The rapid growth of Amazon in the recent decade has attracted many local sellers to begin a business of their own on the e-commerce platform. Yet this trend is shifting with the rise of globalization as many foreign brands are targeting at Amazon as their first steps to conquer the western market. This article serves as a guide for foreign brands who look to learn more about Amazon’s working model and selling system.
Below is all the information you need to understand how to start your business on Amazon.
Amazon has grown into the world’s largest online retailer
Amazon has grown tremendously since its establishment in Bellevue, WA back in 1994. Up until today, Amazon serves 300+ million active customer accounts in 180+ countries and 150+ million Prime members worldwide. Third-party selling partners achieved $3.5 billion in sales during Prime Day 2020 alone.
Source: Amazon, Business Insider
United States is still Amazon’s biggest market
When comparing total revenue between Amazon and Tmall, it’s important to note the different markets each e-platform is active in. While Amazon targets at multiple markets, Tmall targets mainly the Chinese market. Out of the multiple North American and European markets that Amazon targets, the United States is still Amazon’s most active and biggest market.
Chinese sellers exhibit increased presence on Amazon
Although Amazon started with mainly local sellers, an influx of foreign sellers, specifically Chinese sellers, has broken that trend. Data show that China-based sellers accounted for 75% of all new Amazon sellers in January 2021, and that increase is a drastic 47% comparing to the previous year. In 2018, 39% of top Amazon sellers are from China.
This trend not only shows the competitiveness of Amazon but also how more and more foreign sellers are realizing the influence of this e-commerce platforms. Therefore, for foreign brands that want to expand into the West, becoming an Amazon seller is a right step to take. Below are the steps to become a seller on Amazon:
How to become a seller on Amazon ?
Step 1: Register to become an Amazon seller
Before getting started, interested sellers need to choose between the individual and the professional plan based on their unique selling goals. Then, the following materials are required for completing the registration process: 1) bank account number and bank routing number, 2) chargeable credit card, 3) government issued ID, 4) tax information, and 5) phone number.
Source : Amazon
Step 2: Get familiar with Seller Central
Amazon provides all sellers with Seller Central, a seller account site designed to help sellers to navigate their businesses more conveniently and effectively. Seller Central allows sellers to keep track of inventory and sales, download custom business reports, use metrics to monitor sales performance, and more.
Step 3: Tips for listing products
When developing the product page, sellers need to aim for the ultimate customer experience by creating concise yet informative product listings. Amazon has suggested best practices for sellers to consider when labeling products. For instance, improved keywords can increase the chances of sellers’ products being seen.
Step 4: Product delivery
Sellers have two options with product delivery: do it themselves via fulfillment by merchant (FBM) or have Amazon take over through Fulfilment by Amazon (FBA). When sellers choose the FMB option, they need to pay both shipping rates set by Amazon and shipping service selected by customers. When sellers choose the FBA option, they need to pay both fulfillment fees and inventory storage fees.
Step 5: Get noticed on Amazon by consumers
Three ways vendors can get noticed by consumers are: Amazon Prime, Amazon’s Choice, and Sponsorship. Sponsorship is simply paying for an ad to be listed first, but Amazon Prime and Amazon’s Choice badges have specific requirements.
Amazon vs. Tmall
Whenever Amazon is discussed, comparison with other large e-commerce platforms is always involved. Below is detailed comparison in various fields between Amazon and Tmall.
Comparing Amazon and Tmall Global
Tmall and Amazon charge a variety of fees. For instance, Tmall Global charges all sellers a refundable deposit of ~$25k while Amazon collects different types of payment based on seller plan. On the other hand, both Tmall Global and Amazon charge different rates for a variety of fees based on the product category.
Sources: Tmall, Amazon
Amazon Prime: Paid subscription for online shoppers
One unique difference between Tmall and Amazon is that Amazon provides its users with a paid membership program known as Amazon Prime. Enrolling in Amazon Prime can provide online shoppers with many valuable benefits such as free delivery ranging from same-day to two-day, free exclusive Amazon original movies and TV shows, free Amazon music, and more. Therefore, it is important for sellers to provide these prime membership benefits (e.g., free delivery) and become competitively advantageous.
Amazon is more than just an ecommerce platform
Unlike Tmall which mainly functions as a middleman between vendors and consumers, Amazon has been building its own brand in recent years and competing against sellers in certain industries. For example, Amazon developed the famous smart home device Echo Dot(better known as Alexa) and has been experimenting with other industries such as apparel and electronic accessories. Since it’s Amazon’s own brand, Amazon can ensure that their products rank top on users’ search pages when they enter relevant keywords, which can potentially hurt other sellers in the same industry.
Amazon helps sellers handle VAT
Value Added Tax (VAT)is a type of tax that VAT-registered traders in Europe add to the price of the goods they sell and send to the national tax authorities when they file for tax returns. In the U.S., there is no VAT. However, each European country has its own VAT rate, and for Amazon sellers who wish to sell in Europe have to ensure they are VAT-compliant.Amazon provides VAT services that allow sellers to manage their European VAT registration and filing obligations.
Design options for Amazon vs. Tmall sellers
Amazon encourages its sellers to develop store pages to showcase their’ brands and products. Sellers have the freedom to either use drag-and-drop tiles or Amazon’s predesigned templates to create their stores for free. On the other hand, Tmall does not provide these design options for free. Therefore, many Tmall sellers either hire professionals with photoshop skills to design their store pages or use free templates that can be easily found on the web.
Amazon and Tmall encourage the use of digital assets
Both Tmall and Amazon encourage their sellers to include video as a tool to better attract consumers. Yet both platforms have different restrictions on video content and length. Amazon caps brands videos at 45 seconds while Tmall caps at 60 seconds. Regarding the types of content displayed in brands videos,
Amazon does not allow for:
1) Black or empty frames at the start or end of videos
2) Videos that are abruptly cropped at the maximum duration
3) Inclusion of Amazon branding elements and customer reviews
Tmall does not allow for:
1) Inclusion of QR code, external logo, or external link that leads to download
2) Videos that are disproportional or involve excessive shaking
3) Use of manikins
Amazon vs. Tmall return policy
Both Amazon and Tmall have carefully established convenient return policy to make buyers’ shopping experience a breeze. Items shipped from Amazon.com can be returned within 30 days of shipment. Items shipped from Tmall.com can be returned within 7 days of shipment.
Gosund case study: Chinese smart-home brand reaching global tech-savvy consumers
Gosund: A best seller for smart home products
Gosund is a Shenzhen-based smart home company with 10+ years of experience in the field.When consumers enter keywords such as “smart plugs,” Gosund’s products rank TOP and are labeled as “Best Seller.”
Strategy #1: Use a brand name that’s easy to remember
Although the word “gosund” does not have an actual meaning in English, it is a name that can be easily pronounced and recognized by English-speaking consumers in the West, which is beneficial for building a brand image. Such a strategy can make the brand seem less ”foreign” to consumers, conveying a sense of credibility and trustworthiness.
Strategy #2: Employ promotional tactics to boost sales
Knowing the competitive nature of Amazon Marketplace, Gosund frequently employs various promotional tactics to stand out from competitors and appeal to consumers. For instance, Amazon highlights products that are on sale with salient labels such as “limited time deal” and “save X% with coupon” so that price conscious consumers feel they are getting a good deal.
Strategy #3: Increase credibility via “Amazon-Certified”
Because Gosund mainly sells smart home products, its target consumers are mostly likely tech-savvyindividuals who own other types of smart devices like Alexa or Google Home at home. Therefore, these consumers value attributes such as product quality and compatibility with their existing smart devices.
PETKIT case study: Chinese brand creating smart products for pets
PETKIT: An innovator in the pet industry
PETKIT is a Chinese company founded in 2003 with a mission to design and produce smart products for pets. Today, PETKIT serves consumers from 30+ countriesaround the world and their products are listed on numerous ecommerce platforms including Amazon.
Strategy #1: Modern and simple product design
Although PETKIT uses a premium-pricing strategy, the brands modern and simple design conveys the products high-qualityin a style suitable to all cultures. As opposed to traditional pet products that can seem odd in a nicely furnished home, PETKIT provides products that are mostly monochromaticin tone and modern in style that they can even act as decor to some extent. Therefore, pet lovers have a higher willingness-to-pay (WTP) when it comes to PETKIT products.
PETKIT’s product and brand pages often features images of the product in a real-home setting, displaying both the functional and aestheticaspects of the product. The images also sometimes demonstrate warm and lovely interactions between pets and their owners, triggering consumers’ love for their pets as they can visualize the interactions happening with their pets.
Strategy #2: Achieve more exposure via sponsorship
Amazon functions in a similar way as Google in which sellers can pay to have either their brands or products be promoted so that when users enter a relevant keyword, their brands or products rank high among all search results. PETKIT leverages this function of Amazon and actively sponsors their brand instead of product. It is a smart move because keywords such as “automatic” and “feeder” can be expensive and highly competitive yet PETKIT is a unique brand name that is cheaper and less competitive.
Strategy #3: Become “Amazon’s Choice”
Having a product labeled as “Amazon’s Choice” can boost sales significantly as the product will be easier to spot. PETKIT has been successful in getting a few of its products to be eligible for Amazon’s Choice, and it’s clear that the sales of “Amazon’s Choice” products are much higher than similar products without the label.
Must-dos for selling on Amazon
- Aim to be “Amazon’s Choice” by keeping inventory stocked and being able to ship quickly. One tip to ensure that shipping always runs smoothly is to have products fulfilled by Amazon.
- Use sponsorship to boost sales. Sponsorship allows your products to be listed first for certain searches, and has been shows to increase sales.
- Enable Amazon Prime for listings. Attract Prime customers who are loyal and ready to buy by ensuring fast shipping and low cancellation/defects rates.
- If necessary, change the product names to something that is easily pronounced in many languages. Also, choose designs that are modern and neutral, fit for a wide range of cultures. To understand how to adapt products to foreign markets, consider doing market research.