How to Set up an Amazon Business
Simple selling on the worlds favourite digital marketplace
It is easy to think that most consumers start their online shopping sessions with a search with Google, but Amazon is actually the most common starting point for many online shoppers.
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Online spending in the UK is now well over £1.1billion every week and, as businesses strive to meet consumer shopping preferences, eCommerce is becoming even more vital to retail growth.
Amazon started as an online marketplace for books but expanded to sell electronics, software, video games, clothing, furniture, food, toys, and jewellery, and now provides a service covering virtually every retail category. It is the world's largest online marketplace - and it offers some exciting opportunities for you to sell as well as buy.
Amazon does not restrict its eCommerce boom to its own retail lines. Small businesses - and even start-ups - can share in the phenomenal growth of the sector by becoming an Amazon seller and opening an Amazon store - and taking full advantage of Amazon's superb fulfilment infrastructure.
However, setting up your own dedicated eCommerce site means a huge investment in money and time - and it could take years to establish itself. Fortunately, there are some shortcuts to success - and the most effective may be to sell on Amazon. Opening an Amazon storefront, also called an Amazon Store, can set your brand apart from competitors, as well as build trust with shoppers - and provide a shortcut to success.
An Amazon Store provides you with a dedicated website for selling your products. With an Amazon Store, shoppers can explore and purchase a brand’s products while sellers can create a browsing experience that revolves around their brand and products.
Sellers, vendors and agencies can open an Amazon storefront. Anyone that wants to open an Amazon Store, however, must enrol in Amazon Brand Registry, which requires applicants to have a registered and active text - or image-based trademark.
The three reason why Amazon is great for eCommerce businesses starting out:
- The huge Amazon marketplace which can get your products in front of millions of potential customers every day
- The secure Amazon payment system which offers a simple solution to transferring cash from customers to you
- The superb Amazon fulfilment system which can take care of delivering your goods - the next day
Amazon makes it relatively easy to open an Amazon storefront because it uses pre-created designs. The program works similar to website builders like Wix, which means it’s easy to customize your Amazon Store by dragging and dropping elements. To get started, you can open a seller account either as a business or as an individual, with an Individual Seller account, and a Pro Seller account. Pro accounts give you access to far more features than Individual plans but come with a monthly fee. Individual accounts have no subscription, but charge a fee for listing. Both accounts pay product fees when items sell.
For UK sellers who want to sign up as a business, membership for Amazon’s seller program costs £25 excluding VAT per month. You can choose to sell on either Amazon UK alone or (if you’re willing to deal with international postage and possible customs and duty issues) on all five of Amazon’s primary European marketplaces. Selling fees are applied after this monthly membership fee. Sellers who plan on selling less than 35 items a month can sign up as an individual seller and pay no subscription fee. Individuals sell for £0.75 per item, paying only when they sell.
Most sellers opt for Pro accounts because of the many sales-driving features you get as a Pro Seller. But you can always start out with an Individual account, then upgrade.
Fulfilment by Amazon
Fulfilment by Amazon (FBA) lets the Amazon delivery infrastructure work for you. You send your products to Amazon, they store your products for you and do all of the work of picking, packing and shipping them out to customers. For businesses looking to open an Amazon store, fulfilment by Amazon is a great opportunity as it lets you build your business without having to worry about the logistics of warehouses, packaging materials, couriers and so on.
Sellers using Amazon’s fulfilment service have to a pay stocking fee for each individual item they wish to sell. This fee can range from 60p to over £4.50 depending on the size of the item. Storage fees - charged on a time basis - are also applied on top of this.
Potential customers are more likely to purchase an item fulfilled by Amazon.
Customers trust Amazon delivery. Prime members are far more likely to buy a product with FBA because they know they will get their item within two days. Even the customers who are not Prime members are more likely to trust items fulfilled by Amazon because they have no worries about receiving them. Prime customers also know they won’t incur any additional shipping costs on a combined order.
What this means for entrepreneurs is that you can deliver the service of a big corporation without the headache of actually being one. You can focus on finding product opportunities while Amazon handles the rest on your behalf.
Many eCommerce businesses have started in this way. But you will need to invest in your business, and although you can make sales in this way, you still need to work on your promotion online to bring in customers. You may still need to secure funding to cover your costs - but remember, startup businesses are difficult to secure funding for. Many lenders will simply not advance funds to any business that does not have a record of a year or two of successful trading.
The good news is that, at Rangewell, we can often help you arrange funding for an Amazon store, based on your own sound business plan and some funding of your own.
The costs of running an Amazon Store
An Amazon shop may provide you with a fast track to eCommerce success, but although you may be able to set up and run without the overheads of a brick and mortar retail business, there will still be costs to deal with.
And the biggest may be that of buying in stock.
The cost of stock may be kept to a minimum with some lines and in some sectors, keeping a very small inventory and ordering direct from suppliers, but you may be faced with a need to carry a reserve of stock. Depending on what you sell, this could mean an investment of thousands of pounds.
Fortunately, at Rangewell, our eCommerce experts understand the challenges you face when it comes to funding - and know the solutions that are available.
Funding for Amazon businesses
Traditional retailers are well-catered for by traditional lenders and can call on loans to support cashflow and to buy in stock secured on a number of assets - which can include the premises they operate from or the goodwill that they have built up.
Ecommerce businesses have much lower overheads but tend to suffer from cash flow shortages as traditional lenders and banks don’t cater to the sector. Their underwriting processes have not developed as quickly as the eCommerce sector.
At Rangewell we can provide a range of solutions.
The most popular of these is a line of credit. A business line of credit is a flexible funding product that enables businesses to draw on funds as and when needed. It’s typically used for immediate expenses rather than long-term investments and acts very much like an old-style overdraft.
They can be provided by a number of lenders, and offer instant access to funds, just like an overdraft, although no bank account is involved.
Instead, the lender will arrange a line of credit with a limit agreed when you apply. This limit is usually based on your past income.
It is then up to you how much of this reserve of credit you call on. Like an overdraft, the facility will only mean a cost to you when you actually use the facility, based on the amount you draw down, and the time which you hold it. You can repay at any time, and the funds will be ready for use again.
This can be a useful additional source of funding if you need access to small cash sums for short periods, for purposes such as buying in stock - although, in practice, there are no restrictions on how you use the money.
If you want to fund growth or to deal with temporary cash flow shortfalls, it can provide the ideal solution.
Rates will vary between providers and will also depend on the level of funding agreed. Both secured and unsecured arrangements can be provided, with those arrangements secured on assets usually offering more attractive rates.
A line of credit provides a pre-approved reserve of credit that you can call on as you need to at short notice. It’s a good option for eCommerce businesses that need short-term cash to cover expenses, for example, online ad costs and new inventory.
When orders and cash comes into the business, you can pay off what you have borrowed - which means that the cash you have taken out and repaid is ready to be taken out and used again.
You pay interest only on the amount used - ensuring you avoid fixed costs and commitments which are unavoidable with a traditional term loan.
This type of funding has another important advantage. It helps keep pace with the growth of your business, because the more business you do, the more cash you generate, and the quicker you can repay the amounts you take out.
As your business grows, you can apply to extend the line of credit you can call on - ensuring that your further development is supported and that you can bring in stock to meet the demand your Amazon presence generates.
Why you need financial solutions from Rangewell
The eCommerce market is growing fast, but most lenders are still unaware of the potential it offers.
At Rangewell, we know that your eCommerce business is a new type of venture - but we understand the potential that it offers - and the kind of funding that you need. We understand that an Amazon store can provide a sound business environment, with huge potential for profit. As experts in all aspects of business funding, we know the lenders who share our understanding and enthusiasm for eCommerce and can help you secure the funding you need from them.
Whether you are just setting out in eCommerce, or an established trader ready to make the most of the potential your business has started to display, we can find the lenders who will work with you to provide the funds you need.