Current state of the e-commerce market
Now is a great time to get into the e-commerce business. Global e-commerce sales are expected to increase nearly 14% in 2021 and the first quarter saw +39% YoY growth. Sales are predicted to reach $4.2 trillion by the end of the year, according to the Adobe Digital Economy Index. This increase is partly due to the fact that the pandemic shifted consumers’ behavior— with most people spending an extra hour online per day in 2020. It’s likely that this trend will continue, and because of this, there is significant potential for e-commerce entrepreneurs. If you are considering getting into this space, you’ll want to explore the opportunities available through Amazon. The first step is to register and create an Amazon seller account.
What is an Amazon seller account and what are the benefits of creating one?
To sell products on Amazon, you’ll need to set up an Amazon seller account. This is Amazon’s way of verifying the people and businesses that sell items on its site. In its marketing materials, Amazon elaborates, “We’re always looking for ways to add value for our customers and be Earth’s most customer-centric company. As an Amazon seller, you take part in offering those customers better selection, better prices, and a top-notch customer experience.” Amazon values its third-party sellers. In fact, these sellers account for more than half (58%) of Amazon’s business and third-party sales are growing—currently at 52% a year.
There are many benefits to becoming an Amazon seller. You have flexibility when it comes to your business model, types of products you sell and scope of your business. Regardless of if you are looking to get your feet wet in the e-commerce space by selling a handful of items per month or you are interested in diving right in and selling a vast array of products in large quantities, there is an Amazon seller account for you.
Before going through the steps of creating an Amazon seller account, though, you will want to make sure you consider a few questions and have some information at your fingertips. What are you looking to sell on Amazon? Will you develop these products or source them from a supplier? If the latter, which supplier(s)? How do you envision your Amazon store “brand”? Do you have a store name in mind?
Once you have thought through these questions, you will want to make sure that you have the following information available when you are ready to create your Amazon seller account.
- Business email address or email address associated with an Amazon customer account
- Chargeable credit card
- Government-issued ID (identity verification protect both sellers and customers)
- Tax information
- Phone number
- Bank account information for a bank where Amazon can send you the proceeds from your sales
When creating your Amazon seller account, you have the option of setting up your store with an individual or professional plan. This decision is an important one. The main difference between these plans is in terms of fees and liability. With an individual account, you will be charged $0.99 per unit sold. With a professional account, you won’t be charged per item sold, rather you will be charged a monthly fee of $39.99. If you are just starting out and anticipate that you will sell fewer than 40 units per month, the individual plan likely will be the best bet for you. On the other hand, if you are expecting to sell more than 40 units per month, plan to advertise and use advanced selling tools and want to sell in restricted product categories, you may wish to explore the professional account option.
In terms of liability, there are key differences between the individual and professional plans. With an individual account, there is increased risk for you personally, since all assets and debts will be in your name. You will be liable. However, with a professional account, you will have to create a Limited Liability Company (LLC). With this option, your business will be liable, not you personally. Keep in mind that there are additional steps and costs associated with forming an LLC, so you will want to consider these carefully before moving forward. Regardless of which type of account you choose, know that your selection is not set in stone. You can change your plan type at any point in time.
In addition to the subscription fees described above, there are additional fees you should be aware of before you create an Amazon seller account. These fees apply for both individual and professional plans. You will be responsible for selling, shipping and FBA fees (if applicable). The selling fees include referral fees (a percentage of the price of the item sold, determined based on the category of the item), and closing fees for the following categories: Books, DVD, Music, Software & Computer/Video Games, Video, Video Game Consoles and Video Game Accessories. You will be required to pay shipping fees if you fulfill orders yourself. If you decide to go the FBA route, you will want to note the fees associated with order fulfillment and storage. It’s also worth noting that Amazon has announced changes to its US referral and FBA fee structure, which take effect June 1, 2021. We recommend looking over these amendments to know which fees you will be responsible for.
How to create an Amazon seller account
Now that you have a solid understanding of the key considerations to keep in mind when creating an Amazon seller account, it is time to actually create your account.
First, you will want to go to Amazon.com, scroll to the bottom of the homepage and click “Sell products on Amazon”.
You will be brought to the “Become an Amazon seller” page. Once there, if you select the orange “Sign up” button, you will navigate to the professional plan setup page. However, if you click “See pricing,” you will have the option of selecting between an individual seller account or a professional seller account.
Once you are on the “Let’s talk numbers page,” scroll down towards the bottom of the page, where you will see two buttons—one to set up an individual account and the other to set up a professional account.
Here’s a look at the top of page:
When you scroll down on this page you will see:
You now have the option to sign in with an already-existing Amazon account, or you can create a new account for your business. Keep in mind that each Amazon seller account is required to have a unique email address associated with it. If you might consider selling your Amazon FBA business down the line, you’ll want to use a new email address for this account.
You will then be asked to complete a Two-Step Verification process. Amazon uses this step to verify that the email address you provided is yours.
In this next step, Amazon will collect your business or personal address, phone number, credit card information and identity details. During this stage, you will have to select your business type as either an individual, state-owned business, publicly-listed business, privately-owned business or a charity. Below are the definitions that Amazon provides for each of these options:
- Individual: An individual sells in a private context. An Individual does not sell a product to a company / charity and does not operate in a business or professional context.
- State-owned business: You have selected that you are registering as a State-owned business which is a business that is either wholly or partially owned and operated by a government.
- Publicly-listed business: You have selected to register as a Publicly-listed business with shares listed on a stock exchange for public trading.
- Privately-owned business: You have selected to register as a Privately-owned business which is controlled and operated by private individuals. The business seller is registered in the context of a commercial or professional activity.
- Charity: You have selected to register as a Charity which is an incorporated or non-incorporated tax-exempt body which:
- (1) is created and operated for charitable purposes
- (2) employs all its resources to those charitable activities that are under its direct control
- (3) does not distribute any part of the income generated for the benefit of any trustee, trustor, member, or other private individual, and
- (4) does not contribute to or associates with political organizations.
On the next page, Amazon will ask you to confirm your business address and phone number.
Next, Amazon will ask you to add your payment information. You’ll need to include bank account information that is associated with the primary contact or business name.
After you have entered your billing information, Amazon will ask you a few questions about your business.
Next, you will be asked to confirm your identity by uploading additional documentation. You will likely be asked for images of your driver’s license and credit card or bank account statement.
Lastly, Amazon will ask you to verify your address by entering a code sent on a postcard via US mail.
The Amazon transfer process
If, on the other hand, you have recently acquired an Amazon business and have not completed the transfer yet or are considering buying or selling an Amazon business, you may be interested to learn about the Amazon transfer process. There are two ways to transfer information from one Amazon seller account to another— via an Amazon account transfer or an Amazon listing transfer. With an Amazon account transfer, the previous owner hands over their entire Amazon seller account to the new owner. Below is an overview of the steps to conduct this type of transfer:
- Both the buyer and seller will contact Amazon. The seller will let Amazon know that they are making key changes to their account, while the buyer will inquire about setting up a new Amazon seller account. Keep in mind that this step for the buyer is only necessary if they already have an Amazon seller account.
- Seller modifies account information. Once Amazon has approved the requests in step one, the seller will update the account’s contact and payment information and authentication details.
- Seller transfers other assets. These may include social media accounts, trademarks and subscriptions.
- Buyer inspects account. This is the last step in the process. After the inspection period is complete, the funds will be transferred and the deal will be finalized.
The second transfer method is an Amazon listing transfer, where the seller transfers specific Amazon Standard Identification Numbers (ASINs) to the buyer. This process is more complex than the process outlined above. It is important to note that there are pros and cons of each approach, and the terms of the deal will determine which method is appropriate. For example, if you are purchasing listings for televisions from an Amazon seller whose store also carries computers and smart devices, you will need to transfer specific listings, not the entire store account.
Opportunities to sell your Amazon business
At some point down the road, after you have built your Amazon business and it has gained traction, you may want to explore divesting. There has never been a better time to sell an e-commerce business. We have seen interest in FBA businesses significantly increase over the past couple of years, and today these businesses dominate the e-commerce market.
With demand for these businesses at peak levels, we encourage you to consider divesting of your business once it has achieved consistent positive ratings, growing revenue and solid overall performance. Learn about how to maximize the sale price of your FBA business by listening to FE International CEO Thomas Smale on the Sellercast podcast.
Working with an M&A firm is a good option if you don’t have a great deal of experience valuing or selling businesses, don’t have the time to spare and want maximum proceeds from the sale of your business. At FE International, we have years of experience selling FBA businesses, and we take care of the entire process from start to finish—from valuation and due diligence to connecting you with suitable vetted buyers (our investor network is 80,000+ strong) and facilitating the transfer of funds through Escrow.
Benefits of selling your Amazon business
Running an Amazon business can be rewarding and lucrative. However, depending on your business model, it can also be time-consuming and demanding. Often, we hear sellers decide to exit because they are looking to have more time to focus on another venture. Sometimes they are simply looking to retire from a profitable venture. After spending a great deal of time building and growing the business, many entrepreneurs are motivated by the prospect of receiving a substantial lump sum payment. If you choose to divest, it is worthwhile to do so at a time when your business is most profitable, as it will look most attractive to buyers and earn you top dollar.
To get an idea of Amazon businesses for sale, see our current listings.
Recommendations from FE International
As we mentioned earlier in this article, the e-commerce market is growing at an accelerated rate and this growth is not expected to slow down. Because of this, now is an opportune time to get into the e-commerce business, and becoming an Amazon seller is a great way to do so. In this article, we have shared the benefits of selling with Amazon, outlined the steps to create an Amazon seller account, described the benefits of selling an Amazon business and discussed the Amazon transfer process. We recommend that you explore your options in the e-commerce space, build your e-commerce business and – once it has achieved consistent positive ratings, growing revenue and solid overall performance – come back to FE International for a free valuation.