Selling on Amazon with FBA (Fulfillment by Amazon) can be a great way to earn an income. It can be a side hustle or even a main source of income, as many are making more than $100k a year.
However, being profitable in this field can be a bit overwhelming, especially when it comes to knowing where to begin. In this article, we’ll deal specifically with starting a business using FBA, where you send Amazon your inventory and they handle all your customer service needs.
Tip #1 – Learn the Terminology
Amazon is rampant with acronyms and if you don’t know what they are, you can get lost very quickly.
- MF – Merchant Fulfilled
- When you (the merchant) ship products directly to the customer yourself.
- OA – Online Arbitrage
- Buying items from online stores to resell on Amazon
- RA – Retail Arbitrage
- Buying items in retail stores to resell on Amazon.
- PPC – Pay Per Click
- If you create a sponsored product advertisement, this is how much you’re paying for every time someone clicks on your listing.
- ASIN –Amazon Standard Information Number
- This is Amazon’s internal tracking identifier for each listing in their catalog. It’s similar to a UPC but is exclusive to Amazon.
These are just a few of the acronyms you’ll see on a regular basis, so familiarize yourself with them to reduce your learning curve on the platform.
Check out Online Selling Experiment’s more complete list of Amazon FBA and general reselling acronyms here.
Tip # 2 – Plan Your Inventory
Decide what your products will be and how to get them. Ultimately, you’ll want to sell products with a high enough profit margin to make the business worth your time and effort. The goal is usually a 50% profit margin AFTER Amazon FBA takes their fees (more on that later).
Are you going to be making a product? Maybe you’d prefer to source from a retailer or wholesaler? Online and retail arbitrage can be a fun way to get a variety of inventory quickly, but is does require research and that you pay close attention to details.
Consider if the products you want to sell are evergreen, meaning they sell year-round, or if they’re seasonal. If your items only sell well during one part of the year, you might want to round out your inventory with other products that are always in-demand. This will help keep your revenue consistent and provide extra profit to reinvest back into your business.
Tip # 3 – Research the Competition
If you’re trying to sell something everyone else is offering, you’ll probably have a hard time selling it. Before you throw your hat into an overcrowded ring, do some research to see if there are product gaps that you can fill. There are even tools, such as the Chrome Extension “HowMany?” where you’ll rank in search results based on competitors’ inventory.
Tip # 4 – Use the Right Sourcing Tools
There are many online options and apps specifically for Amazon FBA that are designed to help you source products. Amazon’s proprietary app, Amazon Seller (available for iOS and Android) provides a good place to start, but other options, such as Profit Bandit, can be an even better for looking up information while you’re sourcing.
Tip # 5 – Know Your Fees
Newer sellers can have the habit of getting excited, selling a bunch of products, and then wondering why they didn’t turn a profit. This comes down to understanding Amazon’s fee structure. Remember, you’re paying a premium to use Amazon’s services, which can include advertising, shipping, delivery, storage, and even merchant expenses. These can add up quickly, so get familiar with how much products of a certain weight, size, and category will cost in fees, and plan your pricing strategy accordingly.
If you follow these basic steps, the end result can be a very exciting and lucrative Amazon business. The main goal isn’t to jump in headfirst without doing background research; understand your goals and understand the process and you’re on your way to having a successful outcome.