I’m certain that all of you have heard about Amazon by now. They are the largest online retail business in the US, UK, and Europe. The brand name rings a bell in consumer minds. When there is a requirement, people quickly tend to browse Amazon for their respective products. Chances are that you are purchasing many of these products from Third Party sellers via Amazon. Simply by utilizing the service called Amazon FBA, third party sellers can sell on Amazon. How to Start an Amazon FBA Business? This is one of the many concerns of people who hear about this opportunity.
What is Amazon FBA and How to Start an Amazon FBA Business?
Simply said “FBA” stands for Fulfillment by Amazon. Here is where the seller’s stock is looked after and managed by Amazon. Once the platform receives an order from the customer, this does not have to go through the seller. Rather it could directly go to the Amazon FBA warehouse. The order is then packed and shipped to the customer. Furthermore, they also handle the customer service and returns while only the specific concerns are for the sellers to resolve.
From the customer point of view, there is no difference that you notice about purchasing directly from Amazon or making a purchase of items sold by the third party via Amazon FBA. The customer will receive the same shipping service, returns policy, and customer service. The big question here is How to Start an Amazon FBA Business. Read this article right up to the end and you will find out.
For an instance, the image below shows that the Yoga Mat is being sold by “Gaiam” and Fulfilled by Amazon. Hence Gaiam is an Amazon FBA Business.
Fairing against other Business Opportunities
Compared to many other online business opportunities like eBay, Etsy or Bonanza, starting an Amazon FBA Business is a challenge. It is building a Brand name with staff working behind the brand. As the seller, you don’t have to manage the stock or spend time on it. It takes pretty much the same time and work to make a sale of 100 items or even 1000. However, the customer of Amazon gets the best service similar to the largest brands in the world.
In the selling point of view, you can manage a business that sells thousands of products a month by yourself. Amazon FBA businesses are remotely manageable along with all the freedom you need. All you have to make sure is to place the order of your products. Next is to have them delivered to the Amazon FBA warehouse. The rest is for you to focus on getting sales.
Types of Amazon FBA Business Models
In this post, we will focus on two types of Amazon FBA Business models.
- Invent a New Product
This is where you have a concept in mind and have it designed and manufactured by the right company. Then you introduce the product to the market and convince people that they need this product. It is not as easy as it sounds. Providing you put in the work and hire the right people to market, it is not impossible to make sales. Always keep in mind to solve an existing problem with your new product. People might not really want a product that you invented.
- Improve a Product
Simply find existing products in the market and create a better version of it. There are so many products if you conduct proper product research which can be rebranded. You can easily get in touch with the factory that manufactures the product. Discuss with the supplier and have them customize it according to your ideas. They will complete the manufacturing and ship it to the Amazon FBA warehouse.
Sourcing Products for Amazon FBA
After speaking of Amazon, you might wonder where can you source all the products that are sold on Amazon. Some factory has to be producing it for a lower cost. This is where I should mention about Alibaba, a global wholesale giant in China. You can consider Alibaba to be an online wholesale marketplace in China. Factories, manufacturers, and distributors advertise their products in Alibaba. Most of them are flexible to get into an agreement and start producing your unique products as per request. Alibaba has been in the game. It has become very easy for people entering the Amazon FBA Business, to have products designed.
Actually, Amazon is slowly getting flooded with similar products labeled by different Brand names due to Alibaba. You can notice huge profit margins in these products if you compare both sites. Many might not sell well, but there are sellers who have broken that barrier.
Sometimes the only difference you might notice on Amazon for similar products is the brand name and price. These are sourced in bulk from Alibaba and branding is as per your request. It will be solely based on the quantity you order and how your negotiating skills are. There are plenty of people who still buy them on Amazon due to various factors. Even with the selling fees that one must bear, there is a good profit that sellers enjoy by this method.
Same seller on Alibaba Supplying to many Amazon FBA Sellers?
Once you have browsed Alibaba, you might think that the same factory supplies to many Amazon FBA sellers. This we cannot be sure of, but does it really matter? As long as the product is high quality and there is a price advantage, you are able to land sales. Moreover, on Alibaba, you will be able to get similar products in different qualities.
If you come across products on Amazon that you think needs improvement, go find a supplier on Alibaba. After you find the supplier, it’s all about communicating the product design. Improvements you require can be mentioned and they will have it designed for you. In no time you will have unique products under your own brand name and enter the market as a competitor. Sometimes, finding really good products might take some time and research. Patience will help you find a winning product that will be customized to your requirements.
How to Research for products on Amazon?
As discussed in my previous post, the tool Jungle Scout helps you to conduct a search in-depth on Amazon. This will compare listings with data to analyze how much your competitors are gaining sales per month. Jungle Scout displays much useful information to make smart decisions. Finding trending items or hot selling products with or without many reviews is many easy using the tool. The opportunity to take a dive into the search of different niches and finding items by keywords will also be available. There can be many criteria you can use to find a winning product. In the beginning, you can rely on Jungle Scout to provide you good results.
Shipping your Products from Alilbaba to Amazon FBA
The most important aspect of starting an Amazon FBA Business is how to get your products to Amazon FBA Warehouses. They need to go from the seller on Alibaba to the Amazon FBA Warehouses. This may seem very complicated as different countries have various processes to follow at customs. Moreover, Amazon also has some specific requirements for how you should deliver your products.
There are 2 main methods of delivering your products to Amazon FBA Warehouses
- Direct shipping to Amazon FBA Warehouses from your China factory/wholesaler.
A common issue anyone would face when dealing with Chinese manufacturers is the language. This is one of the crucial points where one must pay attention to. However, years of dealing with Amazon FBA specifications, many Chinese suppliers have now become familiar with it. Nevertheless, you still must ensure that the right procedure has been briefed to them.
You get the opportunity to inspect the products. Inspection can be before shipping out. In this process, you are able to verify if the Amazon FBA specifications are in place.
Very quick transit times can be expected when items are shipped directly to Amazon FBA Warehouses from Chinese suppliers. Faster that your products reach the warehouse, you can start selling on Amazon. You save money in paying someone to inspect your products.
The freight charges and custom duties will have to be paid before the items arrive at Amazon.
All the products must follow the packaging and shipping requirements set by Amazon FBA.
Amazon might request you to ship your products to different warehouses and not to just one location.
- Having the factory/wholesaler ship to a middleman, who will then ship it to Amazon FBA warehouses.
Products from the Chinese supplier can be directly shipped to a middleman. They will handle forwarding your products to the Amazon FBA warehouses. There are very popular middleman who will be glad to handle your Amazon FBA inventory on behalf of you.
Your sales strategies will remain a secret from the suppliers.
Shipment has a high rate of acceptance from Amazon FBA.
Product can be inspected before shipping out to ensure the quality.
Shipment will take time to reach Amazon FBA Warehouses.
You have to hire someone to do the whole process or do it by yourself.
Generally, it is highly advisable to use middleman when this is your first shipment to Amazon FBA Warehouses or your are just at the launch of your business. Direct shipping from your supplier is advisable when you are close to run out of stocks and want your products to continue the selling pattern on Amazon. Moreover, once you have a good relationship established with the supplier, shipping directly will be less expensive for you as a business.
Once you have browsed Alibaba and found some items which you are keen on selling, you will definitely be shocked as you come to know how cheap they can be obtained. The factories that produce items and sell on wholesale quantities are able to provide products are lower costs. It is not just simple as deciding a price that you sell for and deducting it from the price you paid to source the items. There are many costs that occur in between. Amazon offers a calculator where you can use for the FBA Business.
Enter your product dimensions, price of the item, shipping charges, custom duties and taxes, delivery fees to FBA Warehouses to get your cost and profit margins. On top of this, there is an FBA Fulfilment fee.
Ideally your item should be of something that people want to buy. Once you have found some products from Jungle Scout and understand the fees associated along with profit margins, you can start negotiating with your supplier.
Finding the Ideal Manufacturer
In order to find the ideal manufacturer for your products which you hope to sell on Amazon, it is highly suitable to discuss with many factories and get quotations. Alibaba has made it simple and easy where you are able to search for any product which you are looking for by simply typing on the search bar. You can then choose “contact supplier” after having read their product descriptions and reviews.
To filter the Original Manufacturer of products, you can simply include the term “OEM” at the end of your search query. As an example; “Charger OEM” will filter only the original manufacturer by keeping out all the re-sellers from the search results.
You could have a custom message ready to send each supplier and based on their responses to decide whom you wish to work with. Generally, the Alibaba sellers are well aware of the Amazon FBA Businesses and will be willing to work with you.
As an Amazon FBA Business, we are not only re-sellers but we are trying to improve existing products and customize them to our specifications. Even though the whole process will take a long time, it is good if you follow the steps and do it right. Designs has to be made professionally. You can always hire freelancers from Fiverr to help you in the designing. The manufacturer also maybe open for suggestions which they can pass onto their factory to start manufacturing the products. It is best to keep your costs low as possible in an Amazon FBA Business to have better margins.
While the products are in the design stage, you have to purchase barcodes. There are many websites that you can easily find online for this purpose. Once you have a prototype ready and tested, your supplier can begin manufacturing.
A key component in every business is Negotiation. Likewise, for an Amazon FBA Business to succeed, you need to be able to negotiate well with your suppliers on Alibaba. Depending on how good your skills are, there are high chances that you can land a hefty discount than the asking price.
Within Alibaba it is easy to get an idea of competitor pricing, hence many suppliers have now realized that they are able to secure more orders if they open up for negotiation. You can end up receiving a best offer depending on the MOQ (Minimum Order Quantity), Unit Cost and Time for production.
Initially, the most important factory will be the Minimum Order Quantity. You will definitely get a good deal if you order thousands of units at once. However, as you are just beginning Amazon FBA, it would not be a wise decision to place such a big order for a product you haven’t listed for sale. Incase, there are no sales, you will have to cover the cost for storage of all the thousands of items which will be at the Amazon FBA Warehouses. For the beginning its advisable to order 1000 or less than 1000 items to start off with.
Next comes the Time for production. Certain suppliers and their factories will take weeks or even months to have your product ready due to the high volume of demand and orders they receive. In the beginning, it is better if you can request them to speed up the process with an additional cost per item without having to affect your profit margins as a seller. This helps your products to be ready for shipping quicker. Products will be sent to Amazon FBA Warehouses quicker and you can start selling them immediately.
Having shortlisted many suppliers from the competition and from who gives a good offer, you might still have few suppliers where you can source the same product from. These suppliers can be in competition with each other already and it is a good opportunity for you to play around negotiating with them for a better deal with faster production. This way, you can always go for the best deal to keep your profit margins intact. Once you have chosen the supplier whom you will work with, also keep the other competitors close as you may receive better offers in future for large quantity orders.
Once the deal is in place and production begins, instruct the supplier to have the items packed in a correct manner in cartons of the same size whereas it will be helpful when sorting out the final stage of delivery to Amazon FBA Warehouses.
Air Freight & Customs
As discussed above, there are very popular middleman in the industry who will handle all your shipping and custom issues in the Amazon FBA Business. However, your suppliers will give you the option to ship via air or sea. Generally a shipment from China to USA will take somewhere like 4-6 Weeks. If you opt for air freight, it will reach in less than a week and being over twice as more expensive.
For the initial shipment to the Amazon FBA warehouses, it is best to have them sent by Air so that you can start selling immediately and for the next orders when stock is running out, you can opt for shipping via sea. This will lower your costs and help you retain better profit margins. The middleman you choose to work with will be able to arrange the delivery of all your products to Amazon FBA Warehouses. Throughout this process, you can also have your products run through quality control just to be sure that it was not damaged during shipment.
Amazon & FBA
Once your shipment has been arrived at the destination country, you have to arrange it to be delivered to Amazon FBA Warehouses. Prior to all that, you need an Amazon seller account. The account can be created even before production begins or even finding a supplier. As an Individual you can sign up for free on Amazon Seller Central in most countries. Amazon UAE, KSA and India might require a local based business to register. It is always better you start with a country that you reside in. The Professional account charges a monthly fee while the Individual account is offered free where you pay a fee for items sold. Furthermore, you have limited access to analytics and data in an Individual account.
Either way, both of the accounts can be used with Amazon FBA. What I would recommend is that you begin with an individual account initially and upgrade when your sales start coming in as it is cheaper to have the professional account at that point of time.
Listing items on Amazon
Once you have completed the setup of your account, navigate to the Inventory tab in the Homepage and click on “Add a Product”.
Then, you will be taken to a page to input all the details of your product. There are several fields which you can fill or simply ignore as they are present to give a more detailed idea to the customer. However, you must fill and complete all the “Vital Info”.
Describe your item along with your Private Label Brand Name as this is what the customer will be presented when he or she is searching for a query on Amazon. E.g. “The Millennials Hustle Powerbank”.
Fill in your brand name or the one you designed for Amazon FBA Business. E.g. “The Millennials Hustle”
You can include a UPC barcode that you have purchased at the designing stage of the product.
Furthermore, you have a section called “Offer”.
Here is where you fill in the price of the product which you intend to sell on Amazon.
Condition of the item
New or Used
Fulfilment: The most important section is the fulfilment. You can choose the FBA option and let Amazon know that you need to start an FBA Business while Amazon handles the stocks and customer service on behalf of you.
A very critical area of any business is eye catching images. This cannot be ignored and it is better if you hire someone professional to do photography of your items.
This is your chance to describe your items with details as much as possible while making the product very attractive and creating the want for the product in the customer’s minds.
Keywords are phrases that customers on the website will search for. This will trigger the website to bring up relevant items. Think of all possible keywords that your item will be searched by and add them to Keywords.
Once the above steps are completed, you are ready to click “Save and Finish”.
Arranging for the delivery of stocks to Amazon FBA Warehouses
After having selected the option to let Amazon know that you are relying on them to fulfil your products, you will be redirected to the Send/Replenish Inventory page.
You can follow the instructions and you will be further asked for some detailed information about your item with certain specifications including the weight. Generally, any product which is sent to Amazon has to be labelled in a unique form for the item and shipment ID provided. This is a barcode that helps Amazon to manage and track inventory at their FBA Warehouses. You can have Amazon do this for you at a cost or even request a middleman to do so. Usually, the middleman who handle freight will cost less than having Amazon do it for you. Negotiating prior to sending them the products to have this extra item done from their end is wiser. Upon agreement, you have to download and send them a copy of the PDF of the labels that needs to go on your products.
The Next Step
Once you have completed all the steps required, you will be able to review and accept it. Select the option “Work on Shipment” to let Amazon know how the products are going to be delivered. A highly suggested way is to choose “Small Parcel Delivery” for the method and for the carrier as “Amazon Partnered Carrier”. When the negotiation is made with the supplier, it is best if you can request them to have the products packed in same sized cartons and weight. This makes the whole delivery process easier and efficient.
The default Amazon Partnered Carrier being UPS, you have the option to pre-pay for delivery. This will be calculated based on the number of boxes and the proportion of each from what you are sending. You will receive a pre-paid label generated from Amazon in a PDF. All you have to do is it provide it to your supplier or middleman, and they will have it attached to all your cartons before handing them over to UPS. Your products will then safely arrive at Amazon.
You can begin listing once your stock has arrived at Amazon FBA Warehouses. The item will be live on Amazon and people will be able to purchase and have it delivered to them without you even having to do anything about it. On the other hand, you cannot just expect your product to sell without doing anything. Always think of ways on how you can get people to buy your products. What will make them convinced to try the product?
When you initially begin an Amazon FBA Business, you have zero sales and zero reviews. Moreover, you don’t even have a ranking as an Amazon Seller. How can you build up that trust with the customer that the product you offer is any good? You have to get your items into being displayed by the Amazon Algorithm. Many eCommerce sites have various algorithms that they use to bring up products on search queries. Amazon likes to call it the “Amazon Search Algorithm”. These are kept as secrets, however people are able to make a guess on how it will work.
The primary task of this algorithms is to pick what has to be shown to customers who browse for products on the site. For an instance, if a customer searches for a “Backpack”, how can the algorithm show a result from hundreds or thousands of Backpacks available? The algorithm can be programmed to pull out the Backpacks that sell well on Amazon first. This can be sorted in ascending order whereas the worst selling Backpack will be found at the end.
However, the above factor itself is not sufficient to bring up results as it could be a product which is backed by a big advertising budget and a well known brand name which is not even worth the price you pay. Customers can still purchase this very product and have bad experiences or end up leaving negative reviews about the item. This is where you realize that the product ratings are also an important aspect to show up in the search results.
Ways that the algorithm analyzes
Now you must think that the algorithm simply picks the better reviewed Backpack over the one with higher amount of sales. That is such a simple task for an algorithm to be run on. When reviews are concerned, there can be scenarios where one Backpack has many 4.8 star reviews and another Backpack having just one 5 Star review. Now can the algorithm simply push the 5 star review to the top of the search results?
On the other hand, there can be a Backpack with many added features over a basic day to day one even though it may have great reviews and be the best seller. For an item to gain many sales and many reviews, it has be generally be listed for quite some time and it will be unfair on the new Backpack with many added features to wait that long to gain a similar number of reviews.
We actually cannot say exactly how this algorithm functions. However, we can just get an idea that it focusses on sales, rating and number of reviews and added value or features. Hence we can come into a conclusion that it might take awhile for a new Amazon FBA Business without any sales or reviews to come up on searches immediately. Nevertheless, a new product with many sales and good rated reviews can be suggested to customers.
Methods of Marketing your products
As a new seller on Amazon FBA, you have to put in the hard work to grab as much as new sales as possible and having good feedback from the customers. Once that is in place, your product will appear in organic Amazon search results. You can follow the following methods to market your own products;
- Paid Advertisements
- Requesting customer reviews
- Sharing the product link with friends and family and having them try and review the products
- Hosting giveaways on Social media
- Finding influencers in the specific niches of your products to do shoutouts or present them the opportunity to use affiliate marketing.
How can you get reviews on Amazon?
You can say that managing product reviews in any online business is one of the toughest parts of running it. People really needs to be convinced to leave a review after a purchase has been made. According to statistics, over 90% of the customers do not leave reviews for products purchased on Amazon. The only thing you could do as a business owner at this point is to find more of the 10% of customers who leave reviews to purchase your product.
Writing to your customers may seem the best option of receiving a few reviews for your products. However, Amazon has its policies on how you could communicate or interact with your customers. As a seller you should be aware of this and be cautious.
The ways of getting these reviews may be different from person to person. It is better to try a different approach which is unique and creative to get reviews from your customers. Once the sales are growing and there is a fairly good volume of sales within certain countries, it is time to explore other platforms.
eBay as another Market Place
Amazon is the largest market place but why should you only stick there? You can integrate the Amazon FBA products in eBay using third party tools. These tools can replicate the exact listing on eBay and fulfil the same order via Amazon FBA once received. The whole process can be completely automated.
Expand to other Territories
After being ranked in one country on Amazon, you have the choice to expand and carry out the same process in others. Certain Amazon accounts lets you expand your selling to other countries with a few clicks. For an instance, your item can be listed on the Germany site and fulfilled by the UK Amazon FBA Warehouse. Furthermore you can get the translation service so that the listings are proper in the target country language.
After taking this stop, you now have an Amazon FBA Business which is global. Congratulations!
It is best if you can operate bank accounts with different primary currencies for the Amazon business to avoid having them being converted at a higher exchange rate by Amazon. You don’t have to physically have bank accounts around the world thanks to virtual options available in the market. These will help you set up accounts in all currencies you wish to receive money in and let you transfer between different countries for a much lower fee.
Introduce New Products
You might have a set of products which worked for you in your Amazon FBA business, but should the income be limited to only those? Why not do the whole process over again and keep on finding and adding new products to your business where you can attract a better volume of sales and grow with a larger customer base. Replicate the same action in other marketplaces and keep the orders constant in order to profit from selling online. Once your online presence is strong in all of these marketplaces, you can introduce new products without a big hassle and have them sold in no time. This comes about with the trust you have built by service your customers over the months or years and what you are willing to do extra.
Hope this article helped you in getting an idea of how to start an Amazon FBA Business from scratch. Start now and you will see results.