I have been selling online through an Amazon FBA business since 2013, but I haven’t really spoken about it much on this blog. I hesitate because to a reader I think it sounds too easy. There are a lot of the articles written about Amazon FBA and they too often just like a scammy get-rich-quick scheme.
The logic is simple and the businesses are very profitable, but they do take time and are a lot of work to get going. It is worth it, but you should treat your Amazon FBA business seriously and just like any other business.
What does FBA Stand for?
For those who are absolutely new to this concept, FBA stands for “fulfillment by Amazon.”
WHAT IS FBA BUSINESS?
An FBA business is a business model with which you leverage the power distribution network and customer base of Amazon. You have probably already made the connection that this is using this business model, Amazon warehouses fulfill your orders, and also provides customer service to your clients.
Essentially, entrepreneurs, like you, can act as a major corporation, but without the headaches of actually being one. You spend your time searching for profitable products and Amazon handles the rest on your behalf.
What benefits can you expect from an FBA business?
An e-commerce business usually has to navigate through the logistics of fulfilling orders and shipping products to its customers in a timely manner. Utilizing the power of Amazon, you take that particular challenge out of your operational equation.
Another complexity of an e-commerce store is keeping track of inventory and getting products listed. Using the FBA business model, you ship the products to Amazon’s warehouse and allow them to take care of the rest.
With these two challenges out of the way, management of your business and growth takes off because:
- You are free to focus your attention on higher-level tasks like conversion rate optimization (CRO), targeted marketing and developing new markets.
- There are plenty of Amazon perks from which both you and your customers can benefit. Handling credit cards, quick shipping, free shipping, and customer service are just some of those perks.
- Growth opportunities are built into an FBA business model. You are focused on growth rather than chasing orders.
- Lower expenses are another benefit. You can’t warehouse or ship from a private e-business at the same rate that you get using Amazon’s facilities.
Though an FBA business if far from being hands-free, it does free you up from the busywork of a business and allow you to focus on those tasks which will produce growth and development.
How much can you earn from an FBA business?
That’s a tough question to answer because there are so many variables involved. However, there are FBA business owners who have made anywhere from $3,000 to $40,000 within the first 30 days of opening their FBA business.
Others have gone from an income level of $0 to $50,000 per month within a period of 8 months. These aren’t typical results, but they are an indicator of the explosive potential that starting an FBA business can have.
Essentially, the possibility exists to earn a five, six or seven figure income utilizing an FBA business model and leveraging the power of Amazon.
Steps to Starting an FBA Business and Creating an FBA Business Plan
Now that we have you properly warmed up and excited about this great opportunity with some amazing income potential, let’s get down to the task of getting your FBA business started. These are seven actionable steps with plenty of tips and practical advice on how to carry them out. All you have to do is follow them to get your FBA business up and running.
1. Create an Amazon Seller Account
You really can’t have an FBA business without creating an Amazon Seller Account. Theoretically, you could save this step for later, but if you have made the decision to “do this thing,” then you might as well commit yourself by creating an account. Here’s how:
- 1Go to Amazon’s website and scroll to the bottom of the page where the page footers are located.
- 2The second bold column from the left is labeled “Make Money with Us.”
- 3Below that heading is a link with the label “Sell on Amazon.”
- 4Click on that link and follow the directions.
Individual vs. Professional
You will have to make an upfront decision as to whether you want to set yourself up as an individual or as a professional. Here is the difference between the two:
- An individual account will not have a monthly subscription fee. However, because it is a free account, there are tons of limitations that you will be subject to.
- A professional account will have a monthly subscription fee of $39.99, but you won’t be charged for the first month while you get your account set up. You are not shackled by the limitations of the individual account.
If you are just playing around, like when you were a kid with a
lemonade stand or like you are hosting a garage sale, then the
individual account it fine, but someone who truly wants to build an FBA
business should just go straight into the professional account and start
things off right.
2. Pick Your Niche
This is almost the hardest part of setting up your FBA business because when you are excited about an opportunity you tend to want to sell everything you can get your hands on. The best way to pick your niche and try to determine how you are going to fit into the e-commerce world is to follow a structured approach. Here are the steps to that approach:
- Consider the areas that you are most passionate about and write them out in a list. These could result from hobbies, special interests, professional experiences, things you have read about a lot or done extensive research on, etc. They can come from and should come from, just about anywhere if you are truly thinking outside the box.
- Brainstorm all of the possible products and product lines that you might be able to offer in each of those areas. Write those products and product lines under each of the areas you are passionate about.
- Start narrowing down those lists to very specific niches. A good example is someone who loves gardening. Well, “gardening supplies” is extremely general when it comes to marketing, so you will want to narrow it down to something like “garden weeding tools,” or “designer flower pots.”
- Narrow down your list of niches down to 3 to 5 areas that you are passionate about.
By choosing items, areas of interest or niches that you are passionate about, you will be much more eager and knowledgeable when it comes time to write advertising copy, product listings, blog posts or presenting a podcast. Once you have things narrowed down a bit, move onto the next step.
3. Research Products
This is where, as they say, “the rubber meets the road.” Though you are certainly passionate about your niches and your products, making a business out of offering those products to consumers is a completely different prospect. You will need to do product research in those areas of interest and niches on your lists. Here are the practical steps for conducting product research:
General Product Searches
In this step, you want to do some general searches to get a better idea of how the products in your niche are represented in the world of e-commerce. Start by conducting searches for your products on Amazon, eBay, and other major retail outlets. A good short-cut is just to do a Google search of your product to see what retail outlets handle your selected products or similar ones. If you note that your product generally lists between $10 and $50, then you are on the right track. Products between these two price points tend to be impulse buys. This is good because you will be able to turn over a higher volume of the stock.
Using MerchantWords, Jungle Scout and Similar Keyword Tools
This is a keyword tool that is an essential element in determining the level of demand for your product. You will use these tools to see how often your products are included in keyword searches, in order to determine whether there is a “good market” for what you intend to sell.
Regardless of what some economic theorists say, supply and demand drive the market on any and every product, service and resource. Items that are in demand sell at a higher volume as well as a higher price, depending on how many of those items are available. Ideally, you want your product to be in high demand, but not have too many suppliers providing the same items.
Best Seller Rankings (BSR)
Amazon BSR should not be the highest priority for determining whether you sell a particular product or not, but they do give you a look into which products and which product categories tend to attract the most buyers. Check out the first three to five products on the BSR within the various categories and niches to which you have narrowed your list. A lower BSR number means that more of that particular item is selling than its competitors. If there are a large number of products with low BSR in a particular product category, then you are in an extremely competitive category. Categories with higher BSR rankings make it a lot easier to break into the market with your initial product listings.
Additional Tools for Market Research
There are some very solid tools for doing much more in-depth market research, which can provide you with loads of data as well as how to interpret it. One of the most popular and powerful FBA market research tools is Jungle Scout. Other market research tools include:
- AMZ Scout.
- AMZ Base.
- Watched Item. (which tracks items on eBay)
- Unicorn Smasher.
After you have narrowed down your products list to a few choice items or a product category, you will want to consult Amazon’s resources to find out what level of FBA fees are associated with that particular product. These fees will depend upon a number of different variables related to the product’s size, shape, weight, special storage or special handling. You will want to try to keep these FBA fees as minimal as possible to keep down your expenses.
Additional Product Research Tips
If you have faithfully followed the steps above, you should have narrowed down your products quite a bit from that large brainstorm list that you started with. At this point, you might be ready to launch into the next step, but there are a few more things that you might want to consider if you are still not certain about which products will suit your business objectives. Consider these additional tips:
- Keep away from competing with well-established products and highly recognized brand names. Competing with the big boys will not work well with you. They have marketing strategies and marketing budgets that you can’t compete with.
- Consider bulk items or clearance items from retail stores. This allows you to sell brand name products and build up your business in the short term. It is difficult to keep a continuous supply of these products coming, so do not base your entire FBA business on this type of strategy.
- You can scout out items in local retail stores as a means of market research as well. To do this, you will want to make use of a barcode scanning app on your Smartphone, like the Amazon Sellers app or Spotify app
By the time you have worked through all of the steps and utilized some of these additional tips for marketing research, you should have established your niche and the main product or products with which you want to lead off.
Step Four: Establish Your Brand
This step could take care of earlier in the process of setting up your FBA business, but because you will probably have to wait for your first batch of products to be shipped and made ready to sell, this is a good time to work on establishing your brand. There are several steps involved in establishing a unique and recognizable brand that clearly identifies you and the product you are offering.
Naming Your Brand
You have narrowed down your list to a single product or line of products that will be your first offerings in your FBA business. However, when you consider naming your brand, you need to broaden your perspective again and consider what your FBA business will look like in five years. What products will you be offering in addition to those you are offering now? It is with the answer to that question in your mind that you should name your brand. Consider a brand name that can more broadly cover those brands.
- Brainstorm several names, which are a good fit for your broader business perspective, that reflect what you intend to accomplish.
- Do Google searches of your list of brand names to see if they are already being used, or make use of programs like Namecheck to get a better idea of what brand names are going to work.
- Be sure to consider brand names that have an available domain as well. You might even go ahead and get that domain registered to set it apart for you when the time comes to build your brand website.
Consider the brand name that makes it through all of these filters and then considers graphic qualities of that brand name so that you can easily move on to the next step in establishing your brand.