Amazon FBA which is also known as Fulfilment by Amazon is a service many businesses aren't aware of and one of Amazon's most ingenious ideas in their rise to internet dominance.
In this guide, we aim to explain the basics of what Amazon FBA is for, how you can start selling on Amazon and share various tools and resources to make the process easier.
What is Amazon FBA or Fulfillment by Amazon?
Everybody knows how popular Amazon is and if you are reading this then there is a very high chance that you have purchased from Amazon on multiple occasions.
What a lot of people fail to notice is that many of the products sold on Amazon are from individuals and third-party companies and not actually Amazon themselves.
This marketplace element to Amazon has always been blended in so well with products Amazon does sell directly that it creates a seamless shopping experience.
What even less people know is that Amazon FBA allows sellers on Amazon to order their products from the supplier and instead of having them shipped to themselves to handle the deliveries, you can have them shipped to Amazons state of the art warehouses in countries across the globe and allow them to handle all aspects of fulfillment and returns.
To a lot of people looking to sell online and on Amazon the idea of having a garage full of products and having to individually package and post the items out is a deal breaker. With this innovation from the experts in eCommerce at Amazon, the problem of having to deal with all of these complexities is a thing of the past and you can focus all of your time on doing what you do best.
What are the Benefits?
There are a lot of benefits to having Amazon FBA handle the shipping and storage of the products you intend to sell.
- Extremely fast shipping for your customers.
- Avoid the need for expensive storage or taking up space at home.
- Returns are also handled, keeping your address private.
- More affordable than individually going to post items yourself.
Getting Started Selling on Amazon
Before you begin selling on Amazon and using the Fulfilment service there is a certain amount of planning and research you need to look into.
How Much Money Do You Need To Start Selling On Amazon?
To realistically start buying your own products in bulk and selling on Amazon you need to be looking at a budget of at least $500-1000 to make it worthwhile. This doesn't mean you need to spend all of this money at once though, I will explain.
When you find a product and have done the necessary due diligence you want to begin by ordering a small sample of say $100-200 worth of the product.
This allows you to verify the supplier is genuine and has a good product and sell this limited batch from your own home to test the water and ensure it is a product that sells.
There are different models for selling on Amazon, though the one we are mainly focussing on here and that is most common is either wholesaling or private labelling, though some people with smaller budgets also use the retail arbitrage model.
Wholesaling - This approach involves buying a product from a supplier, either local or overseas in bulk as is and then sending to Amazon's warehouses (Amazon FBA) and reselling on your Amazon store.
While this is common and can be profitable it helps if you can differentiate from your competition, and it's harder to do this when you are doing traditional wholesaling unless you have a unique product or special sources/suppliers where you can get a great price and then win over your customers with the lowest prices. Ideally, you want to have your own logo at the very least which is called private labelling.
Private Labelling - Similar to wholesaling though you are looking for products where the supplier offers what is collect an OEM service, White Labelling or Private Labeling. Basically, this means you can add your own branding and sometimes have other changes made to the product. This allows your product to stand out from the competition.
If you build up a strong working relationship with a supplier you might find them more open to adjusting a product and adding innovative ideas you would like to see.
Retail Arbitrage - Retail arbitrage is the process of buying from one place and selling at another. A good example is going to a thrift store and buying some vintage items and then listing them on eBay or Amazon for a higher price. Leveraging the arbitrage opportunity between market A and market B.
This is a great option if you have less money to spend a keen eye. You can use apps while shopping in offline stores to check the going price online.
As mentioned above, private labelling is by far the most profitable of the available models and so we will primarily focus on that approach.
Building a Brand - There is one other approach, that is an expansion of the private label model. With building a brand you are more likely to focus on a smaller range of products within a nice, create and market your brand and work to make product improvements so you can seriously stand out from the competition and not just look like a clone with a different logo slapped on.
This approach also means you aren't as reliant on Amazon because you are building a brand name you hope will eventually be searched online and allow you to sell via your own website, eBay, Etsy and other online marketplaces. You could eventually even begin reselling to other online retailers and assume the position of your suppliers one day.
You can use your brand to encourage more cross sales and eventually you could even sell your brand to a larger company.
Now let's look at the costs to consider with selling on Amazon and using FBA.
- Cost of product
- Shipping / Air Express Costs
- Amazon FBA Fees (Varies depending on requirements)
- Amazon Selling Account Fee ($1 per sale or $40 per month)
- Amazon PPC (Pay Per Click Advertising) costs. Optional but advised.
- Cost of giving away a few units or selling at a lower price to encourage more sales and reviews.
Let's take some rough criteria for a product that would be ideal for selling on Amazon.
- We want to pick a product that is not too heavy, or fragile and can fit in small packaging.
- This means we can use express air shipping without it being too expensive and avoid the long wait for shipping by sea.
- We want to sell a product that sells for between $20-40
- Cost of our product per unit including labelling and shipping is between $4-8
- Our product research suggests we could sell at least 10 units a day if we get on page one for our product keyword on Amazon.
When you are first starting out with a product it is wise to place an order for a small number of sample units, you can then test the quality of the product, supplier and test the market by selling these items.
I will go through the process of researching a product, sourcing a supplier and placing your first order for a sample from one or multiple suppliers later on.
Researching a Product
The most important aspect of Amazon FBA is product research. If you can put the extra time and effort into finding a product with the right criteria that ticks all of the necessary boxes then you will save yourself a lot of issues further down the line and make a lot more money.
So how do you find a profitable product?
One thing to keep in mind when hunting for a profitable niche or product is that you don't need to pigeon-hole your private label brand to one topic or industry. You are better off with a generic name that is still attractive so you can test and eventually sell multiple products that are unrelated to under one seller account.
When looking for products that are profitable there is a formula to follow. You want a product that has the following attributes:
- Good Profit Margin - 50-70% profit margin, selling at 2-3X the item cost.
- Not too competitive (Look for Amazon review numbers, you want the average product on page on to be less than 150 reviews)
- You can make at least 10 sales a day
- The ideal-typical cost of product RRP is $20-40
- The cost of goods is $3-10 (when ordered in bulk)
- Isn't patented and only allowed to be sold by certain sellers
- Is a product that's allowed on Amazon (Some categories are only open to advanced sellers with a track record)
- The item is small and light, easily fitting in smallish boxes. This makes it cheaper and more realistic for air freight. Replenishing stock via sea freight takes too long to manage your procurement efficiently.
In addition to the above list we also want to avoid certain products based on the following criteria, or at least approach with caution
- Fragile items
- Trademarked / Patented items.
- Counterfeit Goods
- Electronics & Mechanical items that have a lot more potential issues if something doesn't work. Some might want to explore this area but do so with caution as these items tend to have a high rate of returns.
- Products that are oversold
- Items on Amazon's Restricted Categories List.
As mentioned above Amazon actually have a restricted categories list of product areas you need approval on before you can sell. For a new seller you have no chance of approval on any of these categories so forget about it and focus your attention on the products you can sell.
Another important tool to use when doing your product research is the Amazon Profitability Calculator which allows you to work out all of Amazons costs when selling on their marketplace. This is all important information you need before sourcing a product because these numbers will aid in your negotiations with suppliers.
So how do we do this?
The single best tool to assist in your product research is a tool called Jungle Scout.
Jungle Scout comes in two flavours, their Web App and Chrome Extension. The Chrome Extension costs $99 and is a one-off payment, however, the web app starts at $29 per month and increases based on your usage requirements.
If you had to pick only one then I would recommend the Chrome Extension as it will help with the majority of your Amazon product research, however the web app does allow you to track sales in more detail and is a lot easier than the manual alternative to validate product sales over a period of 1-4 weeks before proceeding with your order.
Fortunately, one approach you can take if you are on a budget but want the full power of Jungle Scout would be to get the Chrome Extension and when ready to aggressively do product research and make a decision sign up for the web app for just one month and cancel before the second payment.
Two to four weeks should be a sufficient amount of time to find your first product anyway. When you are making enough sales you can consider resubscribing to the web app when it makes financial sense.
Here is the video from the founder of JungleScout, a full education masterclass on the subject of finding a suitable product through using JungleScout software for product research to sourcing from various suppliers on websites like Alibaba to getting your product ready to sell on Amazon.
A free alternative is UnicornSmasher however many reviews online show that the accuracy of the data is questionable and nothing comes close to JungleScout.
Lenny does a fantastic job of explaining how to use Jungle Scout as well as other intricacies of the Amazon FBA process.
Another great tool you can use is AMASuite5 which is a multi-program Amazon suite that includes.
- AMA Top Product Analyzer
- AMA Search Analyzer
- AMA Keyword Generator
- AMA Review Analyzer
- + BONUS: Ali Inspector Bonus Software
- + BONUS: Amazon Sellers Training Course
- + BONUS: Amazon Affiliate Training Course
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Sourcing Your Product
When it comes to sourcing a product you have a few options. You can source a supplier locally if you know a product manufacturer that you want to sell products for on Amazon.
You could look for suppliers in your country so not quite as local but still focused on your own region of the world, for this you could use a plethora of websites or just start by looking for suppliers on Google.
The most profitable and common approach is to source from a major manufacturing nation like China and other countries and import these goods to the country you intend on selling within.
The most well-known website for sourcing goods in China that you can sell on Amazon is called Alibaba.com and over the past decade has become a household name not only in the East but also in the West too.
Alibaba has made great efforts to make their website more user-friendly since I first used it back in 2006 however to some it may still seem a little overwhelming.
The key to finding a trustworthy supplier on Alibaba is to look for key indicators on their supplier profiles. These include:
- Gold Supplier Badge
- Allows an on-site inspection
- Accepts Paypal for Samples or Full Orders
- Trade Assurance Badge (Ideally)
These factors will provide several things. If a supplier has a Gold Supplier badge and Trade Assurance then they have been vetted by Alibaba and come recommended.
You want to avoid paying with Western Union or Money Gram as there is no recourse if something goes wrong and has been popularly used for scams, not to say that this is a bad payment method for other things. Western Union has been a shining light in allowing people needing remittance services when working overseas and sending money home.
Once you have found the exact product you want or the one you found on Amazon you will want to create an enquiry template that you can use to send to each supplier.
You want to ask as many questions as possible now to save back and forth later and don't be afraid to ask for other product improvements and enquire about materials.
Ideally, you want to find at least 5 or 10 suppliers with the product you are looking for and send your template email.
On all supplier profiles, you will see a "Contact Supplier" button, this is because with Alibaba you want to get a quote, so you don't just go to checkout and buy, you send a message to the supplier.
When you contact the supplier you want to introduce yourself, ask for more information about the product, letting them know of your interest to purchase said products, an idea of the quantity, the fact you will also want to buy a sample before placing a larger order, request their shipping options and use their private labelling service to get your branding printed on the items.
Don't introduce yourself as the owner or boss. Introduce yourself as the assistant or purchaser, this will allow you to play good cop while also being stern about your employers' expectations from the supplier before proceeding to larger orders and doing more business together.
When you have written your message you will be able to save it as a template in Alibaba for future use, you can then use this again for the next two or three suppliers and for any future products you want to send enquiries for.
You can expect to pay around $100 for your samples, get them shipped to your house and inspect them, the supplier should mark them as samples so you won't have to worry about customs.
A great alternative to Alibaba to compare to and consider as an option is DHGate who provide a similar service with a few differences.
This will also be your opportunity to take professional product photos on a budget. Trust me it's easier and cheaper than you think but there are other options.
Professional Product Photography
One of the best ways to make your product stand out and look more appealing in the Amazon product search results is to have the best product photos, and often this isn't too hard.
Most people think you need a professional camera to take great product shots when in fact most modern smartphones cameras are more than adequate. The trick is all in the lighting. If you have great soft lighting then you will be able to take outstanding photos of your products with a few other tips.
When you finally place your order for products with your private label branding on you will want these shipped to you for inspection and prepping for FBA, this is the ideal time to take one of your items out and setup a space to take some great photos.
You could invest in a small lightbox from Amazon to take photos of small items but a great DIY method is to use your bathtub which is also white on all sides and creates the endless landscape look and is distraction free.
If you do have a budget to spend and plan on doing this for each product then it's certainly worth investing in a lightbox a night soft light and perhaps even a green screen which are also affordable and foldaway these days. This means you can take product photos and then superimpose the Arizona skyline into the background without it looking obviously cut out.
Take photos from all angles so you have some variety to work with, sometimes giving your customer a few extra photos can be the difference that gets you the sale over another listing.
If you really want the most professional look or you are making a generous income from your FBA business already then you could consider sending one of your items to a professional product photographer who can then take shots for you and send them via email.
Designing Your Private Label Logo & Branding
Branded products usually sell for a higher price so we recommend you consider this approach once you are ready to place a larger order after being satisfied with the samples.
When it comes to designing your private label logo and branding to place on products you can go a couple of routes.
1) Hire a designer - Hiring a designer is the option most people will want to ensure they get a professional and attractive logo for their products. I recommend looking at three options.
- Fiverr - The budget option but can offer some great results. Get your logo designed for under $50.
- Upwork - Upwork is a large freelancer website where you can find all sorts of professionals, there are also plenty of graphic designers and branding experts for hire.
- 99designs - The premium option that will yield the most professional results with lots of options for $200. This is maybe worth considering if you intend to reuse your logo over and over for an entire range of products.
Whichever option you take, once complete to your satisfaction you want to ensure the designer sends you a vector format of the file or an illustrator .eps file.
2) Design it yourself - If you want to go the DIY route and have design skills or know how to use photoshop you might want to take a stab at designing your own branding for your products. Here is a great video that takes you through the process of doing this and submitting your design to Alibaba.
How to List a Product on Amazon
This video takes you through the process of how to add your first product to Amazon seller central and use Amazon FBA.
How to Get Sales on Amazon
Once your product is launched on Amazon there are two things you need to ensure your product is a good seller. These are reviews and of course sales.
There is such a thing as Amazon SEO and the more sales and reviews your product has the more sales it will gain as it climbs the product search rankings on Amazon.
Customers find products on Amazon typically by searching for the keyword of the product they want in the search bar. This displays a listing of available products usually based on sales and reviews at which point they will click a product with an attractive price and image or engaging title.
Our aim is to ensure your product ranks on the first page when customers type in the most relevant keywords but ultimately when you first publish your product on Amazon you could be between page 10 (if you are lucky) and 50 if you are not so lucky which equates to very few sales if any.
The sole way to climb the listings so you can gain more exposure is by generating some early sales. There are a few ways you can catalyze this process.
One is by offering a lower price than your competitors by setting up an Amazon Promotion, then set it so you are at least breaking even or just about making a slight profit on your first 10-20 sales.
This way when a prospective customer orders the product listings by price (lowest to highest) you can appear on page 1 for those customers looking for a budget.
Another approach is to use Amazon PPC Ads allowing you to leapfrog to the top and pay on a click by click basis, very similar to using Google Adwords to appear at the top of the Google Search results without earning the traffic through organic rankings and page authority.
Once you have built up some sales and reviews you can increase your price back to the originally intended sale price and begin to generate some more profits per sale.
Generate Amazon Reviews
The best form of social proof on an eCommerce platform like Amazon is customer reviews. Nothing is going to tell the customer whether your product is high quality or not like other people who have bought it and have no allegiance to you.
Products with the most reviews make the most sales so it's vital you generate reviews as a priority.
The best way to get reviews is to do a promotion as mentioned above, where you do a massive price reduction or even give away a few products.
You can list your promotion or special offer on various deal and voucher code websites to gain more traffic from beyond the trees of the Amazon.
One service which is owned by JungleScout is called JumpSend and allows you to see how much other sellers are discounting the product you are selling so you can plan accordingly.
If you can match or beat them then you will increase sales, and more sales with lower profit margins are far better in the long-run when you are playing a game of making sales and gaining reviews to grow your exposure and climb the product listings.
You might not make any money at first but this will make sure that after a while you can generate the daily sales volume of your top competitors that gave you the reason to start selling the product in the first place.
JumpSend will also allow you to send out coupon codes and control the number that is sent out each day for your product. Most sites offer as much as 50-80% off their products during this promotional period with a volume of 5-10 per day for as long as two weeks.
The length you need to run a promotion and the amount you need to discount depends mostly on your product and the competition.
Once you have overcome this initial hurdle and generated some sales and acquired some positive reviews the Amazon search algorithm should start doing some of the work for you and giving you gradually increased exposure.
With more sales comes an improvement in your rankings which in turn leads to more visibility and sales which can then continue to help you climb provided you keep generating good reviews and not negative ones.
Questions About Amazon FBA
Here are some common questions or misconceptions about the Amazon FBA platform.
Q: Can you sell with Amazon FBA outside of the US?
A: Yes, you can, all you need to do is get an EIN number from the IRS website and have a credit card you can use internationally, a local bank account in your country, and a phone number. The IRS website doesn't allow you to be a US citizen or have a company or LLC registered in the USA.
A few years ago when Amazon FBA first launched you were required to have a US phone number to sign up but this is no longer the case.
Q: How do Returns Work?
A: Amazon FBA handle all of your returns for you and if the items are not damaged they can be put back into your inventory to be resold on the marketplace. If the item is broken you can pay Amazon 10c to destroy the item.
Essential Amazon Resources & Tools
Let's recap on some of the essential tools, websites and services mentioned in this guide so you can quickly access them later.