How To Start An Amazon FBA Business
Before you read this post, it’s important for you to know that my Amazon FBA Business is what got me into financial difficulty.
NOT because of the FBA Business model. The business model is insanely profitable when done right.
Ultimately, My FBA business failed because of my lack of capitol/startup funds. I didn’t have enough money to invest into two stock orders right away, so I ran into cashflow issues right off the bat.
(Two loads of inventory, a month apart so you never run out of stock)
Please don’t let this deter you from reading on. The knowledge that I am about to share with you is what allowed me to generate over $30,000 per month in sales on Amazon with just 1 product. (before I f**ked it up and borrowed too much money).
This is quite a hefty ol’ guide to Amazon FBA, if you’re stuck for time, feel free to use the image below to Pin it and come back to it later!
So What Is An Amazon FBA Business?
From the humble beginnings of selling books online, the Amazon CEO, Jeff Bezos is now the wealthiest person in the World. And Amazon are by far the most dominant leaders in online retail and have become an international household name.
But what a lot of us don't know, is that when you buy something on Amazon, there's a very good chance that someone else has sold you that product via the Amazon FBA service.
FBA stands for Fulfilment By Amazon.
This means that Amazon hold the third party sellers stock in one, or a number of HUGE warehouses that they have around the World.
When a customer purchases an item of this stock, Amazon pick out the item and dispatch it to the customer without the seller having to do any of the leg work themselves.
Better still, Amazon also handle all of the returns and customer care on behalf of the seller too. (Although I recommend that you take control of this and deal with the customers yourselves).
The alternative to FBA is FBM, which stands for Fulfilment By Merchant (the merchant being the seller). This business model isn't automated and requires a lot more work. You as the seller would have to handle all of your stock yourself and then manage all of the returns yourself too.
FBA is extremely efficient, so your customers often receive their purchases far quicker if they buy the item via a seller who is leveraging the FBA service. The products are always packaged beautifully too! (we've all seen the brown Amazon packaging, right?)
I started an eBay business back in 2014 selling SD Memory Cards imported from China.
I sold thousands of them.
at first I thought I'd stumbled across the most genius business model, only to discover that I'd actually just created myself a full time job (and then some) which involved packaging and posting lots of electrical goods, 7 days a week.
I hated it, it sucked!
FBA allowed me to run my business as a One-Man-Band without having to invest in a large infrastructure and paying wages for a team of employees to handle the shipments and storage of my stock.
This meant I had more time to focus my attention on getting my stock to Amazons FBA facilities, increasing sales, launching new products and spending time doing what I was most passionate about (family time), all
Without seeming like I'm encouraging hype around this business model, I want to show you some of the results that are possible with starting an Amazon FBA Business.
Here are some of my personal financial results from my Amazon Seller app on my phone:
So now that you know what FBA is, and what kind of results you could expect from becoming an FBA Seller, lets get into the juicy details of how to get started with your very own FBA Business.
Knowing What To Sell
There is a common misconception in business, and that is that we should all look for a 'Gap' in the market.
Now, for some businesses, this is vital.
But for an FBA style Business, the much more logical way of doing it, would be to find a product that already exists and sells like crazy, and then compete with them.
- You'll already know there is demand for this product, allowing you to step in and take a slice of the pie.
- Simple to find factories and suppliers that already produce these items/products and allow you to brand them yourselves.
- Save time and energy in building hype around a brand new product
- Can leverage reviews from already existing products, and apply them to your product to improve on whats already being done to make it better than the competitors.
- More profitable as you wont waste time in a 'development phase' of brand new products.
- There's a fine line between being TOO competitive and entering a saturated market.*
- Could be replica products available.
- Very difficult to get exclusivity on your products from the supplier.
So, unless you are planning on designing a revolutionary product that doesn't yet exist, its a good idea to re-brand an already existing, high selling product with the potential to make it better.
This is called private labelling, and it works very well!
* There is such thing as too much competition. There are certain products selling on Amazon that really are too good to be true. i.e They're very simple to source, they're dirt cheap, they have an insane profit margin and they sell like they're going out of fashion.
These may meet the criteria when selecting products to sell (more on the criteria in a bit), but I would like to hold huge [AVOID] sign above them.
If only you knew what these products were eh!?
I'll email a list of the 45 products that sell SO well, you should avoid them because everyone else is doing it too.
Not only that, but some of the products on the list are also patented, so knowing these products will help you avoid any legal complications.
Get the list here:
How To Pick Top Selling Products
The key to success with an FBA Business, is how much productive time and due diligence you're willing to invest into selecting the best products to sell. You want to pick a home run that will sell really well right away. (Obviously)
I was fortunate with my first ever product, which was a stainless steel salad spinner.
I improved upon a high selling plastic item by manufacturing it in stainless steel. I turned over nearly $20k in my first ever month on Amazon. Crazy right? I was pretty ecstatic to say the least. But was it just luck??
I hope not!
It took me hours of quality market research to find a product that would sell like hot cakes, have a profit margin of at least 40% and was simple enough to private label.
Along with the hours of research - I made sure that I launched in December - Traditionally the busiest time of the year in retail.
So how the heck did I find such a top selling product without suffering from paralysis by analysis?
I used a market research tool call Jungle Scout.
It searches deep within Amazon and tells you what is selling well, and at how much. Its the perfect tool for spying on your competitors as it tells you how many units they are moving per month.
It costs $49 per month which is great value when you factor in time saved manually trolling Amazon for data yourself, and the possibility of hitting a home run with your product selection. There is a cheaper option of $29p/m but this package doesn't include Niche Hunter, and you'll want/need this tool in your arsenal. (Once you've chosen your product, you can cancel your subscription... shhh)
I also have a very specific criteria when selecting products. I should charge you a lot of money to know this (because I paid a shit load of money to know this):
- I use Jungle Scout to find 'Hot Selling' products.
- I then go to Amazon and type the hot selling product keyword in the search bar and find the top 3 product listings for that keyword, e.g Dog Brush
- I then scroll down to 'Product Details' on the listing, and check out the Amazon Best Seller Rank (BSR) for that top selling product, and also the BSR for the product listings two closest competitors. (So basically, the BSR for the top 3 listings for that keyword)
- To meet the criteria, the BSR of all 3 listings has to be under 1000, and at least one for them under 200.
- The products main keyword must also have over 80,000 individual keyword searches per month on Amazon. (For this I use a tool called MerchantWords.com. Its around $60 per month, but again, you can cancel once you've chosen your product. MerchantWords will also provide you with the products most searched keywords, which you can then include into your product listing title when you write your listing on Amazon)
- I then check out with Suppliers or Manufacturers how cheaply I can source the product for (More on this is the next step) to see if its possible to generate a profit margin of at least 30% initially, with the scope to better the margin to 40% in the future (increase margins by reducing costs with suppliers when you create better relationships, and purchase larger quantities)
I've created a spreadsheet to compile the information from this criteria search. You can download it for free here:
FBA Product Picking & FBA Calculator This file contains two spreadsheets.
The first sheet allows you to quickly compile your search results for awesome products to sell on Amazon using the method described above.
The second sheet allows you to quickly figure out your profit margins on potential products.
You'll find both sheets in separate tabs at the bottom of the Excel sheet
How To Find A Supplier or Manufacturer
So once you've found a product that sells like crazy and meets the criteria, you'll then need to start looking a prices per unit that you can source it for.
Then you can figure out your margins.
The place to look is Alibaba.com.
They're a Chinese wholesale market where manufacturers and suppliers display their products.
Most of these companies will work with you to private label their products with your own logo or brand, and even handle your custom packaging too. They'll also work with you to create a totally unique product.
Below is an example of a very high selling Dog Brush selling on Amazon for $24.99.
This item is #1 in the dog grooming category and #42 in the entire pet supplies category on Amazon.
With stats like that, they're selling hundreds of these things per day.
Having done a very quick search on Alibaba, you can see that they will have sourced this item at a fraction of the price that they retailing at on Amazon. And you can guarantee that they're getting a better rate of $3.80 per unit if they're moving as many units per month as I suggested!
The products in the images above are not completely identical as I'm just using them as an example.
The only obvious difference between the two products is that one has been private labelled with a company logo, and secondly, there's an obvious price increase.
I will go into more details about the FBA fees and shipping fees in a bit, but the margins on this item at first glance are pretty darn good, wouldn't you agree?
Alibaba is a highly regarded resource when looking for new suppliers or manufacturers, and its deemed to be secure and trustworthy. I would however recommend selecting the 'Trade Assurance', and 'Gold Plus Supplier' tabs under 'Supplier Types' filter.
This filters out the lower quality suppliers and gives you more piece of mind later down the line when you're handing over large deposits direct to their bank accounts.
I would highly recommend reaching out to as many manufacturers or suppliers that meet your criteria to get their best possible price for the quantity of stock that you require.
Its important to word your requests in a certain way, so you don't come across and inexperienced or too 'small time' for them to take you seriously.
I always use a saved template to contact new suppliers. It saves time, sounds professional and covers most basis and questions required when first reaching out to new suppliers.
To get a copy of this template, pop your name and email in the box below and I'll get it to ya right away:
Once you've got your hands on this template, fill in the blanks with your relevant information and start reaching out to suppliers.
Pricing And Profit Margins
Figuring out your profit margins is not just a case of subtracting the cost of the product at wholesale from the retail price.
There are some other fees involved in this equation.
It certainly helps to know what margins you are aiming toward before reaching out to suppliers, because this will help you in the negotiation when haggling them down on price. (And trust me, this will happen)
Amazon have made it very simple to figure out what your overheads will be.
Amazon allow you to do so much market research prior to investing by providing you with everything you need before you hit the commit button!....
They have created a calculator that tells you the fees of your competitors products, so you can compare them to your own. I'll use the dog brush as an example again:
So as you can see in the above image, I have searched for the product listing and manually typed in the products details. (I made an educated guess with the price of shipping to Amazon, based on a high quantity order)
Amazon literally tell you what your costs are going to be even before you've invested any money into a product by telling you what your competition are already paying.
The Fulfilment By Amazon fees are calculated on both weight and size, so its best to try and keep these factors down to a minimum.
This product has scope to earn a profit of $12.18 on each item sold, which is nearly a 49% profit margin. Thats bloody good! Now just sell 30 of these per day and you've added an extra $11,000 per month in profit to your income!
I'd take that gladly
Shipping Your Stock From China To Amazon FBA
This is that part that scared the crap out of me when I first got into this.
I was scared at this point because I didn't feel qualified enough to move a shipping container full of stock from a factory in China through one of the busiest shipping ports in the World (Hong Kong).
It then had to cross an entire ocean, pass it through customs, and arrange for the shipment to be broken up and delivered to 3 specific FBA warehouses in a different country to the one I was in.
Thankfully, I didn't have to do this part!
I found Flexport.
Flexport are a freight forwarder and customs broker. They're awesome.
I would hand them my suppliers contact details, and they would take it from there. Stress free! (most of the time)
In fact, here is the process when working with Flexport:
- The supplier/factory transport your container full of goods to the port and hand it over to Flexports freight forwarder.
- The freight forwarder then ship your container to the necessary country.
- Flexport handle all customs and tax paperwork before the freight forwarder arrives at the destination port.
- If your stock is all going to just one FBA warehouse, the freight forwarder will hand the shipment over to the Amazon partnered couriers and they will deliver to the FBA warehouse. (the most cost effective way)
- If you have a large number of units, FBA may request that you split the shipment up into multiple batches and distribute them to different FBA warehouses around the country. If this is the case you will need to get Flexport to organise your freight forwarder to deliver to a third party palleting service. (For this, I use riversourcelogistics.com). They will separate your shipment and palletise the correct number of units for you, and then you can use the Amazon Partnered Courier service from there to the different FBA warehouses.
All of this may seem pretty overwhelming at first, but trust me when I say its really not that complicated at all. Even I can manage it!
Flexport are also great for taking the guess work out of knowing where your shipment is at all times. Perfect for staying on track with your Estimated Times of Arrival (ETA) as their online interface is extremely user friendly.
The image below (not one of my own screenshots) demonstrates the real time tracking of shipments. This is important if you currently have a live listing on Amazon and are running low on stock as you may wish to slow sales down to avoid losing your product listings ranking.
From my own experience, a shipment from China to the USA will take between 30-40 days by boat. Probably around the same lead time to the UK too.
The other, quicker alternative is to fly your stock from China and this will usually take around a week. But you'll have to bare in mind that this will cost you up to 5 times the price of shipping it.
The only time that I have flown stock from China to FBA was just after my first ever Prime day, when I had sold a boat load of stock and was in 'danger' of running out before my next shipment arrived.
So I managed to work with my supplier and get a small batch quickly manufactured and flown out within the week. (around 200 units). Now, I didn't make any money on this small batch of inventory, in fact, I'm pretty sure I lost a little money by doing this, but it kept my product listing live on the Amazon site long enough so that I didn't lose my page 1 ranking.
It worked out cheaper this way than having to run marketing campaigns to re-rank my product listing back to where it was, had I have run out of stock and my listing removed. (the #4 spot on page 1).
↑↑ Everything above this line cover the 'logisitcs' of running an FBA Business. ↑↑
Now I'm going to cover the nuts and bolts of starting an FBA Business...
Setup Your Amazon FBA Account
Before you begin, you need to know that there are two different types of Seller accounts:
- The Individual Seller
- The Professional Seller
The individual account is free, and catered to sellers who want to sell small numbers of stock on Amazon. Although it's a free account, you will actually pay more per item in sellers fees. You also get far less data and analytics from your sales.
The Professional account costs a monthly fee which differs, depending on which country you are based in.
I live in the UK, and my business was based in the USA. I paid a fee of $39.99 per month.
To sell in the UK as a professional seller, it will cost you £25 +VAT per month.
To sell in the USA - Click here to get started.
To sell in the UK - Click here to get started
How to Create A Listing On Amazon
Once you have set up your account, head to the homepage of SellerCentral.
Then select 'Add A Product'.
Then skip the search bar and head straight for 'Create A New Product Listing'.
Creating an awesome product listing is VITAL!! - First impressions mean a lot.
You need to generate a high conversion rate as Amazon take this into account when ranking your product listings. (The higher your conversion rate, the more likely Amazon are to rank you higher on page 1)
A conversion rate is the rate of viewers clicking on your product listing, that then become buyers.
To grab your customers attention long enough to keep them on your listing, you'll need bloody good images, a bloody good title, and bloody good bullet points which are then backed up with a bloody good product description.
The images are the first things that your customers will see. However, they will also see all of your competitors images too, so yours need to be like a male Peacock and stand out amongst the crowd.
How do you do that? Get someone else to do it!
Unless you're shit hot with a camera, I'd recommend you have a professional photographer take photos of your product, or...
Head to Fiverr.com and have someone edit your own photos to make them look incredible.
If you're anything like me, you won't have a clue how to use Photoshop. Luckily there are tonnes of people who do on fiverr.com.
I managed to persuade my supplier to take professional looking, high resolution photos of my product and email them to me. I then asked a photoshop Wizard to edit the product images and to photoshop my brand logo onto the side of the product.
The bullet points show up on the right hand side of the images (on desktop) and will be the next thing that your customers see.
You're allowed up to 5 bullet points to sell your products features and benefits, and each bullet point is allowed 100 characters so you'll have to choose your words carefully.
The way I like to plan my bullet points for my product listing, is to write down ALL of the features of my product, and then figure out at least 1 benefit of this feature.
An example of a phone case listing:
- Feature - Snug fit
- Benefit - Your phone will not slip out of the case and break
Its important to spell it out in just a few words and tell your customers why your product will solve their problem.
The product description is is where you can explain in further detail more of the features and benefits of your product. Here are a few tips on creating a high converting product description:
- Write it like a sales letter - Go for the hard sell and really highlight the best features of your product. Its a good idea to go through your competitors product reviews and pick out the key points that show up regularly for why their customers liked their product, and then showcase how your product can do the same - but better!
- Include an attention seeking headline - self explanatory....
- Don't worry about keywords - your product title and bullet points will be the keyword rich aspects of your listing, so make sure your product description is readable and informative.
- Do not make any false claims - although you're trying to sell your product, dont make any false claims or statements thats arn't true. It'll only come back around to bite you in the arse anyway!
Amazon will only allow you to type your product description in one large paragraph, and to be honest, this looks terrible!
There are way around this though.
You can use these basic bits of code to stand out from most other Amazon sellers and create different paragraphs, bold text and breaks:
- Bold - <b></b>
- Break - <br></br>
- Paragraph - <p></p>
(insert your text between the two > < icons)
eg if I wanted to word 'pancake' written in bold text, it would look like.... <b>pancake</b>
Product Titles are probably the most under utilised tools on Amazon by most sellers. (Good news for you!)
I'd actually go as far as saying that your product title is THE most important aspect of your product listing too which is crazy.
Because your product title is where most of your search terms and keywords are picked up by Amazons algorithm, and this is how your customers find your product in the first place.
All of the other components, such as your images, bullet points and description help to sell the product once your customers are on your listing.
You can't sell yer product if people ain't findin' it!
So how do you create the winning product title?
This is how.....
- Use a tool called MerchantWords.com to find out your products highest ranked keywords.
- Put the MAIN KEYWORD at the very start of the title. (this will be the most relevant keyword and will be picked up by Amazon first)
- Incorporate the other keywords into a feature/benefit style of your product, but DO NOT repeat keywords.
- Make it readable, you're allowed up to 200 characters.
Here is an example of a bad product title that I just found on Amazon:
Westmark Germany Vegetable and Salad Spinner with Pouring Spout (Red/Clear)
Here is an example of a Good product title that I just found on Amazon:
Salad Spinner Large 5 Quarts Fruits and Vegetables Dryer Quick Dry Design BPA Free Dry off and Drain Lettuce and Vegetable with Ease for Tastier Salads and Faster Food Prep
Lets break it down....
The bad product title:
- The main keyword waaaaay down the product title. In fact its the 5th word in the title. That should be 1st!!
- It has also only listed just one feature of the Salad Spinner - 'Pouring Spout'
- After having checked it out for myself, I cant actually find the keyword 'pouring spout' as a highly searched keyword when looking for a Salad Spinner
The good product title:
- The main keyword right start the beginning.
- Lists 4 features and benefits of using the salad spinner, most of which are highly searched keywords for this product. (Large, Quick drying, BPA free, Easy to use)
- Used 172 characters, so most of the allocated 200.
How To Send Your Stock To Amazon FBA
This part depends entirely upon where you have sourced your stock. If you have managed to source your stock from your own country, then you can just use Amazons Partnered Carrier (UPS).
Its super easy to do. I'll cover it in this next section.
But most of us will have sourced our products from China or another country over seas. Doing this doesn't make it that much harder, theres just a few extra streps that you'll need to take. I'll cover this too...
First, head to... "Inventory > Manage Inventory"
Then click the tick box to the left of your product listing that you have recently created....
Once that box is ticked, head up to the tab underneath where it says Manage Inventory, and hit "Send/Replenish Inventory"
Then you'll start to work through all of the options, and you'll be asked for your products size and weight, including all of its packaging. You also need to tell Amazon what quantities you'll be shipping to them.
The screenshot below is actually incorrect for my product as I usually send 2100 units, but there are 350 cases, with 6 units per case and not just 1, which still equates to 2100 units but this would confuse Amazon.
Its important to get these details correct as you don't want any hold ups when FBA come to check your inventory into their stores.
You'll also get the option of having Amazon Prep your stock.
What does this mean?
Well, each unit that gets sent to FBA needs to have a label on it that is unique for that item and shipment ID. Its Amazons way of tracking and managing your stock by barcoding it. You have to chose whether you want Amazon do this for you, or if you want your freight forwarder to do it for you.
I've always had Amazon do this for me because its one less thing to organise, I have however heard from a few sellers that it can sometimes work out cheaper to get your freight forwarder to do this, but there not much in it. (Amazon charge $0.20 cents / £0.15 pence per unit for each label.)
This is the part where you'll need to book Amazons Partnered Carrier to collect your stock from your freight forwarder, and if you've sourced your products from your own country, you skip straight to this step.
Depending upon the size of your inventory, you can select either Small Parcel Delivery (SPD) or Less Than Truckload (LTL). My shipments are usually pretty big so I go for LTL and then select Amazon Partnered Carrier.
You'll then need to generate your box labels. You just add the relevant information for your shipment and Amazon will generate a pre-paid label which you'll revive as a PDF. You need to send this PDF to your freight forwarder and they will attach them to your boxes/pallets for Amazons Partnered Carrier.
And thats all there is to it.
Just wait for your stock to arrive with FBA, and sit back and make money.....
This is where to real work begins.
How To Market And Sell Like A Pro.
There are 3 pillars of success with FBA.
Just 3 areas that you have to have NAILED in order to get your product listing ranked higher than your competitors.
- Conversion rate
- Sales Velocity
- 5 Star Product Reviews
Basically, Amazon will favour your product listing if....
- You can quickly and easily turn shoppers into buyers on your listing.
- You sell a LOT of units
- And your customers love what you're selling.
To go into any amount of detail and cover all 3 pillars of Marketing a successful FBA business, I would need another HUGE blog post.
Its a topic on its own.
Until I have written this post, I'd HIGHLY recommend you sign up to my email list.
I will put you in touch with some of the best FBA Entrepreneurs in the World when it comes to starting and Marketing your FBA Business.
(they've taught me most of what I know about FBA too)
Sign up below to speed you along in your journey to FBA Success: