How to Finance Your Amazon Selling Business

Amazon is one of the world’s biggest brands - a giant of the ecommerce industry but also a household name in electronic devices, eReaders and cloud services. 9 out of 10 Brits shop for products on Amazon. They also use it for eBook purchases, Alexa browsing and also for subscriptions such as Audible and Amazon Prime Video. Amazon Prime membership has soared in the UK - with 53.5% of all British households subscribing to the service. 

For those looking to leverage the enormous brand presence of Amazon, starting an Amazon Business can be a lucrative way to diversify your existing ecommerce strategy. For existing Amazon sellers, lacking finance can hinder your ability to maximise the value of Amazon’s enormous customer base. 

For businesses who embrace the power of Amazon and have the right strategy in place, it can become an unbeatable opportunity to reach customers in the UK and around the globe. Amazon Sellers alone account for 5.5% of total retail sales in the whole of the UK. 

Amazon’s FBA programme, which stands for ‘Fulfilled by Amazon’, allows you to take advantage of Amazon’s logistical expertise and store your stock in their warehouses. Amazon itself will fulfil orders and offer customer service, allowing you to step back from active fulfilment duties and focus your attention elsewhere. 

While Amazon might have once appealed to small businesses and individuals who wanted to launch a shop of their own, it is now so competitive and demanding that only those who can invest in the right way can really benefit from FBA selling. Becoming an FBA seller means launching your products to a global audience and aligning yourself with the world’s biggest ecommerce giant - so you have to plan carefully. 

We work with industry-leading lenders who have a significant interest in the ecommerce sector. These lenders prioritise well-structured proposals that have assessed the risks and identified opportunities. If you work with us, we’ll help you get your application together and win the funding you need to become a master of Amazon selling. 

Business Planning

To succeed with Amazon selling, you’ll need a business plan just like you would in any traditional business. If you already have an ecommerce business, you can likely repurpose your original plan and instead focus on the specifics of the Amazon opportunity. However, by writing it from scratch you’ll gain a new understanding of how Amazon’s selling channels work and which unique strengths, opportunities, weaknesses and threats it presents. 

The most important part of your Amazon selling business plan is likely the profit margin aspect. Amazon’s FBA programme has a range of fees you’ll have to pay on every product, so you need to decide what inventory you’re going to buy and whether it will return a profit when you sell through Amazon itself. 

To actually ascertain profit margins, however, you’ll have to do plenty of research before you even consider submitting an application for finance. You need to have a full understanding of how the Amazon marketplace works, which products are viable, what competitors are doing and how you’ll source your products.

Once you have a business plan, you can begin to approach lenders for financing. They will scrutinise the plan and will expect it to be well-researched, with added consideration paid to plans that have included third-party support from an accountant or eCommerce expert. Essentially, anything that makes your business plan and investment opportunity less risky will help win over lenders. 

At Rangewell, we’ll review your Amazon business plan before you submit it to lenders to help you tailor it to specific criteria and increase your chances of success.  

Why you need finance for an Amazon business

The complexities of Amazon’s seller loan system (Amazon Lending) might dissuade you from attempting to get finance. However, to set up as a successful seller and make a profitable business, you’ll need a finance package that allows you to secure stock, insulate your cashflow against shipping delays and invest in measures to get you ahead of this busy market. 

So which areas will you need to consider? At Rangewell, our ecommerce team can discuss your requirements at length and help arrange finance. Even if you’re already an established Amazon seller, you may find we can broker arrangements with lenders to fulfil temporary cashflow shortages or seasonal stock investments.

If you’re looking for reasons to seek new funding arrangements, here are some of the best areas finance can help grow your Amazon seller business, keep reading.

Finance for inventory

The whole Amazon selling business process relies on a keen understanding of which products sell well and at what time of year. That gives way to lots of seasonality and if you choose to sell overseas, geographic swing. To account for this, a good Amazon seller must have a steady source of stock coming from their suppliers so that they continue to fulfil Amazon’s expectations. 

While Amazon itself will hold your stock and take care of shipping, you’ll still need to arrange the actual supply chain for the product/s you’re selling. Running an Amazon selling business at scale means letting go of the ‘retail arbitrage’ idea and instead focusing on large stock runs of profitable items. 

Some inventory is more seasonal, which means it requires a significant upfront investment but may not ‘pay off’ until the season begins. In an Amazon context, your risks are lessened by the fact you don’t need to pay for long-term warehousing - but you’ll still need to consider the same process other ecommerce retailers adopt for seasonal stock: namely working out how many units you’ll need ahead of the peak demand and ensuring you have the stock available. In the Amazon system, this is even more important - you can’t just say ‘out of stock’ like you can on your own ecommerce site. Instead, a competitor may step in and fill the gap. 

Amazon offers some unique sales events that present opportunities for businesses such as Prime day, as well as mass participation in the likes of Black Friday and Cyber Monday. These short-term events often necessitate a quick rebuy of your best-selling products so you can harness the increased demand. 

However, financing such a significant investment in product lines may not be possible without external lenders. At Rangewell, we often work with clients who need ecommerce financing to aid in stock purchases ahead of seasonal demands. 

Remember, finance can also help you if you spot key opportunities in the market and want to capitalise on them without having to wait until your profits come in from another product line. The flexibility of cash injections made through ecommerce lenders can help you beat competitors to the post and stand out from the crowd. 

Additionally, Amazon itself can be unreliable in terms of cash flow for product purchases. Some sellers wait 14 days, but others find themselves delayed by notifications around unavailable balances and account level reserves. 

Product photography

When you’re working with Amazon, you may not need product photography if you’re supplying a listing that already has information and photography. However, most people will need to take unique photographs of their products in order to add to their appeal and give the consumer a clear image of what they’re buying. 

For Amazon, this generally means clear photography of the product against a white background as well as some ‘feature’ imagery of the product in use. Considering brand photographers in the UK charge approximately £200-450 per shoot, you may end up needing significant finance to employ a product photographer for multiple product ranges. 

Packaging

Amazon might be the company responsible for shipping your package, but once the customer opens the cardboard parcel, your product will likely still have its own unique packaging. This is an opportunity to flex your branding and design aesthetics - but is also a way to showcase certain attitudes such as eco-friendliness by eschewing plastic in favour of biodegradable packaging. 

Whatever you opt for, packaging design is an industry in its own right and you should ideally employ a designer and packaging company to create something unique. Alternatively, you can opt for a more generic packaging option - but you’ll still need to invest in buying the units and combining them with your product, or liaising with your supplier to combine both from their end. 

Tools - inventory management, product research etc

There are many different tools, both physical and digital, that may be needed for a successful Amazon seller. These include inventory management systems that let you scan in your stock and send it on to Amazon with ease, product research apps that can assess pricing and tweak your own listings to beat competitors and even physical machinery such as packaging or 3D printers. 

In rare cases, some businesses find so much success with certain product ranges that they discover there’s more profitability in producing the items in the UK to save on import fees and lead times. In these cases, you’ll need finance for a production facility which means approaching a lender who has the experience and authority to support you. 

Advertising

For traditional ecommerce retailers, advertising is an enormous expense as it requires investment across a range of different channels and techniques. You may need, for example, to invest in Google PPC advertising, traditional print advertising, social media ads, etc. 

For Amazon sellers, advertising costs are more focused on the platform itself and could arguably be more efficient because customers already have buying intent when they’re on the platform. Amazon’s ad system is offered in an auction-style format where you’ll compete against other sellers for top position. Costs scale depending on the item and competitiveness. 

Of course, as a business owner, you may not have the time or experience required to spend tweaking advertising efforts and monitoring ROI. It may be more cost-efficient and scalable to work with a freelancer or agency that can maximise your advertising efforts and generate the best possible return. 

In a competitive marketplace, having expert assistance will lead to greater sales and profitability that can more than justify the added expense of advertising. 

Consolidating debt

Another possibility presented by independent lenders is the idea of consolidating other debts. If you’ve already taken out multiple loans against your business, you may find a lender who can essentially combine these into a single repayment to create greater visibility over cashflow and more certainty over repayments and terms. 

How to get finance for Amazon sellers

Amazon sellers face two choices: Amazon’s own finance solution (Amazon Seller Loans) and independent finance from ecommerce lenders. At Rangewell, we work with a variety of lenders who can offer ecommerce funding to grow your business without the restrictions imposed by Amazon itself. 

Are Amazon seller loans useful?

If you’re a newcomer doing research, you’d be forgiven for thinking Amazon’s own finance option might be a good idea. However, Amazon’s Seller Loans are limited solely to those who meet certain criteria and are unsuitable for new businesses who want to start selling through the channel without a proven track record. They operate on an invite-only basis and are not available to apply for. 

To clarify: you’ll only be invited for an Amazon Seller Loan if you already have a selling account (access to Seller Central) and meet the company’s criteria, which may involve a credit score check among other checks. You cannot apply as a new seller.  

In addition, Amazon’s finance rates can change without prior warning. Where they may offer a set loan one week, the next your limit may change. This creates uncertainty for your business and cash flow. If you’re reliant on the Amazon system to sell products, doubling down on Amazon and becoming reliant on their finance options too means you have a far more concentrated risk. 

Independent ecommerce finance

Rather than choosing Amazon’s own restrictive loan structure, why not explore the independent lender market which presents greater opportunity? Rangewell can help you navigate the market and choose the right lenders to suit your needs. We are specialists in ecommerce finance and have helped Amazon sellers expand their business and maximise their profits. 

If you’d like to get started, all you have to do is start the conversation. We offer a free, no-obligation consultation where we can help advise you on your plans and guide you through the application process. 

Don’t let Amazon’s terms dictate your chances of success. Secure finance to grow your business and capitalise on the world’s biggest marketplace by talking to Rangewell today.