A Startup Guide To Selling Amazon FBA
If you ask the average Amazon seller how they feel about FBA (Fulfilled by Amazon), you’ll likely get a mix of positive and negative opinions. The decision to hand over logistical responsibilities depends entirely on your style of business, and the work you’re able to put into it.
Selling through FBA can be a great way to make money. Amazon isn’t going anywhere. It’s growing with a year-over-year revenue increase of over 20%.
To help you get up and running, we’ve put together a beginner’s guide on how to sell via Amazon FBA, guiding you on the path to a more profitable business.
What is FBA?
FBA allows you to hand over the practical elements of selling through Amazon. Once you have sourced or produced a product, you can ask the supplier to ship it directly to Amazon. They will store it and ship it on your behalf once a customer places an order.
You’re able to eliminate much of the logistical work, as well as customer service. If anything goes wrong with the order or delivery, Amazon will handle it. You don’t have to touch your product at any point. In return, Amazon takes a cut of the proceeds (with percentages depending on product sold and seller program chosen).
What are the advantages and disadvantages of FBA?
Selling via FBA isn’t easy. If it were, everyone would be doing it. But there are huge rewards if done right, and with persistence.
- Amazon has an excellent reputation. Everyone knows the brand and people trust the platform.
- Who wants to worry about complicated shipping practices and customs regulations? Let alone filling your storage space with cardboard shipping boxes? Amazon takes the hassle of storing products out of your hands.
- You don’t have to worry about returns. Amazon has your back.
- Once you become an FBA seller, your store automatically qualifies to offer Amazon Prime shipping, which increases your exposure to Amazon’s regular customers.
- Using FBA can take a hefty chunk out of your margins, depending on your product. Avoid selling large, heavy, or very cheap items with low margins.
- One of the biggest challenges is controlling your inventory, especially during peak times of the year. Get it wrong, and you can be penalized by Amazon or even kicked out of the program. (Behalf’s Marketplace Seller funding can help you control business cash flow to improve your inventory forecasting).
- Amazon takes care of all the shipping, packaging, and labeling. That means you have no control over cutting costs, finding cheaper or more eco-friendly materials, and better routes.
- You need to be patient and plan ahead. It can take a while to make a profit
Step One: Setting Up an Account
When you go to the Amazon FBA account setup page, you can choose from two account types. Selecting an account type comes down to how many products you plan to sell in a month:
Individual seller account
There are no set monthly fees for this level, but there are fulfillment, storage, and referral costs, which vary depending on your product. There is also a flat-rate fee of 99¢ per item for using Amazon. Keep in mind it’s often cheaper to pay these Amazon fees than pay your own marketing and operational costs.
Professional seller account
This level is $39.99 per month, but there is no fee per product. It makes sense to choose this option if you plan to sell more than 40 products a month. There are still similar fulfillment, storage, and referral fees. Here is the main advantage, though: with the professional level account, you have access to campaign ads (those sponsored products you see), as well as business reporting. These reports help you understand what needs to be tweaked and optimized to keep your business expanding.
Step Two: What to sell on Amazon FBA
Now for the fun part. It’s time to figure out the best products to sell on Amazon FBA. Here’s one way to research products that are in high demand, but have low competition:
- First, go to the Best Sellers list on Amazon. Here you’ll be able to see all the products that have the highest sales volume. Keep in mind that in the beginning, you won’t be able to sell “Gated Products” like clothing until your store becomes more established and gains a good reputation.
To start, pick a category like Sports & Outdoors. Then choose an interesting item from the top of the list. How much is it selling for? Can you source an equivalent product and make money, especially if the product has a lower cost? In this example, let’s choose a pair of ‘neoprene dumbbells.’
- Next, we need to check the demand for this product by checking its Amazon Best Sellers Rank (BSR). To do this, click on the dumbbells and scroll down to the Product Details. Here we can see they rank #4 in Sports & Outdoors. This tells us they’re probably selling a considerable amount of this product. Anything that has a BSR of 5000 or less is selling a good amount each day.
- Now we can research the competition. If there are 3000 other sellers crushing it, we might want to find a different product – the chances of getting to the first page of Amazon are slim. To find your competition, use product keywords to search for similar products. In this instance, we want ‘neoprene dumbbells.’ These results will show us the top sellers for this product. Scroll down towards the bottom of the page and click on a similar product. Then look for the Best Seller Rank again. In this example, we can see the BSR is #191,245. As a rule of thumb, any BSR that is higher than 5000 would not be considered a robust top seller. In this instance, because the BSR is very high, it would mean there is an excellent chance we can compete by selling the same product.
- Perform this same BSR research on several different products over the next few weeks to focus your product search and reduce risk for yourself.
Step Three: Find your supplier
You’ve chosen your product, and now you need to find a good supplier. The quickest and easiest first step is to go to Alibaba.com. This company is not a supplier themselves, rather a business networking platform connecting you with suppliers. Find someone who is trustworthy and will provide the exact product you want:
- Go to Alibaba and search for ‘neoprene dumbbells.’ The first thing is to filter the results by Trade Assurance, Gold Supplier (if you have that option), and Assessed Supplier. This means that you can get your money back if the product isn’t up to scratch. Also, the supplier has been vetted and visited by Alibaba to confirm they’re a legitimate business.
- While looking through the results, make sure you keep your financial goals in mind. Remember, you have to pay Amazon a chunk of change. Ask yourself if the Alibaba supplier costs will mean you can still make money on top.
- Now this is critical: make sure you’re differentiating your product from your Amazon competitors by studying their customer reviews. If reviewers are saying “the color of the dumbbells wasn’t accurate” or “the material didn’t feel comfortable in my hands,” then make sure you’re offering a product that addresses those issues.
- Contact the supplier to get further price quotes if you order in bulk: 100, 500, and so on. Be very, very clear about the exact specifications of your product, including dimensions, colors, and materials. Don’t leave anything up to chance.
- This is also the time to decide whether you can purchase products to bundle in with the weights, to add even more value to the customer (think a free towel or sweatbands). While this may eat into your margin, it could also result in selling more product and reaching a higher Amazon ranking.
Step Four: Send your product to Amazon!
Now that you’ve done your research about what to sell on Amazon FBA, feel comfortable about the product, and found an excellent supplier to work with, it’s time to start selling!
Have the supplier send the product directly to Amazon on your behalf. You don’t even need to see it. However, to make sure Amazon has all the correct product information, ask the supplier to attach the FNSKU label directly to the retail packaging of the product. There is a potential risk there though: once your supplier becomes familiar with the FBA requirements and process, they could cut you out and sell directly to Amazon themselves.
If you do have the supplier send directly to Amazon, make sure they ship with any international duties paid since amazon will not pay shipping or customs fees for you.
Finally, remember you are paying Amazon higher fees for a reason. It’s Amazon’s job to keep track of your inventory, ship your products, provide customer service, and process returns and refunds. Anytime a customer contacts you about an FBA order, politely ask them to contact Amazon.