How to become an Amazon seller
Amazon is a multinational company that focuses on ecommerce, cloud computing, digital streaming and artificial intelligence.
Amazon is the biggest ecommerce site in the game, launched in 1995 focussed on selling books, it's since grown into a behemoth that intersects many of our daily lives.
And while it offers everything from video streaming, to physical shops and servers to build web applications, at its core it’s still an ecommerce site for many people. To give you an idea of scale there are over 9.7 million sellers on Amazon with the UK home to the second largest number of sellers at 250,000 so if you set up shop you’d be in good company. In terms of revenue, the 9.7million managed to generate over $80 billion (in US dollars) last year, and Amazon claims that third party sellers make up over 50% of goods sold on their site. So the demand certainly matches the supply.
Whether you’re an established ecommerce brand or just wanted to get rid of some old belongings what makes Amazon so appealing is that it’s accessible to all. Here we look at how you can get set up as a seller on Amazon, how much you can make and what it would mean for your taxes.
How can I start an Amazon seller business?
Amazon Plan
The first thing you’ll need to decide on is what kind of plan with Amazon you want to use. It could be:
- The individual plan, which is 75p for each item you sell.
- The professional plan, which is £25 per month no matter how many items you sell.
For each plan Amazon also takes a referral fee which is a cut of the amount the customer pays you, and the percentage varies based on the category your product fits into. Most referral fees range between 8% and 15% of what you get from the customer.
Structure and Strategy
You also need to decide whether you’re going to be a 100% solo seller on Amazon, or you want to work as a partner of theirs through their Fulfilment By Amazon service, which means that they store, ship and offer customer service for your product. If you go down the FBA route, you’ll pay a fulfilment fee which is based on product category, and a storage fee, based on how many cubic metres your product takes up.
You’ll then need to decide on your selling strategy. For this you can be:
- A reseller, where you sell second hand items.
- A brand owner, where you build your own products, or source products to tell under a private label.
You can do both, but it helps to understand each of these areas in full.
Use available support
Once you’ve established your structure and strategy, the first three months after setting up your profile are critical. You can learn from the best at Amazon using what they call their five selling programmes: Brand Registry, Fulfilment By Amazon, A+ Content, Automated Pricing, and Advertising.
Understand who you’re selling to
You might already have a hunch about what product you're selling, you might even have done some market research, but you’ll also need to think about how the product fits into the Amazon structure. Amazon lets your product target either:
- Consumers (D2C - directly to consumers)
- Or other businesses ( B2B - business to business)
By selling to consumers you get access to a market of hundreds of millions around the globe, while there are hundreds of thousands of businesses ranging from small enterprises to FTSE 100s.
Create an Amazon seller account
You can either use your existing Amazon customer account if you have one, or you can register a new business account. To do the latter you need:
- A business email address
- A chargeable bank card
- A valid passport or ID
- Company registration details (And VAT number if applicable)
- A bank account for Amazon to transfer sales proceeds
List your items
So what can you list? There’s a range of categories which your item can be listed under and within each category these items can be either used, certified refurbished, refurbished or new. The categories are:
- Automotive
- Baby products
- Books/Music/Video
- Computing
- Consoles and video games
- DIY and tools
- Garden and outdoors
- Kitchen and homes
- Large appliances
- Lighting
- Musical instruments
- Office products
- Pet supplies
- Shoes & accessories
- Software & video games
- Sporting goods
- Toys & games
You’ll also need to create individual product IDs to track your products, inventory, and establish the name and details of the product. It’s handy to know that if your product is already being sold by other sellers then it’ll automatically be given the details of the original listing.
After that you need to fill in the product details for the customer view. If you’ve ever used Amazon as a customer then you’ll have seen the drop down by the images of the product that gives you all its specs.
How do I attract customers on Amazon?
So you’ve seen the nuts and bolts of putting together a business account on Amazon, now you need to start getting business. Here’s a few pointers we think would work.
First up you want to get your pricing structure right. Amazon is built around having some of the best prices, so look to be as competitive as you can without losing money against your overheads like storage and advertising.
Provide fast shipping using the Fulfilment By Amazon service (essentially offering Amazon Prime) this tends to set products up well against competitors as so many shoppers need or want products immediately which is why they’ve turned to Amazon in the first place.
Advertise your offers - this might not just be on Amazon itself where you can pay to be featured, but also consider having a separate personal landing page and advertising that across social channels so that you can create a funnel to push new customers your way.
After you’ve had your first few sales then it’s about consistency to grow the business. Get as many 5 star reviews as you can, as they’ll boost your appearances in searches and give potential customers reassurance that you do what you say on the tin.
How do I pay tax on my Amazon income?
So yes, you do need to pay tax on your Amazon income. Contrary to popular belief, you do not need to be registered as a limited company. This means you can pay tax either as a self-employed income or as a limited company.
If you’re self-employed
If you make more than £1,000 selling goods online, you’ll need to pay tax on it. In which case you should register as having a self-employed income with HMRC.
Even if it’s a side hustle and you have a fulltime job which is being taxed through PAYE, your total income (including your ecommerce income) will need to be taxed.
You can read more on how to complete your self-assessment tax return in this Earnr article.
The usual cut off date to complete your self-assessment is the 31st of January if you’re doing it online, and 31st of October if you’re completing the form by post.
The tax bands for ecommerce income is the same as any other occupation:
- Tax allowance: 0% of earnings (You earned between £0 - £12,570)
- Basic rate: 20% of earnings (You earned between £12,571 - £50,270)
- Higher rate: 40% of earnings (You earned between £50,271- £150,000)
- Additional rate: 45% of earnings over £150,000
You can read more about tax bands, how they work, and what a personal allowance is in our blog post here.
If you’re registered as a limited company
Then you’ll also pay 19% corporation tax on profits on top of any income tax you might be liable to pay.
How can Earnr help?
Earnr allows you to track your ingoings and outgoings over the course of the year, and automate your tax return. You mark each payment you receive and each expense to your income so that by the time you get to doing your tax return, we’ll have everything we need to do the process for you.
We also give you real time projections for your income as the year progresses so you know how much tax you’ll need to pay. You can say goodbye to manual bookkeeping!
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