Entrepreneur Insight

How to Sell on Amazon and Other Online Marketplaces

From data analytics to considering payment options, here’s what businesses should keep in mind when setting up a digital storefront.

Robert Johnson, president of The Compak Companies, had been in the business of selling products directly to bookstores and churches for 20 years. But when it came time for his business to set up a sales platform on Amazon, Johnson and his staff were flummoxed.

“Once we got into the space, it was a complex environment,” he said.

Compak manufactures and markets the Celebration Communion Cup, prefilled packages of unleavened bread and Concord grape juice for use during church services. The Amazon question wasn’t an issue of whether or not to expand online sales to other areas; Compak CEO Jaquie Dua said it was key to their continued existence, and the question was how to proceed.

“We saw a decline in our sales to bookstores,” she said. “We decided we needed to sell products to our end users.”

Finding outside help

Johnson and Dua are tech-savvy—they’ve sold products from their own website for years. After taking a shot at building an Amazon sales channel themselves, Dua realized they needed help.

“We had some blind spots that we weren’t aware of,” she said, referring to Amazon’s frequent rule changes and lack of notification to sellers about the changes. “You can never completely perfect your Amazon presence. It’s not a set-and-forget business model.”

Johnson and Dua found NG Inc., a consulting company based in South San Francisco, California. Led by Felix Yeh, the company uses the expertise it developed through selling personal-care products through its original company, NutraGroup, to help other merchants.

Merchants across the globe are jumping into online sales in a major way. Even before the COVID-19 pandemic moved the majority of retail operations to digital, they’ve realized that bricks and mortar are, for the most part, on the way out as retailers’ channel of choice. And selling exclusively from a website branded with your business name won’t be adequate.

Getting on board with Amazon, eBay, Etsy, Shopify and other global e-commerce platforms has become essential. E-commerce sales in the U.S. has grown by double-digit percentages each year since 2017, to $787 billion in 2020, according to commercial real estate services firm CBRE. It’s projected to rise another 15% in 2021, to $892 billion. Much of the growth in e-commerce has been fueled by small businesses, or even individuals looking to start a new career or supplement their original income.

Identifying funding needs and payment types

It’s been a boon for Yeh and his company, both on the sales side and the consulting side. He received financing from East West Bank to purchase new sorting equipment and expand warehouse space. Securing a loan from an outside source is something all online sellers should give serious consideration, Yeh said. It can cost “tens of thousands to hundreds of thousands of dollars” to set up a major online sales business.

Consider the litany of expenses: Leasing space in a warehouse or fulfillment center, hiring workers to handle critical responsibilities in the distribution center, and buying software to manage cash flow.

“The overhead can be pretty hefty,” Yeh said.

Other issues can arise, too. Although Amazon does not currently accept cryptocurrency as payment, some other platforms like Newegg do. Should an online seller start accepting crypto now, in case Amazon does add that payment type later? If a seller takes crypto payments, it could build a niche market among tech-savvy consumers. But cryptocurrency is still in its infancy and may soon attract more regulatory scrutiny.

Analyzing sales data

NG has helped Compak master online payments, Johnson said. They’ve also assisted with another area in which Compak didn’t have much experience—analyzing sales data.

Data analytics is an essential part of setting up an Amazon sales page, Johnson said. “Knowing what’s happening in real time and getting feedback almost instantaneously has been crucial to our success,” Johnson said.

“Amazon is no longer that space where you have a few quilts in your garage, and you try to sell them,” Johnson added. “The rules of engagement change in a very fluid fashion, often times without your awareness.”

Amazon has specific deadlines for when a seller must confirm an order and ship it. It also has standards of quality for certain products that it frequently adjusts.

Retail arbitrage

In addition to navigating Amazon’s complex rules and selling requirements and the future of payment technologies, there’s another pressing concern for online merchants.

Retail arbitrage players buy up much of a merchant’s products in bulk and at discount. They resell the same products later at a marked-up price. Johnson describes arbitrage players as “rogue sellers.”

Amazon does not prohibit retail arbitrage. Thus, it’s an issue all sellers must confront.

Arbitrage can inflict serious damage on legitimate seller’s reputation with individual Amazon buyers, Yeh said.

“It’s confusing for customers,” he said.

That’s why it’s important for a new Amazon seller to partner with a third-party expert like NG to negotiate with the arbitrage players. Or, what’s perhaps a better alternative, is having an online seller expand to all of the platforms—eBay, Etsy, and so on.

“If you aren’t doing it,” Yeh said, meaning setting up a sales platform on other channels, “some other places will do it for you.”

And no business owner wants to give away their revenue and profit for free.

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