In this post, I aggregated the top trending Amazon FBA questions on the internet and will answer them one by one. The questions I will answer:
- What is Amazon FBA?
- How does Amazon FBA work?
- How to start selling with Amazon FBA
- What to sell on Amazon FBA
- What are the fees associated with Amazon FBA?
- Is Amazon FBA worth it?
- The advantages and disadvantages of Amazon FBA
What Is Amazon FBA?
Amazon FBA, or Fulfillment By Amazon, is an ingenious system whereby an Amazon seller can ship their merchandise to an Amazon fulfillment facility (in their client’s vicinity) and then Amazon takes care of the rest. Whenever I explain this to people who are new to eCommerce, they always give me a smirk, which universally means, This is too good to be true – what’s the catch!? And that’s the beauty: There is no catch, but this is not a free service to the community, so do keep in mind that you will be paying for this convenience.
How Does Amazon FBA Work?
Ok, so now that you generally understand what Amazon FBA is, you are probably wondering how it works!?
Let me break down the process for you:
- Send your inventory to Amazon – The first thing you will need to do is pack and label your inventory, then choose a storage facility closest to your client base and head to Seller Central to set up a shipping plan.
- Items are received, sorted and stored – Once your items arrive at the Amazon Fulfillment Center, they are sorted based on the item type. Occasionally, Amazon will employ a practice called ‘commingling,’ which means they can send your items to an area where demand for that item is currently high. If all your items are standard issue, there is a good chance clients will receive items different than the one you originally sent in.
- Your listing goes live – Once your items arrive and are entered as available inventory on Amazon’s database, you will be able to go live with an active listing and start actively promoting it using Amazon Marketing Services, for example.
- Orders are placed by customers – Customers start making purchases from your listing. If they are buying from your Amazon listing, then it will be directly processed, packed and shipped. If, however, you prefer being a multi-channel seller vs. being a single-channel seller, and you sell an item on eBay or another marketplace, you will need to set up MCF or Multi-channel Fulfillment.
- Packed, shipped and sent – Amazon will proceed to pack, ship and send out your item, allowing both you and your client to track the item with a tracking number they provide you both with.
How to Start Selling with Amazon FBA
Starting with Amazon FBA can be accomplished in a few easy steps. Let me walk you through it:
Step #1: Create an Amazon Seller Central Account – Head over to Amazon’s website and click ‘Sell on Amazon’. Once you do this, you will be prompted with a decision: Do I set up an individual or professional account? Individual accounts are free, yet come with limitations, while professional accounts cost $39.99 and allow you access to all features. As articulated in Amazon’s division above, if you are selling under 40 items per month, then choose the free individual option. But if you are planning on running a business with over 40 sales a month, then spring for the Pro account.
Step # 2: Choose your selling niche – You may already have a niche, and you are simply considering joining FBA, in which case you can skip this step. But for those of you who still don’t have any idea, consider using a tool which helps you find trending items, such as AmazeOwl (Please note that we are not affiliated with this company and do not have any corporate or financial agreements with them). AmazOwl uses a five-star ranking system which allows you to determine how difficult selling an item will be in terms of competition, what the demand for a certain item is and what your potential profit margin might look like. Seller tip: FBA fees are taken on a per-product category basis (as well as shape, weight, and size), so beyond finding a product with low competition, high demand and a large profit margin, you also want to choose an item in a category with lower FBA fees.
Step # 3: Source your products – Once you have chosen your niche as well as the products you think are most suitable and competitive for you to sell, you will need to start sourcing those products. Many sellers have already learned the ins and outs of sourcing products by expanding their eCommerce business overseas, while others are still at the beginning of the road. In any case, here are the main modes for sourcing products:
- Sourcing products overseas from wholesalers on Alibaba. You can get products at a 25% or higher markdown – leaving you with a higher profit margin.
- Look for local trade shows. It is always a good idea to go out and meet suppliers, see their products in person and create a personal connection with the people you plan on working with. Keep your eyes open on the internet and in trade magazines for such trade shows. Here is a list of some of the top eCommerce trade shows taking place in 2019 from etailinsights:
- As I mentioned above, try approaching local retailers, wholesalers and manufacturers to strike a deal with them. This is a great idea, especially if your customers are locals who prefer buying products made in their area in order to support local industries and jobs (this is a big trend now and can even help you when marketing your products to future customers).
Step # 4: Work on your brand – Many eCommerce sellers overlook this step, but it is extremely important to create a brand identity even for the smallest of businesses. Once you understand your niche, it should be easy to take this to the next step, which includes choosing a name and creating a logo for your Amazon FBA business. If, for example, you are selling baby products or doggy items, use these ideas in your name and logo. Here is a cute logo and name I found while looking for inspiration on Pinterest:
Consider using a site like hatchful or Tailor Brands in order to create a quick, free logo. Also, if you are really looking at Amazon FBA as a serious business, then consider opening an LLC, or Limited Liability Corporation, so you can register and protect your brand name and logo.
Step # 5: Create product listings – Finally, the moment you have been waiting for. Your products are in an Amazon Fulfillment Center, so now all you need to do is create a listing. Using your eBay listing design as an effective tool is really more of an art than a science. There are some basic things which you absolutely want to pay attention to, while everything else you can work on and optimize later:
- Images – Images are extremely powerful, as sight is one of the strongest senses in human beings. You want to use a professional camera and have a plain, clear background (black or white). For sellers who want to add a little extra, consider playing with the focus – meaning your product is in focus while the background is blurry. This makes for some really captivating shots. Sven Van Der Pluijm got his product shot just right on Unsplash:Check out Felt Magnet’s post for tips on taking these types of product shots
- Product titles – Titles are also uber important. Titles are how buyers search for products, they are how algorithms rank your listing on Amazon, and after a picture, I would say a title plays the largest role in whether or not someone chooses to click on your listing. I wrote a post about ‘How to create the perfect eBay title in 9 easy steps’, and I recommend checking it out, as a lot of the info there is applicable on Amazon as well as other marketplaces.
- Product description – The product description should be short and to the point, yet informative and fun to read. Always think of your brand narrative and who your buyers are. What experience are they essentially buying from you? Ask yourself, “Are my clients trying to feel younger, thinner, more stylish, etc.?” and then craft your listing around that sentiment.
- Item details – This is technical yet important. Be sure to accurately fill in your item details from size and color to brand, model and condition. This is extremely important both in terms of Amazon’s search algorithm as well as attracting an audience looking for exactly what you are selling.
Please note: You will only need to create an independent listing on Amazon if your product does not yet exist on Amazon. Otherwise, you will be ‘joining’ an already existing product listing and can skip this step.
Step # 6: Invest in marketing campaigns – You have a great listing, now you need to drive traffic so you can generate sales. One of the best ways to do this is by using Amazon Marketing Services, or AMS, to run one of three types of campaigns:
- Sponsored products
- Headline search ads
- Product display ads
You don’t need to necessarily invest in this from the beginning, but at least have a look. Once you have a revenue stream, start testing out different ad campaigns and see which converts best for you and your products.
What to Sell on Amazon FBA
Above, we spoke about using an online tool to search for items to sell on Amazon. Here are a few more options in this regard (again, we have no affiliation with these companies):
- Shows you the top 30,000 best-selling products in each category.
- Arbitrage feature which helps sellers find items at a lower cost.
- ASIN-based monitoring using sales tracking and keyword ranking as well as negative product review tracking.
Pricing: You can try it out free with one product. The paid version ranges from $20-$180.
- Ability to view current product trends.
- Profit calculator.
- Product tracker which monitor’s chosen product’s performance.
- Sales history analyzer which helps you understand seasonal product trends.
Pricing: You can try it out free with one product. The paid version ranges from $44.99 a month, $135 for the year or $399 for life.
Here are a few additional tips when choosing what to sell on Amazon:
- Stand clear of big brands and well-established products like iPhones, for example. These markets are saturated and the competition is insane. Stand clear and instead potentially choose a product in a category in which you have a lot of personal knowledge, say gardening, for example. This is super conducive to your success, as you can offer priceless information to shoppers and even blog about your items and gardening, building a community around yourself. At some point, you may even become recognized as an authority in your field of choice.
- Bulk or clearance items are a great way to source a ‘lot’ or a ‘bundle’ of items which will not replenish itself. Usually, if you go to stores which are closing down, end-of-season sales or even estates, you can pick up really great bargains. You can sell these items through your FBA account and constantly change the items you have on offer. This demands a lot more time and work from you but can be rewarding financially and personally if you are the bargain-hunting type.
- Use an app to find items in retail locations. The Amazon Sellers App and the Scoutify app are great options which will turn your smartphone into an Amazon FBA machine.
What Are the Fees Associated with Amazon FBA?
First of all, it is important to know that Amazon has an FBA Calculator which you can use to determine if a product is, in fact, profitable for your business. Beyond this fantastic tool, here is what you need to know about Amazon FBA fees and how they work. You have two fee categories: A. Fulfillment fees and B. Monthly inventory storage fees.
Fulfillment fees – This is a fee which Amazon charges on a per-product basis and includes:
- Customer support
- Item returns
- Shipping and handling
The amount you will need to pay Amazon in this regard depends on the size of your item. For example, an item which defined by Amazon as small (i.e. 1 lb or smaller) will cost you $2.41,but a special oversized item (.i.e over 2 lbs) can run you $137.32 and an additional $0.91 for every additional pound.
Monthly inventory storage fees – These are charged based on the quantity of units you sell monthly, as well as the cubic foot area of which your products take up in an Amazon storage facility. It’s also based on what time of year you are storing said products:
- January – September – $ 0.64 per cubic foot
- October – December – $2.35 per cubic foot
- January – September – $ 0.43 per cubic foot
- October – December – $1.15 per cubic foot
Here is a screenshot of the breakdown from Amazon’s website:
Is Amazon FBA Worth It?
That is a hard call to make, as it is extremely individual. By using the calculator above, you can at least determine if it is profitable for you to sell through Amazon FBA. If it is not profitable for you, then, of course, you should not use this service. Beyond profitability, here are some pros and cons to consider before making the Amazon FBA leap.
The Advantages and Disadvantages of Amazon FBA
Amazon FBA Advantages:
Customer service – Amazon takes care of all customer service issues for you and has a center available to your customers 24/7. They also handle all logistics and returns. For sellers who are extremely busy growing their business, this is a benefit which gives them the time to focus on business growth and general peace of mind.
SERP – SERP, or Search Engine Results Page, exists everywhere on the web, including on Amazon. Amazon search results are regulated by an algorithm called A9 (on eBay it is called Cassini). In any case, sellers who are registered with Amazon FBA appear higher in search results, meaning they have a probability for larger sales quantities and increased profits just by virtue of being a ‘member’ of FBA.
FBA is Multi-channel – As I mentioned earlier, Amazon FBA is actually a multi-channel service which in and of itself is an interesting fact since, in a way, they are helping other marketplaces. Either way, by setting up your MCF or Multi-channel Fulfillment with FBA, you will be able to send in all your multi-channel inventory and then integrate with Shopify, private retail sites you own, as well as eBay. This is a huge advantage since it helps you manage inventory levels across the board and run your entire eCommerce retail business via Amazon.
Amazon FBA Disadvantages:
Costs – Amazon charges you $40 dollars just for the privilege of being able to send in over 40 items on a monthly basis, and based on the dimensions and other factors, Amazon takes an additional estimated 30% of a product’s value.This percentage fluctuates depending on the time of year and duration of storage, as I previously mentioned, but still, Amazon is taking a huge bite out of your earnings!
Brand Identity – I discussed honing your brand identity above, which is paramount in eCommerce, but with FBA, some of that limelight gets stolen by Amazon, as all the labels and boxes have strict requirements to sport the FBA brand. If you are truly trying to build up your brand, you have to consider if you are willing to partially concede to Amazon in this regard.
Inventory damage – In general, but especially during peak seasons, Amazon treats your inventory as communal (i.e. commingling, as I mentioned before). When they are low on merchandise, they may dip into your stock and then when you make sales, you may be out of stock at no fault of your own. Amazon FBA can, therefore, cause damage to your reputation and bottom line as a business.
And now the ball is in your court. Only you can decide if Amazon FBA is right for you. If you do decide it is something you want to try out, I recommend beginning with a pilot. Send in any number under 40 units to Amazon FBA and try it out for a month or two. If everything goes smoothly and you are satisfied, then consider upgrading to a Pro account.
Please let me know what kind of experiences you have had with Amazon FBA – I want to hear the good, the bad and the ugly.
As always, thanks for reading! 🙂