The ultimate guide on How to start an Amazon FBA Business
If you think that starting an eCommerce business is a good idea, the first question you might have would be, “Why is Amazon a good place to start?” The answer to that is, quite simply, exposure.
Marketplaces such as Amazon have the potential to boost eCommerce brands right from the start. Top marketplaces have massive reach, accounting for $2.67 trillion in sales for 2020, which is about 62% of global online sales.
Amazon alone has more than 300 million members, 150 million Prime members, and counting. It is no wonder that the average sales of small and medium companies on Amazon were $160,000 in 2020.
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Setting up an Amazon seller account is also easy, so eCommerce companies have every motivation to sign up for the service. Add the pandemic, which increased online shopping activities significantly, and you have a winning combination.
The one thing that might give sellers pause is the problem of fulfilment. Sending goods locally is not too much of a problem, but much of Amazon’s success lies in its global reach. The logistics of storing, shipping, and packaging for the international market can be daunting.
Amazon has an answer for that: Amazon FBA.
Amazon FBA Business Benefits
Amazon FBA (Fulfillment by Amazon) is a service offered to third-party sellers on the platform since 2006. It automates order fulfillment and shipping. Starting an Amazon FBA business means sellers can concentrate on selling because Amazon takes care of everything else.
Amazon FBA members do not need to have an online store as that is what Amazon does best. Amazon also takes over payment processing, inventory management, and packaging and shipping items. All a seller needs to do is sign up for the service and pay the fees.
Amazon FBA products are also eligible for Prime fast and free shipping, making them more attractive to impatient buyers.
Because Amazon FBA members pay a fee, Amazon has every reason to support them as much as possible. The accommodation ranges from guides on how to start an Amazon FBA business to loans.
How to Start Amazon FBA Business
You have decided that Amazon is the company to help you make a success of your eCommerce business.
The next thing to do is to begin launching your venture on Amazon. Here are some things to do before you start selling including product research, sourcing the product, creating an account, listing a product, and promoting the product.
Let’s get deep into each step:
#1. Decide What to Sell
The first thing you must do is pick your first product to sell on Amazon. Even if you are already selling products on your online store, it won’t just pick products at random for your Amazon seller account.
You need to select your first product carefully as Amazon is an ultra-competitive space. If you choose a product that does not sell on Amazon, you could end up with a lot of inventory that will eat into your overall profits.
Before you’re neck-deep as an Amazon seller, take this time to brainstorm and do market research for that perfect first product. You should also look for suitable suppliers to get the best returns.
Pick a niche
The best way to think about products to sell is to look for a niche. What do you look for when browsing through Amazon and can’t find it? Niche markets tend to be less competitive, so you have a better chance of shining when you are the first and only one to sell it. Think about the products you like and see if you can add them to your list.
If you or your online store has a social media presence, use the comments section to find out what people want. Alternatively, you can sound out your product idea and see if your audience is interested in it.
People you know and who know you are often a good source of feedback as there is trust between you.
Check the market
Once you have two or three ideas about which you are excited, do a search on your favorite marketplaces (including Amazon) to see the price range for those products. If they sell for between $5 and $30, chances are people buy them on impulse, so expect to sell a lot of them.
You should also do a keyword search to see the search volume for relevant product keywords. A high search volume usually means people are interested in those types of products.
The next thing is to check the bestseller rankings on Amazon to find out if there is a demand for the products on the platform. If you see certain products selling most in the categories, that usually means high competition for that category. You don’t want to get into that market for your first product.
Instead, check out the first few products in the categories you like for their ranking. If they have a low rank, that means it sells well on Amazon. However, if all the products in one category have a low ranking, you can expect to fight to get noticed. It is better to choose a category where most products have a high ranking, less competition.
#2. Source the Product
Once you have chosen your products, the next step is to find a supplier. You will select the type of supplier depending on selling as online arbitrage, private label, or wholesale.
Online or retail arbitrage is simply buying products at a discount and then reselling them higher. Suppliers can be retailers, such as Walmart, or wholesalers, such as Alibaba. Because you are selling a ready product, you don’t have to order in bulk.
This is how to start an Amazon FBA business with little money.
On the other hand, a private label is slapping on your brand or label on an existing product, essentially making it your own. Suppliers are usually manufacturers for a product you like that agrees to put your label on it. Private labels can set up your brand on the market, and if successful, it can be very lucrative. However, this usually requires ordering a product in bulk, which means a significant investment on your part.
Another capital-intensive business model is wholesaling. When you position yourself as a wholesaler on Amazon, it means you buy products in bulk from the brand itself or its distributors. You are, in essence, an authorized reseller, which is excellent. However, you do need to sink a bit of money into the business.
#3. Open a Seller Account
Once you have found a supplier for the first product you want to list on Amazon, the next step is the easy part: creating a seller account.
Registering for an account is simple. You simply follow the steps on the sign-up page:
- Click on “Sign up,” which will bring you to the options page. DO NOT click on the “Sign up” button at this point, as it will take straight to the professional seller registration. Instead, click on “See pricing” in the “Make money” box.
2. Choose whether to sell as an individual or professional. A professional account comes with a monthly fee of $39.99, while an individual account does not. However, an individual seller pays $0.99 for every product sold. It is wise to get an individual plan only if you think you will sell 40 or fewer units a month (41 x $0.99 = $40.59).
3. Once you’ve clicked on the type of account you want, follow the instructions on the screen and click on “Create a New Account.”
4. The next screen will require business information such as type and location. Fill in all the required fields, and make sure you supply your full name. Click on “Agree and continue.”
5. You will next have to supply personal information so that Amazon can verify your identity. When you have entered everything, click on “Next.” The subsequent screens will ask you to choose a marketplace, e.g., Amazon.ca, provide credit card and billing information, and add details about your products and Amazon store. Click “Next.”
6. The final step is validating the business address you provided previously. Check to make sure the address displays correctly, then click on “Confirm.” You will receive a verification code that you need to enter in the “Enter code below” box. Click on “Next,” and you’re done! You are now an Amazon seller.
Note: You can sign up for the Amazon FBA service once you have created a product listing on the platform and are ready to ship inventory to Amazon.
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#4. List the Product on Amazon
With your seller account fully verified, you can now list your product on Amazon. This is where you will need to put your marketing chops on display because you need to sell your product hard.
That begins with an excellent listing that gets the shoppers’ attention. As such, you don’t want to find the listing of a similar product and clone it. You want to make your listing distinctive.
To do that, invest in keyword research, photography, and packaging. Each one will contribute significantly to the impact of your listing on the page. Keyword research will allow you to choose the right words so your product will rank high in a relevant search.
A professionally shot image of your product will make it look attractive and increase your brand’s credibility. Beautiful packaging will also make them want more.
Some tips for the image:
- Use a white background with the product taking about 85% of the image
- No logos or text
- Shoot from multiple angles
- Add photos of the product with and without packaging
Note: You need to create a UPC barcode or some other product ID for your product. You cannot list your product without it.
After listing your product, the next step is to generate an FN SKU barcode to include in your packaging. You do this by going to the Manage FBA Inventory section of seller central and selecting “Print Label Items.” Send this to your product or packaging supplier, whichever is suitable. You cannot skip this step.
5. Ship to FBA
However, you need to prep your products before shipping. Amazon has strict guidelines for preparing and labeling products before shipping to FBA. You need to remember and do a lot at this point, but it gets easier as you get used to the flow. You can also choose to have Amazon do this for you. Of course, all these services come with a cost.
Now comes the most challenging part: promoting your product!
You did most of the actual work when you took the time to create an awesome listing, but there are still a few things you can do to boost sales. One is to advertise your product through the Pay Per Click (PPC) service of Amazon or a third party such as Facebook.
Another way is to promote your listing on your blog, social media, and any other online avenue open to you. Get people to talk about your Amazon product and spread the word.
Of course, the best way to promote your product on Amazon is to make sure you deliver a quality product and superb customer service. Reviews are critical on Amazon, so make every effort to ensure your customers are happy.
How Much Does It Cost to Start an Amazon FBA Business?
Starting an Amazon FBA business is easy, and registering to be a seller does not have to cost anything. However, aside from your inventory costs, you do pay specific fees once you start selling. The actual costs will depend on many factors, including your product’s size, weight, and shape.
Below are some fees you might pay as an Amazon FBA seller:
- Referral fees – Amazon charges a commission for hosting the product on its platform. Most sellers pay 15% to Amazon per unit, but the rate will depend on the product. The referral can be as low as 12% and as high as 40%.
- Individual seller fee – This is the $0.99 flat fee per unit mentioned earlier. Professional sellers do not pay this.
- FBA fees – Includes shipping and handling costs shouldered by the seller, which is about $3.00 per unit for small items that are less than a pound in weight. Heavier and larger products pay higher fees.
- Other fees – These refer to any added services you choose, such as Labeling Service, Packaging Service, and long-term storage.
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Conclusion on Amazon FBA Business
The Amazon FBA business model is not for everyone. Starting it is easy enough, and the benefits are great. However, the costs do tend to pile up, so you need to take very careful stock of what you stand to gain when opting for Amazon FBA.
If your purpose is to move products as quickly and painlessly as possible and your profit margin is such that it can absorb the fees, then Amazon FBA is the way to go.
About Guest Author
This guest article was written by the AMZScout Amazon Expert Team. AMZScout is a popular Amazon tool that helps sellers maximize growth and revenue. We love to create engaging content to help users achieve success on Amazon.