How to Make Money with Amazon FBA
Amazon – the largest online sales platform! There are unlimited products that you can find on their website, and they are ready to serve buyers in almost every corner of the world.
While Amazon is currently serving millions of people around the globe with it’s extensive collection of products, it also offers a profitable business opportunity to budding entrepreneurs.
Yes, if you are interested in starting a business online, you can leverage the power of Amazon. This can be a very powerful business model because many of the customers love to buy from the Amazon marketplace because of the almost limitless choice, next day delivery and generally competitive pricing.
In this article I will discuss an increasingly popular business model from Amazon that anyone can try. By the end, hopefully, you will have a clearer idea of how to make money with Amazon FBA.
What is Amazon FBA?
Fulfilment by Amazon (FBA) is a special business service provided by Amazon whereby they provide the storage, packaging and shipping to sellers just like you. It means the business owners just needs to focus on finding products that will sell and then finding suppliers that can provide them in a timely manner to Amazon’s Fulfilment Centres. Amazon then handles the packing an shipping to the customer.
It means you can run your own business under the umbrella of the biggest online store. Millions of potential customers use Amazon everyday. Your FBA listings are also accessible to Amazon prime members which generally means higher conversion rates.
How to Identify Best Niche/products to Sell?
If you are planning to set up Amazon FBA business, the first question in your mind will be how to identify the best niche to sell in or products to sell. The Amazon market place is already loaded with an extensive collection of products. Also, you have plenty of competitors in almost every niche that are targeting the same potential customers as you. So, how can you build a profitable business online?
Here are some tips to identify the best product to sell as an Amazon FBA:
First of all you will need to decide which of the 3 basic models you are going to operate:
1. Traditional Reseller. Buy products at wholesale price and resell on Amazon for a profit.
2. Retail Arbitrage. Look for end of line or clearance products either in local stores or online – if you are able to source sufficient volume then this could be an easier entry point as you won’t need to deal with wholesalers who might not want to accept orders from a beginner.
3. Private Label. Find manufacturers that will produce products under a new ‘brand’ that you develop. The most difficult of the 3 but the one likely to result in the largest profits if you are successful. Possibly best left to those with experience of the first 2 methods.
Now check if the selected niches/products are affected by seasonality. Ideally you need to choose a product whose demand stays consistent throughout the year. For example, a smartphone. People may need to buy irrespective of the seasons. On the other hand, items like Christmas lights or air conditioners may be popular during specific periods only.
Check how much margin you will be able to get by selling the selected product. You need to account for the expenses involved in Amazon fees, advertising, and shipping as well. While considering the price points, you should also consider the competitor prices to ensure you can make a profit and be competitive or do you think there is a way to charge a premium price for a premium product?
You should also consider whether the product you intend to sell needs special approval by Amazon. You can see a list here.
It is important to consider the dimensions and weight of the product. At the same time, you should consider how delicate it is to ship. Too large or too heavy a product may cause so many problems that it may not be the perfect fit for Amazon FBA.
The product should also be in demand – otherwise you may not see much in the way of sales.
How to Source Products?
If you have decided to go for the Reseller or Private Label model then you will need to find a supplier or ideally more than one (ideally you don’t want to be 100% reliant on only one supplier)
In the recent past many, if not, most Amazon FBA sellers may have been sourcing products from China. But with concerns increasing on a number of levels it is advisable to look for suppliers in the countries you are most likely to be selling in. Ideally ask for quotes from all shortlisted suppliers and compare the margin but also take account of the likely quality based on reviews of that company’s other products.
Another reason to think long and hard about Chinese suppliers is the language barrier. Make sure that your supplier can communicate to you in your preferred language because this is hopefully, going to be a long-term relationship and you want to be able to make yourself understood. Also, check how they will deliver the products to you/Amazon. If it is a heavy, bulky or delicate then you may have to be more selective with shipping options.
Assuming you have an idea for a product (if you are private labelling) or wholesale/retail suppliers if you are going that route then you will need to create an Amazon Reseller account at Amazon Seller Central. If you already have an ordinary Amazon account then just login and at the bottom of the page you will see a link to Fulfilled By Amazon where you can sign up.
You can sign up for a free reseller account but you are limited to 35 sales per month and you are charged per sale (if you are making £500 per item then you may be OK with that!) or more likely the professional account which has a monthly fee of £25. There are numerous other fees on top though such as storage and fulfilment fees so you need to factor those in to make sure you are able to be profitable.
You can then add listings for your private label products or any other products that you are reselling. If you are reselling existing products then the listing will already exist. Ideally you need to optimise your listings to get the highest number of customers to find your products. A tool such as Keyword Tool for Amazon can help you to tweak your listings to increase your visibility in search. Of course you can also go the paid route by paying Amazon to advertise your product in the search listings.
Another way to attract users to your Amazon store is JumpSend.
Major Success Stories:
Before starting your own Amazon FBA business, you might be interested to hear about a few success stories? Well, they are many and below we have listed a few to help inspire you to try out this business idea.
Michael Ward started working with Amazon in the year 2011 with extensive eCommerce experience from several online stores. He decided to sell the best costumes and toys and hence choose a purposeful name for his business: Best Costumes and Toy Deals. Within just one year of setting up his Amazon FBA business, he was able to earn $1.2 million in revenue.
Another big name on the list is the ZONLIFE platform, which was set up by Chris Jones. He started his Amazon FBA business with a small investment of $3K, and he successfully sold around 500 units within just six weeks. Today he has expanded his business to an extensive range of personal care and health care products.
UPFUEL is another Amazon FBA business, which was set-up by Chris Guthrie. His small initial investment helped him to earn more than $3000 just within three days. He keeps on updating many monthly offers on Amazon FBA and is still one of the popular sellers in this marketplace. You can listen to his plans to scale his Amazon FBA business to $100k per month here.
CIRDAN is a book store set up by Barry and Lisa. Unfortunately Hurricane Wilma almost wiped out their inventory in 2005 and their business. They realised that not only could they sell their stock on Amazon but Amazon could also house their inventory. Moving to Amazon FBA has allowed them to expand their business to the point they now employ 10 staff .
How to Make Money with Amazon FBA: Downsides
For many newbies the biggest issue will be the amount of capital required to start an FBA business. Unless you are using retail arbitrage then the upfront costs of purchasing stock could prove to be substantial.
Another thorny problem is one that a number of sellers have complained about. Namely Amazon starts producing a ‘copy’ of a successful product in its Basics range and completely obliterated your competing product.
How to Make Money with Amazon FBA: Conclusion
While it is certainly not easy to make money with Amazon FBA, it is possible. You will need to do a lot of research to find the right products, suppliers and listings to make it work. If you are able to then the sky is the limit given the number of customers that you can reach on Amazon.
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Further reading: FBA Black Edition Review, Junglescout Review, Junglescout – FBA Tools & Training