Amazon launched a program in 2006 “Amazon FBA Business”. It allows you to manage eCommerce business efficiently. You source a product and sends the inventory to Amazon. They keep your inventory in the warehouse and manage it for you.
Once you start receiving the orders, they will pack the ordered unit and deliver it to your customer. Assured shipping, prime delivery, and time saving are the best pros of doing FBA business. Check Fulfillment by Amazon business model below.
FBA Business Model
Step 1:
Make an account on Seller Central. List your product on Amazon as FBA.
Step 2:
Make shipment labels for the products and get them labeled to the inventory.
Step 3:
Forward the inventory to the mentioned Amazon warehouse.
Step 4:
Once your inventory reached the Warehouse, Amazon makes your listing active.
Step 5:
When you receive the order, Amazon will process them.
How to start an Amazon FBA Business with plan
Table of Contents:
- Make a seller central account
- Start with product research
- Find a supplier to source the product
- Make a profit calculator sheet
- Call a sample and test it
- Negotiate and make a shipment plan
- Get it shipped to assigned Amazon warehouse
- Optimize the Amazon listing
- Prepare email templates
- Start promoting to make sales
- Collect reviews
Sign up to Seller Central
The first step to start the Amazon FBA business involves Seller Central registration. Fill all the input fields and provide necessary documents. They will moderate and activate your account.
Start with product and niche research
A super hit movie demands super star cast and a great story plot. The same things applies to Amazon. Here, your product is a super star and story is a niche.
Amazon is a market of billions of products. Millions of sellers are selling billions of stuff already on Amazon. It makes market research a necessary job. Explore Amazon niches and find out a key product to start FBA. Explore Amazon Best sellers, Most wished for, and movers and shakers features. It will help you streamline your product hunt. Go deep inside niches, you will see a good opportunity market.
Few things to consider while doing product research for FBA: –
- Lightweight and durable product
A seller sends his inventory to Amazon warehouse to start FBA business. Like other shipping careers, Amazon charge FBA fees to customer for order processing. The shipping fees depends on product weight.
So, target a lightweight product and a durable product for FBA. It costs less Amazon FBA fees that will contribute to more profit. Try finding a product weighs between 1-5 pounds. A small, compact, and lightweight model costs less for product. Such a product will help you start an Amazon FBA business with little money. Avoid glass, electronics, and clothing niche. It incurs more refunds and returns.
- Competition and Demand
The second thing to look for is competition and demand of the product. Shoes, garments, and grocery are good demand categories. But, you will find thousands of sellers competing to each other. So, it is a good idea to go for it?
No, it is not a good idea to stat a new venture in this categories. See the above image. 1,00,000 sellers are competing on Amazon. It is in great demand though. Sellers have good reviews and ratings as well. But, think of competition, much higher. Establishing a market here would be a tough task and needs a lot of investment and thats all risking your $$$$$.
So, it is better to look for a product having less sellers and demand is moderate and high. Do market research and Amazon research. Check competition and analyse competitors listings. Search a product on Amazon and check seller results. See how many listing with under 50 reviews on top search page. The more new listings, the higher your chances of making market.
Jungle scout and Helium 10 would be an ideal option to find winning products for your business. Search products with advanced filters and get product ideas instantly. These tools will deliver you metrics such as product sales, weight, dimension, FBA fees, expected profit/sales, and best seller ranks of the products for better decision making.
- FBA fees
As Amazon do shipment of your orders, so obviously they will quote you shipping fee. That fee is the FBA fee. The FBA comprises of shipping charges and referral fees (15% of the total sales amount).
So, when you researching a product on Amazon and going to a conclusion, do check the FBA fees Amazon is charging for that product. Install Amzscout chrome extension to calculate approximate FBA and storage fees. Make an excel sheet and prepare a record of all products. Add a column for FBA fees and monthly storage fees. This way you can identify actual profit the product is leaving to you.
- Avoid category approval products
You can sell anything on Amazon that fits their selling guidelines. But, Amazon does not approve selling all products without certifications and legal licenses. There are categories that needs approval to sell on Amazon. Grocery and Gourmet, Hazardous items etc needs certain certifications to get approval.
If you are a retailer and selling a branded product (e.g. Nike shoes), you need to prove yourself as a legitimate retailer in order to start selling on Amazon. So, better to avoid ungated categories and do your research within approved categories for running a headache free business.
Product Sourcing (Find the right supplier)
Prepare a list of products you think are the best for launching on Amazon. The second phase is sourcing the products. To start with sourcing, you need to understand your FBA business model.
Do you want to start with low stock inventory or want to give a moderate or huge start. Based on your planning and budget, i have drafted three best models to start FBA business for sourcing your product.
Amazon FBA has three models:
- online arbitrage
- Buy wholesale and sale retail
- Private label / Wholesale
An Arbitrage business refers to a trick of purchasing products at low and discounted prices from local stores, shopping malls, and stock clearance sites and list them on Amazon at higher prices.
Suppose, you went to Walmart and found a product selling at 30 USD. Scan and check the product’s selling price on Amazon. You will find an option in the seller central to scan the product’s barcode, scan the product at Walmart store and compare the price. The tool will show you the particular product’s price on Amazon along with fees. You will get idea whether you making profit or not. If it is selling at 90 USD at Amazon, and let’s say FBA fees is 10 USD. Still it is leaving you 50 USD as a core profit.
List it on Amazon in a single click, make an FBA plan and you are all set to sell it on Amazon.
Pros:
- You can buy stock as required.
- less investment
- Easy delivery to home.
Cons:
- You need to involve into product packing and labelling.
- You need to forward inventory to Amazon warehouse. Less stock more shipping fees.
Buy Wholesale and sell retail
No big companies sell their stock directly to retailers. It is because all retailers do not have a big space or warehouse to keep products and budget to pay for it in a single go.
There is a distribution channel where companies or factories source their products to wholesalers. These wholesalers buy big quantities from them and allow retailers to buy limited quantities from them. Once you have prepared the list of selected items to start selling on Amazon, start your hunt to find wholesalers.
You will find wholesalers on global sourcing directories such as Alibaba, Aliexpress etc that allows public selling to sell their products at any platform without license or concern under their brand name. Check for their asking price, MOQ, and initiate a discussion to done deal with them. They are familiar to Amazon FBA business model and will help you get your inventory to Amazon warehouse with ease. So, no need to produce a storm in your brain regarding shipment plan.
Pros:
- Moderate MOQ.
- Easy shipping to Amazon warehouse directly by the supplier.
- Good discount
Cons:
- No branding, you are selling a retail merchandise of other brand.
- Listing hijacking
A Private label business is one of the best launching businesses for Amazon FBA. It gives your product an unique identity and a unique selling preposition to compete with the competitors.
The model refers to finding a company/brand/manufacturer/supplier who produces goods in large quantities and allow private label packaging. This means, you will sell their goods only but it will be labelled as your brand product. You can either engraved your brand name, get custom package box designed to give a best look and feel for effective marketing.
Supplier finding sites such as Alibaba, Aliexpress, DHgate, and 1688 are best in the online industry to find such suppliers quickly and easily. You will get all that done with a decent MOQ sometimes for under 500 units as well.
Pros:
- Packing, packaging, designing, and labelling from manufacturer.
- Product stocking at much affordable quote
- Wide opportunity to establish your private label name as a brand in the industry.
Cons:
- High/moderate MOQ
- High investment
Alibaba, MADE-in-China, DHgate are good sourcing directories to look for suppliers and manufacturers. Check out best sourcing methods to find a supplier for your product.
Based on all above three FBA business types, think of your budget, risk range, and resources and give a launch with the best business FBA model that fits into your shoes.
Calculate profits (Free Profit calculator sheet)
You get the quotations from suppliers and manufacturers. Now, it is time to check whether a product worth a launch or not.
Add MOQ, supplier price, shipping fees, Tax and other details to sheet. Check how much profit a product is leaving on every unit. Go for a product giving at least 100-150% ROI or $10+.
Call a sample to your address and test it
Think like your customers. Will you believe on images and description available on supplier’s listing? Is it a genuine supplier, I am dealing with?
Better not to keep a single loop hole that can risk your investment. Ask the supplier to send a sample product to your home address. Once you receive the product, test the product and its durability. Take suggestions from family members and friends. It will help you launch a better product.
Negotiate and make a shipment plan
Once you made a decision, it’s time to do a final discussion with the supplier. Negotiate with supplier for price and MOQ.
Ask the supplier regarding the shipment plan. They will tell you the box size, cartoon size, freight forwarder details, and shipping carrier information. All this information would be required for making labels in seller central.
Product Inspection
A visit to another country for product inspection is not everyone’s cup of tea. But, one can afford to spend on inspection company in the hometown of the supplier. Research an inspection company either on Google or Freelance marketplaces and get your inventory inspected for quality assurance.
Get your inventory shipped to the Amazon Warehouse
Once you have finalised the discussion with the vendor, open seller central and make a new Amazon FBA product listing.
Once, you made the listing prepare label, download of barcodes and labels. Supply it to the supplier, they will dispatch it to the cartoons and unit boxes.
If you have no idea how it is done, just opt for Amazon services, the Amazon team will do the barcode fixing to each unit when they receive the inventory.
Optimize the listing
The shipment from supplier to Amazon takes between 7-30 days. So, this is the time to improve Amazon store. Do Amazon listing optimization, and prepare a good product launch strategy.
Start with keyword research for Amazon product. Add relevant keywords to product description, bullet point, and title. Also, add partial match words to back end terms. It will help you gain more visibility on Amazon searches.
Write a best product copy to engage your customer. Check competitor listing content and get reference to write a new copy.
Product images keeps equal value in listing optimization. Add 5-7 relevant product pictures to the listing. You can ask supplier to provide it. Use Helium 10 chrome extension. It analyze and show listing optimization score.
Try to get at least 7 or higher score for your listing. It is considered a good score unless your listing get at least 10 reviews.
Prepare email templates
There should be a communication between a seller and a buyer. Amazon limits the FBA seller and customer communication to seller central only. But, it is enough to establish a communication channel.
Prepare Amazon email templates to interact with your customers. When you get an order, shoot an order confirmation template to the customer within 24 hours. Send feedback request email to customers after four days. Send emails to them weekly until they do not review it.
Start promoting and selling
Once your shipment reached the warehouse, your listing will become active. It is time to start promoting your listing and sell it to a wide Amazon audience. Amazon has various tools for you to grow your business. Run Amazon sponsored ads, throw sweet deals and discounts to your customers during product launch.
Amazon PPC
Amazon had in-built PPC services for sellers and brands. You can make a campaign and get your listing visible on search pages. Target keywords that your customers searches on Amazon. Optimize your PPC campaign and get them land on your listing page.
Social Media influencers
You can take help of influencers in your industry. Find good social media profiles with good and engaging follower base covering relevant content. Make a deal and do paid partnership with them. they will make product unboxing videos and share on their social media and giving their voice to their audience. This way your product get more exposure.
Social Media
Hire a VA or start social media channels for your business. Do post content regularly and build a follower base for your business. Put catchy deals with discount codes to attract users. Make social media ad campaigns and run regularly.
Join groups and communities
Facebook and Reddit are treasure to FBA sellers. Join FBA Reddit communities and Facebook groups. You will get access to Q/A sessions, case studies, and new marketing strategies.
Strategy to get initial 5 reviews
ERP
The ERP stands for Early review Program. Amazon helps new sellers in getting initial reviews. Amazon appeals to genuine customers to buy and review it.
It costs $60 for up to 5 initial Reviews. There is no guarantee of the program that you will get all 5-star reviews. If you are sure, your product is of the highest standard and good quality, then enroll for ERP.
Other way to start FBA business
Buy pre-owned Amazon FBA seller central account
You can start selling on Amazon without above methods. If you have good budget, you can buy existing Amazon businesses. Flippa, Empire flippers etc are best sites to source Amazon FBA business for sale.
Discuss with sellers, audit their statistics and get the deal done. This way you can get a good selling product in hand with supplier details.