Hello! Thanks for following me on my journey to go from $0 to $5,000 per month by selling on Amazon. During my journey, I’ll use terms or acronyms that are related to selling on Amazon that you may or may not be familiar with. That said, I wanted to make a blog post on terminology and general lingo. These are terms that are good to know in general but you’ll hear them a lot on any website dedicated to Amazon sellers. If you are planning to make money selling on Amazon, it is worthwhile to know these!
Terms & Acronyms Used by Amazon Sellers
Profit Margin refers to a calculation that determines the percentage of revenue remaining, after all expenses have been subtracted. The formula used to calculate profit margin is net income divided by revenue, or net profits divided by sales. The way one can determine net profit and/or net income is by subtracting all of the company’s expenses, which include material costs, operating costs, and tax costs, from the total revenue.
Here is an example for you:
This means that you will make a 30% profit on your revenue in this example.
Return on Investment (ROI) is a performance metric that measures the loss or gain incurred on a particular investment compared to the amount of money invested. ROI is typically calculated into a percentage or ratio and used to help make financial decisions, as well as analyze a company’s profitability and/or the efficiency of investments.
ROI Formula: (Net Profit / Cost of Investment) X 100
Here is an example for you:
$300 Income (Net Profit)
This means that you will make a 75% return on your investment in this example
|ASIN||Amazon Standard Identification Number (ASIN) is a unique set of 10 numbers and/or letters that identify products on Amazon. The ASIN can be found on the each products information page on Amazon’s website. The ASIN is produced when a product listing is created in Amazon.
An example of an ASIN is B01CX26WIG which is the ASIN for “Samsung's” Curved Monitor
Universal Product Code (UPC) also known as barcode, is a unique two-part code, that is assigned to every item, as a way to easily identify product information, such as brand name, color, and size. One part is a series of black bars and the other part is a 12-digit number. You will need to get a UPC from GS1 If one does not already exist for your product(s).
|FEIN or EIN||Federal Employer ID Number (FEIN) or Employer Identification Number (EIN) are typically used interchangeably as they define the same thing. This is a unique, nine-digit number that the IRS uses to identify your business especially for tax purposes. You must have this number if you have employees or if your business is an established corporation or partnership. Amazon may ask for this when setting up a sellers account and suppliers may ask for this to prove your business identity. You can apply for an FEIN by going to the IRS website.|
|Resale Certificate||Resale Certificate is also known as a tax exemption certificate which facilitates the ability for a business to purchase goods while avoiding local sales tax. While utilizing this certificate it is the businesses responsibility to collect the tax from the customer at the point of sale. It is common that a supplier/wholesaler will request a copy of the resale certificate to verify the items are being purchased for resale. If a business/individual does not possess a resale certificate, they will more than likely have to pay sales tax on all purchases. Here is a useful article to determine how to register for a resale tax certificate in your state.|
|MAP||Minimum Advertised Price (MAP) is a policy set forth by the manufacturer that limits how low a reseller can price their products. The main purpose of MAP, is to help small businesses compete with one another on value and service, rather than just price alone. Each MAP limit is product specific and will be governed by the manufacturer, who can decide to stop selling to those found not in compliance with their MAP.|
|MSRP||Manufacturers Suggested Retail Price (MSRP) is the price at which the manufacturer recommends that you sell a product; retailers often sell items lower than this.|
Quarters are periods of time that much of the financial world focuses on. Many businesses set quarterly goals and run performance reports (quarterly reports) at the end of each quarter and end of year. The Fourth Quarter (Q4) is the 3 month period that includes October, November, and December. Depending on the products you sell, there is usually a massive peak in sales during this time.
|MOQ||Minimum Order Quantity (MOQ). Your supplier will often have an MOQ in place which is the minimum amount of product you can purchase in one order.|
|Wholesale Price||Wholesale Price is the amount paid for items that are sold in bulk to distributors differing from the price that is charged to consumers. Typically, wholesale benefits include mass shipping and bulk discounts.|
|NET D||Net D is a payment term between two parties where a customer has a specified amount of time to make a payment for service/product received. This is common practice between supplier and distributor or retailer. The amount of time given to make payment is represented by the number after Net. For example, Net 15 represents the purchaser has 15 days to pay an invoice and Net 30 represents the purchaser has 30 days to pay an invoice and so on and so forth.|
|FBA||Fulfilled by Amazon (FBA) is the process where an Amazon seller prepares and ships their items to an Amazon fulfillment center, where the inventory will be stored until purchases are made. When consumers purchase these items, Amazon will pick, pack, and ship them directly to the customer. There are many benefits when utilizing FBA, such as Amazon handling all returns and negative reviews that are associated with shipping issues.|
|FBM||Fulfilled by Merchant (FBM) is the process where an Amazon seller ships their own items directly to the consumer upon purchase. In this practice, the seller is also responsible to handle all returns and negative reviews associated with shipping issues.|
|Retail Arbitrage Sourcing||Retail Arbitrage is the process of purchasing items in retail stores and selling them in another marketplace for a profit. Typically, the items purchased using this method are considerably discounted compared to retail price. Such items are typically found in retail stores such as Wal-Mart or Target and sold on Amazon or eBay.|
|Drop Shipping Sourcing||Drop Shipping is when a retailer advertises a product for sale on Amazon, but doesn’t hold any stock for the product. When they receive notification that a sale has been made, they notify either the manufacturer or wholesaler, who will then ship the product directly to the customer.|
|Private Label Method||
Private Labeling is when a retailer utilizes a third-party or contract manufacturer to produce product(s) and sold under the retailer’s brand name. Typically, the manufacturer also creates the product labeling and packaging per the retailers specifications.
|Liquidation Sourcing Method||Liquidation Sourcing is when a retailer purchases extremely discounted items from other retailers or online sellers and sell in another marketplace. These types of discounts generally occur when companies are closing down or selling off stock to raise capital.|
Wholesale Sourcing is the process of buying products in bulk from a manufacturer or supplier at a discounted price and selling for items at an increased price.
The Buy Box References the “Add to Cart” Button on Amazon. There is only one product listing for each product that is for sale on Amazon, so all the sellers who are selling that product have to compete for that listing. However, one seller will have the Buy Box at any given moment, meaning when customers check out, that seller will more than likely get the sale.
|BSR||Best Sellers Rank (BSR) is the current sales volume of a given product when compared to the sales volume of other products in the same category. It is important for sellers to review the historical BSR trends when deciding to invest in a product (SupplySpy has a tool to do this), the lower the rank, the better.|
|Amazon Seller Account||There are two options for sellers. The Professional Selling Plan which is $39.99 per month and the free Individual Selling Plan. Individual Selling Plans have to pay a $0.99 fee to Amazon for each product that is sold. We recommend the Professional Selling Plan because only Professional accounts can get the “Buy Box.”|
In an effort to protect its customers, Amazon requires a seller to go through an approval process in order to sell certain items. Items that fall within this requirement are considered “gated” and may require additional fees, performance checks, and other qualifications. Check our list of gated categories/products.
These are considered items that are not gated, meaning they do not have restrictions and sellers do not need approval by Amazon to sell. Typically, new Amazon sellers target items that fall within this classification, considering gaining access to gated items can be timely and not always guaranteed.
|Ungating||This is the process of gaining approval from Amazon in order to sell a gated product. Here is how you can start the ungating process.|
|Supply Chain||Manufacturer/Brand Owner > Wholesaler. The higher you do business in the supply chain, the best deals you can get on products.|
|Product Bundling||Product Bundling is the process of creating a unique product listing by offering multiple products in one Amazon listing. The reason Amazon offers this method to sellers, is to enhance or ease their overall customer experience. This means, the seller must think about the products they are bundling and make sure it achieves this goal. This is a way to increase sales as it will create a listing where you will have no buy box competition. It is important, however, to get familiar with Amazon’s Bundle Guidelines, as they closely monitor and regulate this selling method. Also, be sure to regularly check out SupplySpy Tips & Tricks blog section as we will be publishing informative articles related to this topic|
So, that is all for now. Many of these are pulled straight out of SupplySpy’s free ebook, The SupplySpy WholeSale Guide To Generating Amazing Profits on Amazon.com. Be sure to follow SupplySpy on Youtube to see my periodic vlogs.