A few years ago, I found myself in one of the worst times ever. My mother was very ill, my relationship wasn’t at its best, I was broke and with no actual friend by my side. I was drowning myself in motivational videos on YouTube and somehow I find one video where a young couple was explaining how they managed to escape their 9 to 5 jobs by creating an online business. I was all ears. I started to search for more and detailed information about this Amazon FBA thing that they were talking about. And this is what I found out…
What is Amazon FBA
So, first of all, Amazon FBA stands for Fulfillment by Amazon. That means that you choose a product to sell, you ship it to an Amazon warehouse and you list it on their website. When a customer buys your product, Amazon handles the picking, packing, shipping and tracking the order for you. They will also take care of the returns and refunds. In exchange, you’ll have to pay them the storage and fulfillment fees.
There are several options of selling on Amazon:
· Wholesale
· Arbitrage
· Dropshipping
· Private Label – this is also what I recommend you to do.
Today, we will cover Private Label. This means you pick a product and you create your own brand around it. First, you have control over your price, which means higher profit margins and you only need to start with one product, so less work for starting.
Things to do as an Amazon FBA seller
Ok, let’s be honest there. Things aren’t so simple, especially if you do choose to sell a private label product, as I did. The process of picking a product to sell is a hard one and you must pay attention to it, because it can be the most important step in creating a profitable business on Amazon. You should do your research, this is your first big responsibility. For me, it was an overwhelming process, making my first product research manually. From my experience, you absolutely have to use some tools for this, and I think that using both methods complementary is the smartest choice.
The second thing you must be aware of is keeping your inventory in stock. It doesn’t matter if you have the best quality product, the most carefully selected package and the fullest kw description, if you do not have your inventory in stock. What’s happening is the moment you are out of stock, your listing is starting to decrease in rank. You could put your listing in pending by closing it (attention! close the listing, DO NOT delete the listing), but this won’t prevent as much as you’d want the fatal decrease.
So, make your math way before starting selling, cause even if you’re selling 200 units in 2 weeks, but after that you’ll have to wait one month for restock, it was all in vain. Maybe if you’re lucky enough to be in a niche where there’s no real competition and you are killing it, you’ll have a slight chance to grow back your listing on first page.
The third step you must be aware of is marketing your product. You must learn how to launch and advertise your product, because in an overcrowded market like Amazon today, you have to be seen in order for people to purchase from you.
How much money can you make?
Well, this actually depends on many factors, but the most important factor is you. Your work, your mindset and your choices will determine the amount of money you can make from this and how fast you can scale the business. However, there’s a difference between the revenue and the profit you make. When you’re doing your math around your future Amazon business, you must take into consideration:
1. the cost of product and
2. the shipping,
3. the amazon fees
4. the PPC advertising
So, let’s say you can make from 0 to 40 000$ per month. Realistically, you can start making 1000$-2000$ profit within the first month of selling. If you use this money to reinvest in a larger stock and a more aggressive PPC campaign, you can scale quickly and have a tangible and steady business within a year, which rarely happens with a physical business.
The Advantages of using Amazon FBA
There are some advantages and some disadvantages when using Amazon as a seller. Let’s look at the most important criteria in order to make a calculated decision.
1. There are plenty of platforms out there where you can go and sell whatever you want, but no platform is as big as Amazon with over 300 million active customers and 90 million having Prime accounts.
2. It’s a relief not having to deal with hundreds of order forms and all kind of logistics that is happening in the backstage. Picking, packing, shipping are also automatically processed while you’re comfortable in front of your laptop. This is allowing you to focus on selling more and better, and improving the quality and growing the store, and scaling the business.
3. You do not have to stress about returns or customer service. Imagine all that logistic in reverse, while having to be a master in communication dealing with an angry and unsatisfied customer. However, I do recommend you to communicate with your customers when they reach to you with an issue and try to solve they problem. This will always help your business and those customers are more likely to return and buy again, because now they also like you.
4. Because of the multiple platforms and warehouses Amazon has for every corner of the world, delivery time is not an issue anymore. 5 to 8 business days is their standard delivery time, and 2 business days for prime.
5. When it comes to storage, you do not have to worry. You benefit from unlimited storage space, so you just worry about advertising and selling more.
The Disadvantages of using Amazon FBA
1. FBA is expensive – you have to pay fulfillment fees, storage fees, Amazon PPC, so you have to take all these into consideration when calculating your profit margins. And if you’re not selling as fast as you would need to, you would have to pay attention to long term storage fee.
2. Amazon has major control over your account. They can close your listing, delete your reviews, block you from selling and ignore you when you’re dealing with important issues. These things aren’t that frequent, especially if you’re a good boy and play by the rules.
3. When impulse buy is made as easy as one-click of button, more returns may appear in your seller central account. This is not in your favor as you are losing money in shipping back and forward and many times products are damaged in the process.
4. We talked about the multitude of warehouses Amazon has. Well, this also has a negative aspect, because it is difficult to keep track of your inventory. Many times you are not aware of how many units you may have available as they keep moving your products between warehouses.
How to start an amazon business
Selling on Amazon is not that hard, but it’s not simple either. You must follow some clear steps:
1. Setup your Amazon account – make sure you choose professional
2. Research the market, choose a niche and a winning product
3. Find a supplier and outsource the manufacturing
4. Establish a brand and work to develop a brand image
5. Create a shipping order and ship the units to Amazon
6. Study your direct competitors and make a keywords list
7. Create a “killer” listing, using the proper keywords
8. Launch and start Advertising – I recommend PPC and FB ads to start
So, what did I do wrong?
So why have I failed? Even if I followed the advice from well-known courses and I made every step by the book? Because I wasn’t financially prepared to make such an investment. I have the necessary money to buy and ship 200 products, but that’s all that I had.
My product was starting to sell well, I was on first and second page for the main keywords. I reached 20 units per day in sells when I realized I’ll be out of stock soon and I don’t have the money to order and ship a new batch. I had to wait to receive the money from Amazon, then order, and then wait again for the products to be manufactured and shipped. Wait to arrive at Amazon’s warehouse and then start a new launching process. Meanwhile, I closed my listing, but the decrease in rank was hard and irreversible.
You see, new sellers have an advantage. The algorithm will throw them from nowhere to first pages. As a new seller you don’t need to sell hundreds of units a day, you just need to sell some in order to be pushed up in rank. This is a benefit that you only have at the beginning, afterwards you’ll have to work hard to maintain the listing where it is or even increase the rank.
When I received the restock, I had to re-launch, I managed to recover a bit, but never to where I was before. At the same time, the manufacturer price increased, so I decided that it is best to sell all and close the listing for good. This isn’t giving up though, just a calculated decision, something I’ve seen approaching inevitably. I am planning to return, but with another product, and with more experience under my belt.
