Setting Up Your Amazon FBA Account
Update Jan 2016: I’ve been selling on Amazon for nearly two years. All new posts related to Amazon selling and private labeling are on my new site PrivateLabelPreneur.com. This is still a very relevant post to read so don’t miss it!
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Setting up your Amazon FBA seller account is simple and goes fast. But like anything that comes with a contract, you should take the time to carefully read the Amazon Services Business Solutions Agreement.
It’s always a good idea to know what you are signing even if you have to wade through 26 pages of boring text!
In this post you’ll find:
- A six-minute video (above) I made that shows me setting up my account. This could be useful so you won’t be surprised by anything before you begin.
- A list of things you should have handy before you start the process.
- A few cautions you should consider.
- A link to a list of tools, resources and sourcing ideas I’ve put together for you.
Things to have handy before you begin
Before starting, here is a list of things you need to decide or have handy to make the process simple:
- Decide if you want the Individual account or the Professional account (click here for more information on the differences). I chose the Professional account for three reasons:
- The first month is free; it’s $39.99/month after that and you can always switch to an Individual account later if you choose.
- I plan on selling more than 40 units/month. That’s the break even point since you are charged $.99/unit on every sale for the Individual account.
- Professional sellers earn top placement on product detail pages.
- Decide on your seller name. You can use your own name, but many people choose to use their company name or an alias. You might want to come up with a few alternatives because you may find that someone else already has the name you want to use.
- You’ll need information for a valid credit card so have that ready.
- Amazon reports payments to the IRS so you will be required to enter the equivalent of W-9 information, which includes your social security card number.
While you won’t need your banking information to get signed up, you will need to enter it in your seller account before you will be paid. So, you might as well have it handy and get that done right away! (How’s that for positive thinking!)
Caution #1: Amazon has the right to deduct from your account
When you read the Agreement, you’ll bump into section 2 right away. This section makes it clear that if your account goes negative, Amazon has the right to charge that amount to your credit card.
That can happen pretty quick if you aren’t selling. How? Because all the costs to ship your inventory to Amazon’s warehouses is charged against your seller account. So are Amazon’s fees for each sale. So even if you are selling, you can go in the negative if you aren’t paying attention to your pricing the fees associated with your sales.
Since becoming an Amazon FBA seller I haven’t had any problem with this; however, it’s something you should be aware of.
Caution #2: Choosing to commingle your inventory comes with risks
There are two ways you can ship product to Amazon’s warehouses: labeled or commingled. If you label your own products, which I do, you are identifying each unit as yours (among other things). When you do this, you can be certain that any order fulfilled will be with product you sent in.
If you don’t label your product, Amazon will “commingle” it with the same product in the warehouse. When an order comes in for any commingled seller, it is fulfilled from that pool of product. While it’s easier to ship this way, I think you are putting yourself at risk. Here’s why:
- If you carefully select your product, like I do, you don’t want a less-than-perfect unit being shipped to YOUR customer. You could incur higher returns, dissatisfied customers and a hit to your seller rating.
- If you sell items that are ripe for counterfeiters, you could be accused of selling knock offs and get your account closed. Click here to read a horror story of one seller (I don’t know this person so their story may be bogus, but the risk it highlights is very real).
Caution #3: You are responsible for paying sales tax
This is really important. Amazon is very clear in their Agreement that sellers (that’s you and me) are responsible for paying all sales tax owed. Period.
While Amazon offers a service to collect sales tax owed (for a fee, of course), you must have a State Registration Number for each state in which you want Amazon to collect tax.
Registering in California alone (as I have done in the past) brings with it a lot of administrative work: reporting, paperwork and, of course, payments. Going through this for multiple states seems like a nightmare to me.
So, I have taken a wait-and-see approach. I’m going to wait until the beginning of 2015 to make an assessment as to how to move forward. If I’m selling enough to warrant continuing, I’ll buckle and register in the states where I have inventory, if not, I’ll close my seller account.
Click here for an article that helped me come to this conclusion.
Considering the hassle and risks, I still think that being an Amazon FBA seller has some real possibilities. If I haven’t scared you off, take the leap and open your seller account, get sourcing and see what works for you. Here’s a link to a list of tools, resources and sourcing ideas I’ve put together for you.
I’d love to hear from you about your experience. Do you have other insights that should be shared here? If so, please add a comment below. Are you ready to get started? Let us know that, too. If you have questions, just ask in a comment and I’ll help in whatever way I can. As always, thanks for reading and helping the community by engaging in the comments!
- Income Lab 1.3: Amazon FBA Seller Tools & Resources
- Income Lab 1.1: 10 Important Tips for New Amazon FBA Sellers
- Income Lab 1.0: Selling Through Amazon FBA (Intro)
- About Income Labs
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