re selling on an online platform like Amazon. Keep in mind that for every product you put out there, a customer can find thousands of other similar ones. The competition can be overwhelming. So how do you stand out?
The fastest way to get your potential customer’s attention is by using attractive photos. You don’t have to go out of your way to shoot in a studio setting. You just need to pay attention to certain details that enrich the way your product appears on the site, such as:
- Make sure your product is set on a well-lit setting but try not to overdo it with high-exposure images. Keep the lighting soft and balanced, preferably somewhere close to the window, where you can leverage the neat contrast.
- A lot of first-time sellers use flash mode when they shoot product images, giving it a very amateur appearance that hardly gains customer confidence. Try to get your product photos during daylight with as much natural light as possible.
- Shooting on a smartphone is okay, as long as you have a steady hand and the image comes out looking clear.
- There is no one-size fits all method. No hard and fast rules. Try not to be a perfectionist. Shoot from multiple angles and various settings and don’t be afraid to experiment with the camera.
- Get images of your product from various lifestyle settings to demonstrate how customers can use it. This adds a practical dimension to your marketing that most sellers often tend to overlook.
- Try to keep your background as neutral as possible, offering a good contrast with the product’s color. You want your customers’ eye to be drawn towards the product, not the background.
So far we’ve talked about the wide variety of opportunities Amazon sellers have to make money. We also covered several practical tips to boost sales on the platform. In the next lesson, we’ll be looking at which industries thrive the most on Amazon, and which products are the most profitable for different sellers.