Starting any business takes some front-end effort. That said, there’s not many businesses with lower barrier to entry than the Amazon FBA business. Is this tutorial we go through the basics of how to become an Amazon Seller and how Amazon FBA works. After reading, you’ll fully understand how Amazon FBA works, what Amazon FBA fees include and will be ready to start your Amazon business today!
If you’d like a career and business path with no boss, working on your own schedule and FREEDOM – this article will help you start on that journey.
What is Amazon FBA?
Amazon FBA, or Amazon Fulfillment Services, is the process of shipping your products to customers. Amazon FBA makes it relatively simple to sell your products to a large pool of customers. If you’re interested in selling on Amazon, the recommended approach is to establish an Amazon FBA business. Fortunately, the process for becoming an Amazon FBA business is straightforward. That said, it does require upfront work and investment to make it successful. Continue reading to learn the essentials.
Fulfillment Methods: FBA vs FBM
FBA stands for Fulfilled by Amazon. Although most Amazon sellers use FBA, Amazon sellers can also use FBM which stands for Fulfilled by Merchant. The difference is that if you use FBM you, or your business, will need to fulfill the items you’re selling to the customer. This means packaging and shipping every order. Through FBA, inventory is sent to Amazon and Amazon fulfills orders. This means they pick, pack, ship and handle the customer service for products sold via this route.
FBM is a good option for small use cases and one-off items that are sold. It’s also viable if your business already has a warehouse and fulfills orders via another e-commerce platform. By using FBM, you pay the Amazon referral fee, but not the fulfillment or storage fees that FBA sellers using the FBA services pay. We’ll dive into the Amazon fee structure further in this article but know that you’ll pay higher fees using FBA because of the convenience.
Is Amazon FBA Worth It?
Amazon FBA is a direct shipping business model, whereby a third-party seller ships product from Amazon. Amazon handles fulfillment and shipping, which means the seller doesn’t worry about storing inventory, shipping or even customer service. Those functions are handled by Amazon. Amazon fees will cover those services and what is shipped to buyers. Amazon will also promise to make up for shipping errors or losses with additional orders. Importantly, Amazon’s fees do not fluctuate. The fees are fixed and established by Amazon.
Amazon’s FBA service also allows sellers to offer products directly to Amazon’s customers, without Amazon needing to stock inventory. You have the potential to gain access to over 250,000 products that Amazon might not have in stock. For entrepreneurs looking to start their own businesses, the possibilities and business opportunities are almost endless. If you don’t already have a product, you don’t necessarily need to create one on your own. You can start selling through Amazon Marketplace and become a product supplier to businesses who are already selling to consumers. Once you’re listed on the Amazon Marketplace, Amazon allows you to sell through its FBA services. This requires that you first establish and confirm that you are able to sell in the product category if it requires approval.
How Amazon FBA Works
In simple terms, Amazon FBA allows you to sell online, for a set price, the products you’ve designed and produced. Here’s an easy-to-understand explanation of Amazon FBA from Amazon: “An Amazon FBA order consists of several components. First, Amazon will identify the products you want to sell. Then, Amazon will place your products in their inventory. When the items are available, your customers will be able to order them at an affordable price.”
Where to Start?
If you’re curious about Amazon FBA, you probably want to know what it takes to start a business. When I started my Amazon FBA business, there wasn’t a clear place to start. I hope that this article and the additional content published on FBA Global Online will help potential entrepreneurs understand the necessary steps to get started in creating an FBA business.
Beginning you Journey: What you should know from the get-go, is that you can’t do this alone. Using tools and resources effectively is crucial to your success. Having a product to sell is great, but you’ll want to confirm that the product has both an active market (demand) and isn’t overly competitive (supply). Listed below are seven key steps to follow to become an Amazon seller.
7 Steps to Become an Amazon Seller
1. Sign Up for an Amazon Seller Account
a. Individual Account:
- No subscription fee
- Per unit sold cost of $.99
b. Professional Account:
- $39.99 a month
- No additional cost per unit sold
- Full access to advanced selling tools and advertising.
The Individual account is a good way to get a taste of the Amazon Seller platform to really help answer the question of just what is Amazon FBA! That said, make sure before your first product begins selling that you’ve upgraded to the Professional account. The $.99 cost charged per item adds up quickly. If you’ve done your research correctly, you will blow past 40 units sold in no time. At that point the Professional account is also more cost-effective than the Individual.
Start an Individual Seller account today by hopping over to Amazon Seller and learn for yourself!
2. Find a Product to Sell on Amazon
Now that your seller account is established, it’s time to find products to source and sell. You’ll want to identify products that have high demand and low competition on Amazon. This will achieve profitability for your business. Product research is one of the most crucial tasks for becoming a successful Amazon FBA seller. Early product choices make or break Amazon sellers so it’s important to rely on the data.
It’s critical to develop criteria to follow in each product you launch. If you don’t set rules for yourself, you run the risk of jumping into products and committing thousands of dollars without properly vetting the product. Avoid that early Amazon FBA mistake made by many sellers (yours truly, included).
I use the following criteria as a baseline when performing Amazon FBA product research.
Amazon Product Research Criteria
- Revenue: Look for products generating between $15,000-$40,000 a month
- Price Range: $15-$70
- This is both where the majority of casual Amazon customers shop fall and reduces your upfront cost for inventory.
- Reviews: Average reviews of 250 or less
- This average can be taken based on products on the First Page of search results for a keyword related to your product. Most products are not trademarked. Certain brands trademark the variation of a product they sell, but you have no legal issue barring you from customizing and selling your own version of the product under a Private Label
- Search Volume: Top 5 keywords should have a combined search volume of at least 10,000
- Product Weight: product should be less than 5lbs (less than 2lbs is ideal).
- Product Sales: a similar, or the exact same product, is selling at 300 month or greater.
- Ability to Private Label: product is not trademarked by brand selling. Most products are not trademarked. Certain brands trademark the variation of a product they sell, but you have no legal issue barring you from customizing and selling your own version of the product under a Private Label
With the assistance of cutting-edge software and tools, you should have the goal of validating Demand and Observing Supply for your niche and keywords.
A) Amazon Seller Software
I highly recommend paying for the right to use product research software. Below are the software tools I recommend:
- Helium10: Software suite offering full service Amazon FBA seller platform that includes chrome extension for Product Research.
- Viral Launch: Amazon seller all-in-one suite that comes with keyword research, product research and a free viral launch chrome extension.
- Sellics: Amazon seller software offering both all-in-one features, and marketing tools that help with Amazon PPC advertising.
- ManagebyStats: Software suite offering full service Amazon FBA seller platform that DOES NOT include chrome extension for Product Research.
Through the use of Google, you can validate trends and find profitable Niches on Amazon
- After a broad topic search – use the ‘People also ask’ section to help narrow a market to a niche.
Reddit is the best place to find passionate fans. If you want to find out how loyal a niches followers are, scan through the subreddits related to your product and you will quickly be able to gauge popularity.
The longer the threads = the more passionate the niche
3. Select a Fulfillment Method
Before you begin ordering inventory or creating a killer product listing, you need to decide how you’re going to fulfill the orders. As we discussed above, you can either fulfill the order on your own (FBM) or use Amazon’s fulfillment service (FBA) to pick, pack, store and ship your products to customers.
Unless you’re seasoned in e-commerce and already have warehousing and/or a relationship with a third-party logistics company, we strongly recommend using Amazon FBA. Using FBM saves money in the short-term, but there is no way to efficiently scale when you’re fulfilling your own orders.
Remember, the only way to grow and build passive income is to develop efficiencies for each sale. With FBA, each additional sale doesn’t add labor hours to your life!
4. Create an Amazon Product Listing
Although this may seem counterintuitive, you need to create the Amazon product listing before you find how to actually buy inventory for the product.
After reviewing the listing requirements for your product category, you can begin creating your listings. If you have a small product catalog, it may be easier to use the Add a Product Tool to list one product at a time. Alternatively, for sellers with Professional accounts and a large product catalog, we recommend that you use an inventory file to create and load your product listings.
Add a product tool overview
Add a Product is an online tool available in Seller Central within the Inventory tab. This web-based interface allows you to list your inventory one-by-one, rather than entering data into a spreadsheet in bulk.
Steps to create a listing using ‘Add a Product’
2. You will be asked to categorize the listing you are creating. To do this, either:
- Search your product title and select the right categorization from the recommended options.
- Browse from the list of available categories and identify the specific category type for your product.
3. Once you’ve categorized your listing, you will be prompted for product information. You will see multiple tabs across the top of the page requesting different types of product information. Required fields are marked with an asterisk.
5. Source your Product
Typically, products are sourced via China on Alibaba. Through Alibaba.com, you can search and find many suppliers in your niche. If you do not see the exact product you are looking for, you can work with a manufacturer to make such product.
Once you get to Alibaba, you can begin a search using the dropdown to select “Suppliers”.
One quick tip that will help insure your initial inventory orders: Check the following two requirements:
- Verified Supplier
- Trade Assurance
If you have a preferred manufacturer in the US, elsewhere or make your own products – that’s also an option. Any product made in the US will cost more than that made in China, but your shipping lead time will be greatly reduced.
6. Optimize your Product Listing
After you have a listing created and your inventory is on the way, it’s time to truly make your listing pop to Amazon customers.
Create a killer listing so that your product stands out among the competition. There’s two areas where Amazon’s A9 algorithm incorporate your content to index your product. These are:
- First Two Bullet Points
Ensure these are keyword rich, without being keyword stuffed.
By building effective listings, you can increase your brand’s discoverability and entice customers to buy your products.
Provide relevant details to help your products appear in browse refinements
Below is an example of the browse refinements available to customers. When you don’t populate the associated attribute fields when you create your listing, you may prevent products from gaining visibility within these browse nodes. Depending on the category, populating these attributes may not be required, but it is strongly recommended to maximize your discoverability.
Build detailed listings to allow your products to surface higher in search results
Amazon search automatically incorporates the title of the product, the seller name, brand information, and search terms you provide. Factors such as: degree of text match, price, availability, selection, and sales history help determine where your product appears in a customer. By providing relevant and complete information for your product, you can increase your product’s visibility and sales. Category Style Guides and Category Templates will provide you with specific guidance on keeping product attributes relevant and useful for customers.
Product Name Example: Here is an example of a product title that incorporates the important details of a product without being excessive or providing unnecessary information.
Laura Ashley Sophia Collection 300-Thread-Count Pillow Cases (Blue, Queen, Set of 2)
This a better product title than Blue Pillow Cases because the recommended Product Name above includes useful information that will be indexed in Amazon’s search:
- Brand – Laura Ashley
- Product line – Sophia Collection
- Material or key feature – 300-Thread-Count
- Product Type – Pillow Cases
- Color – Blue
- Size – Queen
- Packaging/Quantity – Set of 2
Manage the quality and accuracy of your brand on Amazon
Customers associate the quality of your detail pages with the quality of your brand and products. It is important to provide high quality data and images when building your listings. This helps build customer confidence and interest in your brand:
7. Launch and Promote your Product
Once you have an optimize Amazon product listing, it’s time to promote your product. Amazon Product Launches are all about getting eyeballs to your product listing.
This can come several forms of Amazon Advertising:
- Amazon Pay per Click (PPC)
- Limited Time Deals
- Early Reviewer Program:
- $60 fee per product enrollment once the first review is posted. Enrolled Amazon reviewers receive a free product and will give a review. The Amazon verified reviewer is required to submit a review.
- Vine (Brand Registered Sellers Only)
- Same concept as the Early Review Program but there is no cost to enroll a product. Amazon Vine reviewer are not required, but typically do, leave a review
This can also be done in Off Amazon routes:
- Facebook Ads
- Instagram Promotion
- Email Promotion
- Paid Launch Giveaway programs
Tips for Amazon Product Launches
- Get reviews on your product
- Ensure you have enough inventory in stock
Using Amazon PPC
Amazon PPC is a better advertising route in comparison to advertising on Google or Facebook because you’re targeting shoppers who are already on Amazon with intent to buy.
In order to set up and run successful Amazon PPC campaigns, you will need to have the baseline knowledge before beginning. If your products do start selling well, it will be time to scale your business. At that point you will be playing catch up if you are trying to learn the PPC basics. Starting with a baseline as you launch your business will help your Amazon FBA business for years to come.
Important to know for Amazon PPC
- Match types
- Sponsored Product Ads
- Sponsored Brand Ads
- Sponsored Display Ads
Amazon PPC can be an extremely effecient way to get early customers to your listing and increase your ogrganic ranking.
CONGRATULATIONS – YOU NOW KNOW THE BASICS
What Now? Keep These in Mind
How to Calculate Amazon FBA Fees
Amazon FBA can be a highly profitable business model. We have an FBA Global FBA Calculator which allows you to estimate profit margin well before you commit to buying inventory. This Amazon FBA revenue calculator is perfect to track FBA fees/costs and to learn what to sell on Amazon FBA.
That’s what this Amazon FBA calculator is all about. You’ll learn how to calculate your business profits by Amazon FBA. Online marketplaces are great for sellers. Their fees to Amazon are lower than at conventional retailers. The money is in your Amazon FBA profit center.
Using the Amazon FBA Calculator
Click here to get started with the Amazon FBA Product Calculator. Pick your business model Choose the product category (Market, Monopoly, etc.) Select the product types Choose your price points Add your expected Amazon FBA sales Add your Amazon FBA fees Remember, when pricing items, the pricing must work for your target audience. Below you can see the price information which should help you reach your target price point.
- Fill in all the details
- Enter your shipping rate
- Input your percentage of fees
- Enter any discounts
- Remember to enter your price points for each Amazon FBA inventory
For a more detailed article on how to calculate Amazon FBA fees, click here.
Know if Your Making Money with Amazon FBA
The FBA revenue calculator can help you understand if you are making profit with your FBA business. This is particularly helpful in a seller-driven model where Amazon FBA fees are required in advance of purchases. Use the FBA model example:
Sell a $100 pair of shoes for $150. This would be an Amazon FBA profit if you only used one-third of your commission and received $100 upfront. Your real goal is to sell more shoes for $150 total but make the most profit by selling more shoes in the first place!
Use our tool to help calculate the profit of your first pair of shoes. If the FBA profit calculator yields a loss, you can change the profit margin to a lower amount or change the amount of shoes you want to sell.
Know your Profit Margin
A profit margin is the difference between sales price and cost of sales. It is calculated by using the quantity sold to calculate the price divided by the quantity sold. This calculator is mainly used to estimate what percentage of the sale profit you will earn on Amazon FBA, not to understand what the profit margin of your products are. When you are new to selling on Amazon FBA it can be very difficult to calculate the costs for your products before actually selling on Amazon FBA. The three FBA costs are:
- Amazon FBA fees
- Vendor costs
Each FBA fee has an associated shipping cost. You can check the price of your products on Amazon before you sell on Amazon FBA. You can estimate how much you need to sell your product to break even.
Best Amazon Seller Tools for Amazon FBA
Starting any business takes some front-end effort. That said, there’s not many businesses with lower barrier to entry than the Amazon FBA business. Is this tutorial we answer: is Amazon FBA worth it and how Amazon FBA works.
Use Seller Tools
If you are looking for advertising help with Amazon PPC, try PPC Entourage.
All in One
The best all-in-one Amazon Seller Tool.
The best Amazon PPC tool for advertising.
Analytics and Account Management
The best Amazon tool for keeping your business in front of you.
Professional Listing Optimization
The best service for taking your listing from 0 to 100.
One of the biggest advantages of Amazon is the huge marketplace that people can sell through. There are almost no restrictions. For those who don’t have a lot of inventory, it can be a profitable enterprise. And of course, the entrepreneurial freedom that comes from Amazon. Amazon doesn’t care how you sell or what you sell if you don’t steal.
That’s it, Amazon FBA is all about getting in, getting ahead, and getting paid! A good chunk of the beginning of any business has to do with the customer. This tutorial gives you a good place to start and lots of resources to help you along.
If you’d like help getting started in Amazon FBA, Reach out to FBA Global directly or join our Facebook group where we share Amazon FBA insights and recent tips for how to become an Amazon Seller in 30 days or less!