Amazon is one of the largest companies globally, and its e-commerce platform allows sellers to get their products in front of a massive audience of potential customers. If you’re considering using Amazon e-commerce, this article will help you understand:

  • Amazon’s profit structure
  • Amazon’s profits by region
  • How to sell on Amazon
  • Your potential profits as a seller

How Amazon Profits

Source: Volusion.com

Amazon is a giant in the world of e-commerce, but retail isn’t the only revenue stream it’s focused on. Below is a breakdown of Amazon’s top income categories:

  • Product Sales: Overall, product sales from online stores account for 47% of Amazon’s net sales ($56.2 billion). In the second quarter of 2021, third-party sellers accounted for 56% of the items sold on Amazon.
  • Advertisements: Ads are a fast-growing revenue stream for Amazon. In 2021, it made $21.5 billion in ad revenue, which is an enormous leap from its 2019 profits of $9.3 billion.
  • Subscriptions to Amazon Prime: Amazon Prime subscriptions generate 6.5% of Amazon’s revenue, or approximately $25 billion.
  • Amazon Web Services (AWS): — AWS is Amazon’s cloud computing business, and it dominates the market. It offers more than 200 cloud computing services like cloud storage, blockchain networks, and databases. In 2020, AWS made $45.37 billion in revenue. It accounts for 12% of Amazon’s total revenue.

Amazon Profits by Region

Amazon’s 2020 revenue shares by region show that the United States is by far the largest market for Amazon, making up 68.3% of its revenue. Germany and the United Kingdom are the next largest regions, accounting for 7.7% and 6.9%.

How Do You Sell on Amazon?

Source: Logicwebmedia.com

Amazon’s e-commerce platform offers sellers many great features to help them sell successfully. To get started as an Amazon seller, you’ll need to decide on a seller plan and fulfillment strategy.

Seller Plans

Amazon has two seller plans, individual and professional. The individual plan is very basic and is for users selling fewer than 40 items per month. The professional plan allows you to sell more than 40 items per month, create listings in bulk, and qualify for higher placement on product pages. It also provides tools to help you manage your inventory, advertise, run promotions, and sell more efficiently.

The individual plan costs 99 cents for every sale you make, and the professional plan costs $39.99 per month no matter how many sales you have. Both plans are subject to Amazon’s referral fees, which vary by product type and range from 8% to 22%. In addition to the referral fees, some products are also subject to $1.80 closing fees.

Fulfillment Options

As an Amazon seller, you can choose to fulfill your own orders or use Fulfillment by Amazon (FBA). Fulfillment refers to storing your product until it sells, packing the order, shipping it, and processing any returns or exchanges. With FBA, you send your products to an Amazon warehouse and let Amazon employees handle every aspect of your order fulfillment.

Choosing to fulfill your own orders is more work, but it’s less expensive and allows you to control the quality of customer service your buyers receive. Amazon customer service representatives (CSRs) aren’t going to be as invested as you are in the quality of service your customers receive. Providing personable customer service is a great way to set your business apart and build brand loyalty, so this is important to consider before finalizing your Amazon e-commerce strategy.

While there are drawbacks to Fulfillment by Amazon, such as complex fee structures and a lack of control over the service your customers get, FBA can help you scale your business quickly. Here are a few ways FBA can benefit your business:

  • It takes all the work of fulfillment off your plate, freeing you to focus on your marketing, product development, or any other aspect of your business.
  • It makes you eligible for free two-day Prime shipping and free shipping for eligible offers. This is a huge draw for many customers.
  • It puts the “Amazon Prime” logo on your product listings to let customers know Amazon handles fulfillment, and you benefit from Amazon’s credibility as a seller. Many shoppers feel more confident buying Amazon Prime products. They trust they’ll receive the order and know any returns or exchanges will be fast and easy.

How Much Money Can You Make From Selling on Amazon?

Amazon e-commerce profits vary greatly, with some sellers earning less than $500 per month and others earning more than $250,000 monthly. Here is an earnings breakdown according to a 2021 JungleScout survey of thousands of Amazon sellers:

  • 17% earn under $500 per month
  • 9% make between $501 and $1,000 per month
  • 20% earn $1,001 to $5,000 per month
  • 13% make $5,001 to 10,000 per month
  • 38% make more than $10,001 per month
  • 4% don’t know how much they make monthly

Nearly 65% of survey respondents said they were profitable within their first year of selling with Amazon, so you won’t have to wait long to see results.

What Can You Sell on Amazon?

Source: Jwj.org

The types of products you can sell on Amazon are seemingly endless, but it’s good to know which product categories are the most popular. These are some of the most popular products to sell on Amazon:

  • Clothing, shoes, and jewelry
  • Toys and games
  • Books
  • Electronic accessories and gadgets
  • Beauty and personal care
  • Cameras and photo accessories

There are tens of thousands of different products sold on Amazon, but they have a few items they prohibit and others requiring preapproval. It’s important to check Amazon’s listing policies before you commit to your seller strategy.

Some of these items are prohibited for obvious reasons, but there are many others you wouldn’t expect to see on these lists. We’ve included examples from both categories below. For comprehensive lists, see Amazon’s category requirements.

Some of the items that you can’t sell on Amazon include:

  • Alcoholic beverages
  • Tires
  • Counterfeit items
  • Nicotine products
  • Live animals that are not insects, fish, shellfish, or crustaceans
  • Vaccines

Some of the products that require preapproval from Amazon:

  • Jewelry
  • Music
  • DVDs
  • Sports collectibles
  • Hoverboards
  • Laser products
  • Postage stamps
  • Collectible coins
  • Fine art
  • Services
  • Streaming media players

Amazon Selling Tips

  • Price your products strategically: The average price point for products on Amazon is $10 to $50. Keep this in mind when choosing what you want to sell. You’re more likely to attract buyers if your product falls into this price range.

    Of course, you’ll fall outside of this price point automatically if you’re selling expensive items like laptops or furniture. For these items, research your competitors’ pricing to help you make your decision.

  • Optimize your product detail pages: You should have a clear product title, an informative description and include information likely to appear in Amazon’s search filters like product category, size, and color.
  • Collect customer reviews: More than 90% of consumers read reviews before making their purchase decisions, so customer reviews are hugely influential. Shoppers are often skeptical of products with few reviews or none at all. The easiest way to fix this is simply to reach out to your customers and ask for a review.

    Tip: You can’t control what customers will say about your product, so if you see that you’re receiving more negative reviews than positive, use this as feedback to improve the negative aspects of your product. Making these changes can turn your product reviews around and boost your sales.

Amazon uses diversified income streams and constant innovation to take over every market they enter quickly, including e-commerce. This means that third-party sellers benefit from Amazon’s enormous audience without having to do much independent marketing. With the right products and selling strategies, you can build a profitable business quickly with Amazon’s e-commerce platform.

Related Software and Services