Fulfillment by Amazon (FBA)
The Fulfillment by Amazon (FBA) has become one of the most popular ways to earn income online, and for good reason. What makes it different from other traditional ecommerce businesses is that instead of you having to fulfill orders one by one, you can automate order fulfillment by taking advantage of Amazon’s fulfillment services and advanced shipping and earn more sales from Amazon’s coveted Prime customers.
Why Fulfillment by Amazon (FBA) Matters: Stats to Know
Amazon has more than three hundred million active customers, with 90 million Prime subscribers in the U.S. alone. Brands available specifically to Prime buyers are those that utilize FBA.
And, Prime customers spend more money with Amazon. This means that if you use Amazon FBA and are therefore more visible to Prime buyers, you can make more money.
Here are a few other reasons why you should consider selling on Amazon:
- Access to 2.5 Billion monthly shoppers of Amazon which means high sales for your business.
- Almost 25 years of market trust that Amazon has built overtime ensure shoppers trust you, too.
- Amazon’s FBA program does all the hard work for you.
- Jungle Scout (a sales estimation software) lets you predict sales in advance.
- Easy scalability – your business can be as big or as small as you like!
What is Fulfillment by Amazon (FBA)?
If you are having difficulty in understanding what it is, well in simple words Fulfillment by Amazon is a service that Amazon provides to its sellers.
The way it works is:
- You send your products to Amazon.
- They store them in their warehouses.
- When a customer orders one of your products, Amazon picks, packs, ships and tracks the order for you.
- They also handle returns and refunds.
All of this comes at a price. Amazon charges both fulfillment fees and storage fees. However, those fees include stellar 24/7 customer service of Amazon, the cost of shipping goods to customers and access to one of the most advanced and largest fulfillment networks in the world. The bottom line is that Fulfillment by Amazon is a storage and distribution service which Amazon offers sellers, at a fee of course.
If Amazon does all the work, than what will you do?
As an Amazon FBA seller here’s what you’re responsible for:
Pick the products. All the back end work is handled by Amazon, but you need to decide what to actually sell. I’ll provide you with a few ideas on how to sell products on Amazon in a moment.
Keep inventory in stock. Amazon will alert you when inventory is running low. But it’s your responsibility to ensure that the things you sell stay stocked up.
Promote and advertise. Amazon is a huge catalog of thousands & millions of products. Therefore, you’ll need to do a little work to make sure people find your products. But don’t worry–it’s pretty easy!
How to Start Selling on Amazon Using Fulfillment by Amazon
First: In order to get your Fulfillment by Amazon business up and running, you’re going to need to create an Amazon seller account. Go to the website of Amazon, scroll down to the footer and look for the heading marked “Make Money with Us.” Then, click on the link that reads “Sell on Amazon.”
At this point, you can either sign up as a “Professional” or an “Individual.” You will not be charged a monthly subscription fee, if you sign up as an “Individual.” Sign up as a “Professional,” if you plan on building a business over the long haul. The first month is free, and after that, you’ll be charged $39.99 per month plus selling fees.
Other than that, the process of signup is relatively straightforward. Follow the onscreen instructions and complete setup.
Uncover product opportunities and establish your private label
There are a variety of ways to leverage the FBA model, but the most popular way is private labeling. The idea is to establish a label or brand, apply it to your product and sell it on Amazon.
First, you will be required to do your Amazon product research. This is the most important step for a number of reasons. You can lose money if you enter an unpopular product category and start selling a product for more than what your competition is selling it for. If you take the time to find a popular product category, study product reviews, do competitive analysis and identify a product that you can sell at a better price or improve upon, you’ll have found the sweet spot.
Retail arbitrage is another popular way to sell products through Amazon; it involves buying a brand name product and flipping it on Amazon for profit. This is a much easier way of making money on Amazon (at least in the short term).
You need capital with private labeling. Ordering private label products may cost you a lot of dollars, but if you’re looking to build an asset that can later be sold, then this is the direction you want to go in.
Your supplier, another key piece of the puzzle. You can’t make money if you don’t have products in stock, as mentioned earlier you need to ensure that the time delay between the placement and delivery of the order is as brief as it can possibly be.
How to source a product on Alibaba
Once you’ve discovered your product through research, you’ll need to source it through a manufacturer. There are plenty of options out there, but your best bet is with Alibaba.
How to build the perfect Amazon product listing that sells
Then, after you’ve made a deal and your products are being created, it’s time to start building your Amazon product listing. This is an incredibly important part of how to sell on Amazon FBA, so make sure you know all the best tricks, tips, and strategies to build a listing that sells. You can check out this guide.
How to ship your products to Amazon from the manufacturer
Next, you’ll need to ship your product to Amazon from the manufacturer. This might seem difficult, but I’ve searched a guide that’ll make this as easy as ordering a pizza!
How to launch and promote your product
Finally, you will need to launch and promote your product once it hits Amazon. It’s also not difficult, in fact once you get this done, there’s very little you’ll have to do beyond tracking ads and making sure your stuff stays in stock. Here’s a guide to help you pull through this final one.
Tips for growing and scaling your FBA business
Pursue your passion. If you enjoy doing it, you will stick with it for longer. Find a product category that excites and interests you.
Increase your product offerings. As said earlier you’ll be required to do proper research for every new product offering you create. Having more products can help your business avoid becoming dependent on just one product.
Improve your BSR. BSR (Best Sellers Rank) is an important metric for both your sales and your customers. Also when the time comes to sell your business this’ll be a key factor which will determine whether it will sell or not. Buyers will want to see steady growth over time in your BSR rank.
Build your brand website. As you continue to expand your private label product offerings, you’ll want to build a dedicated, professional site for your business. A website provides you with another way to market your products, and it can also make your business attractive to potential buyers.
Become an affiliate with Amazon. Increase your revenues by becoming an Amazon Associate. From your own site refer customers to your products, and start earning commissions.
Amazon FBA Hurdles
Anyone who has considered selling on Amazon knows that the marketplace comes with its own regulations, rules, and restrictions. And in the recent times, Amazon has implemented even more rules & regulations in an attempt to reduce fraudulent sellers in the marketplace.
Although they are crucial to the success of Amazon, but they can certainly be frustrating for newcomers like you. It’s often difficult to know what products you’re allowed to sell and how you’re required to list those products.
When you sell on Amazon, you must comply with its rules. And those rules make it very difficult for you to promote your brand. You are not allowed to include much information about your business on your product pages, and if you choose to use FBA, you won’t be able to include any branded inserts in your shipments.
In fact, if you’re shipping with FBA, your products will be shipped in Amazon’s branded boxes, which can be even more confusing for your customers. The only other option is to pay extra to ship using blank, unbranded boxes.
Lower Profit Margins
Competition is both a blessing and a curse. You’ll have to sacrifice some of your profit margins, in exchange for increased traffic on Amazon. Not only will you be required to continually change your prices to compete with other sellers, who are potentially selling identical products, but you’ll also have to pay a portion of your profits to Amazon.
Selling on Amazon may seem like more trouble than it’s worth with so many challenges to overcome. However, all of the merchants I talked to agreed on one thing: the added traffic and revenue from Amazon is worth the effort.
How much do FBA business owners earn?
“Over forty percent of our profits come from selling on Amazon,” said Fernando Aguerevere (CEO & Partner, Hot Chocolate Design). Spencer Haws from Niche Pursuits reports he was able to make nearly $40,000 within 30 days of starting his FBA business. Chris Guthrie from UpFuel made almost $3,000 within 30 days. James Amazio, founder of Feedbackz, went from zero to $50,000 per month in just eight months.
These results aren’t necessarily typical, but they do show that it is possible to build a 5-, 6- or even 7-figure business by leveraging the FBA model.