How to Start an Amazon FBA Business

start an amazon fba online business
 

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Selling products on Amazon is a fantastic way to make money from home. You can start an Amazon business with nothing more than a laptop, internet connection, and some hard work. Here are some tips and insights into how you can start your own Amazon FBA business.

Importantly, a critical step in starting an Amazon FBA business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.

What are the Benefits of an Amazon FBA Business?

There are several benefits of starting an Amazon business. Some of these benefits include:

  • You do not need a lot of start-up capital since you only need to pay for the products that you want to sell on Amazon.
  • You do not need to have any previous experience in selling or shipping products. Amazon will take care of all of this for you.
  • You can start this business with a small amount of money and scale it up later on.
  • It is very easy to find suppliers for Amazon FBA products since many large manufacturers want their products to be sold on Amazon quickly.
  • Setting up an Amazon business is very easy and can be done in a few simple steps.

how does amazon fba work infographic

 

How to Start an Amazon FBA Business

Step 1: Decide on a Niche

Amazon has over 50 categories of products that you can use to start your own Amazon business. You can choose anything from baby products, apparel, books, toys, etc. Whichever product category you decide to use is entirely up to you and there are no limits as to what kinds of products you want to sell. 

However, be careful while choosing the products because Amazon takes into account the number of units sold in a particular period while ranking a product’s performance among its other product listings. Therefore, you must do some research before picking the specific products that you intend to sell on Amazon. 

Step 2: Conduct Market Research

After deciding on the niche of the products that you want to sell, you need to conduct market research before taking further steps. A few things that you might want to consider while researching are the competition for your product, its pricing, and profitability. You can find all this information on Amazon itself by looking at other similar products or doing some Google searches.

Step 3: Write an Amazon FBA Business Plan

Once you have decided on the product, it is time to come up with an Amazon FBA business plan. Your business plan should include your goals and objectives, what you are bringing to the table, how long you expect this venture to last before making any profit etc. It is also important that you do some extensive research about selling products online to understand what you are getting into. You can find a lot of helpful information online and it is also advisable to join some online forums where people discuss their Amazon businesses.

Step 4: Source Products and Get Suppliers

Now that you have your business plan in place, it is time to source products and get suppliers. This can be a bit tricky and you must do your due diligence while selecting the suppliers. You can use websites such as Alibaba to find reliable suppliers, but always remember to check their ratings and quality reviews before placing an order.

Step 5: Setup Your Amazon Seller Central Account

Once you have sourced the products and gotten the suppliers, it is time to set up your Amazon seller account. This is a simple process and the only thing you need to do is register with Amazon, provide some details about yourself, choose your plan, etc.

Step 6: List Your Products on Amazon

Once you have created your Amazon seller account, you can start listing your products on Amazon. You will need to provide a title for your product, a description, the ASIN number (this can be found on the product’s Amazon page), the price, and the quantity that you want to sell. You can also choose to add some images of the product. Be sure to choose images that are as clear and large as possible.

Step 7: Ship Your Products to an Amazon Fulfillment Center 

Your products will be listed on Amazon within a day or two, but it will take longer than that for the orders to start coming in. This is why you need to send your products to Amazon regardless of whether there are any orders or not. This way, Amazon will have your products in stock and will be able to fulfill the orders as soon as they come in. You can either use Fulfillment by Amazon (FBA) or Merchant Fulfilled Network (MFN).

FBA is a service offered by Amazon where they will take complete responsibility for your product. They will manage inventory, shipping, and customer service. MFN is a service where you will be responsible for all these processes yourself. In both cases, you need to ship your products from your location to Amazon’s fulfillment centers.

Step 8: Start Generating Sales

Once your products are listed on Amazon, you need to generate sales. This might take some time depending upon the category that you have chosen for your product. You need to be patient and wait for more customers to come to you rather than trying to force-sell them something they don’t want. The best way to do this is by providing great customer service and offering good discounts from time to time.

Step 9: Scale Up Your Business

Once you have started making a profit and have a few steady customers, it is time to scale up your business. This can be done by increasing the number of products that you are selling, hiring more employees, or expanding to new markets. With a well-executed business plan, your Amazon business can be a huge success.

So there you have it – the six simple steps that you need to follow to start an Amazon business. It is important to remember that this is not a get-rich-quick scheme and it will require a lot of hard work and dedication. But if you are willing to put in the effort, then there is no reason why you cannot achieve success with an Amazon business.

If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

How Big is the Amazon FBA Industry?

The e-commerce industry is growing each day. This growth is due to the increasing number of businesses that are now shifting their business online. A major chunk of this growth can be attributed to Amazon which has seen a steady increase in its revenue over the past several years. The company, founded by Jeff Bezos in 1994, now occupies more than 40% market share of the entire e-commerce industry.

In terms of Amazon FBA, it is estimated that this business segment constitutes a whopping 70% of the company’s total sales. This figure is expected to grow in the coming years as more and more businesses are switching to this model to take advantage of the benefits that it offers. With the booming e-commerce industry and the increasing popularity of Amazon FBA, it is safe to say that the Amazon FBA business model is here to stay.

amazon centers full

 

What are the Key Segments of the Amazon FBA Industry?

Dropshipping – One of the major advantages of this profitable business model is that it eliminates a lot of start-up costs since you do not need to invest in buying any products. But at the same time, you have to find a reliable supplier for all your products and manage their supply chain.

Private Label Products – This is a popular business model among Amazon FBA sellers. In this model, you create your own brand and products, which gives you a lot of control over the entire process. However, it can be expensive to set up and requires a lot of initial investment.

Retail Arbitrage – This business model involves buying products from retailers that are selling them at a very low price. Then you’re selling these products on Amazon for a profit, which means that this model also eliminates the need to buy inventory or have storage space at home. However, this model is very competitive since everyone has access to the same information and data.

Wholesale – This model requires you to find a reliable supplier and then purchase products in bulk at a discounted price. You can then sell products on Amazon for a profit. However, this business model is riskier since you’re investing in inventory that you may not be able to sell at a higher price.

 

What Are Some Popular Niches Within The Amazon FBA Industry?

There are several key niches in the Amazon FBA industry. Some of these niches include:

  • Health and fitness products
  • Organic food and supplements
  • Home décor and furnishings
  • Clothing and fashion accessories
  • Laptops, tablets, and smartphones
  • Kids’ toys and games

 

What External Factors Affect the Amazon FBA Industry?

Some of the external factors that affect the Amazon FBA industry include:

  • The increasing number of businesses shifting to e-commerce to expand their market and reach a larger number of customers. This means that there is no limit to how big this business can get.
  • Favorable government regulations regarding online businesses will play a huge role in the future growth of the Amazon FBA industry.
  • The fierce competition that exists between different FBA companies and retailers, which can lead to price wars and cutthroat practices such as undercutting.
  • The increasing cost of shipping products to Amazon warehouses, which can impact the profitability of an Amazon business.
  • The availability (or lack thereof) of quality suppliers for specific types of products.
  • The ever-changing trends in the e-commerce industry, which can make it difficult for businesses to keep up with the latest sales trends and changes.

 

Who are the Key Competitors in the Amazon FBA Market?

There are several key competitors in the Amazon FBA market. Some of these include:

  • Walmart
  • eBay
  • Overstock

Other online retailers, as well as traditional stores, also offer similar services to those offered by Amazon. These companies can be classified as indirect competitors since they mainly operate on a more regional basis.

 

What are the Key Customer Segments in the Amazon FBA Market?

There are several key customer segments in the Amazon market. Some of these include:

  • Individuals who want to save money by buying products at a lower price than what they would find at traditional stores.
  • Individuals who want to purchase unique or hard-to-find products that are not available at local stores. 
  • Enterprise businesses that want to expand their markets and brand name by selling products through Amazon.
If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

What are the Typical Startup Costs for a New Amazon FBA Business?

The average cost to launch an Amazon seller business is between $3,000 and $4,500 for the first item you sell on Amazon. Keep in mind that these are just averages. Your costs may be higher or lower depending on your specific product costs.

Here’s a breakdown of each cost:

  • Purchasing your inventory – This will be your biggest expense, and it will vary depending on the products you choose to sell. You’ll need to factor in the cost of the items, costs for shipping, and any customs or duties.
  • Monthly storage fees – Amazon will charge you a monthly storage fee for each item you store in their warehouses. The fees range from $0.50 to $2.25 per cubic foot, depending on the size and weight of your inventory.
  • Shipping fees – this is the cost of shipping your products from your supplier or manufacturer to Amazon’s warehouses. Amazon also charges a fee to handle the shipment and provide you with a tracking number.

 

Is Owning an Amazon FBA Business Profitable?

It’s important to remember that there are many factors that contribute to the success of your Amazon FBA business. The most profitable businesses have a low investment, high demand and low competition product. However, it can be difficult to find these products but they exist if you know where to look.

Use tools such as Google Trends, Google Keyword Tool and Jungle Scout. Using these tools will help you narrow down your product possibilities to find the perfect one for your Amazon FBA business. You can also use paid tools but keep in mind that there are many free resources available through different websites.

 

What are the Keys to Launching a New Amazon FBA Business

It’s always exciting to start a new business, but it is important to do your product research and make sure you are aware of the key things before you start. Here are some keys to launching a new Amazon FBA business:

Product Research

Make sure you do your research before committing to being an Amazon seller. Look into average profit margins, competition levels, and profit per unit sold. Consider the type of products you want to sell also. It is always good to find a niche that can be profitable for you since it will mean less competition in the future.

Consider Your Time Commitment

If this is going to be something you are serious about, consider how much time it will take up in your schedule. Keep in mind that any growth of the business relies solely on YOU so the additional time commitment may be necessary as both a new business owner and employer.

Pick the Right Product

Choosing the right product is one of the most important aspects of starting an Amazon business. The products you choose to sell on Amazon need to differ from those found in other retail stores so as not to be confused with competitors. You also want something easy to ship, lightly fragile, and as lightweight as possible as well as inexpensive enough for customers so that you maximize your profit margin per item sold.

Keep Costs Down

Since we all know that lowering costs is one of the best ways to increase profits, any cost savings you can implement into your Amazon business will help increase margins and profits over time and will give you much needed breathing room when it comes time for expansion or reinvestment back into the business. Just like any other type of business, reduce your overhead as much as possible to help you grow more quickly and reach profitability sooner. The money you save now will pay off later in the form of higher profit margins.

Understand Your Competition

It’s important to understand who your competition is both on Amazon and within your niche market because it will give you a better idea about pricing, profit margin size, and how much profit should be left at each sale to reinvest into inventory costs or further advertising for example.

Make Sure You Have an Online Presence

Since so many people use the internet for shopping these days, make sure that there are online avenues where your potential customers can find you so that they aren’t forced to only use Amazon.

If you are serious about starting your own Amazon FBA business, make sure you do the product research and consider the above-mentioned items before taking a leap of faith with your hard-earned money or time. It is always better to be safe than sorry when it comes to any investment of either one.

 

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How to Start an Amazon FBA Business FAQs

Buying wholesale is a great way for Amazon sellers to make some extra money on the side. There are many benefits of buying wholesale to sell on Amazon. One of the most important benefits is that you may be able to purchase items for cheaper prices than if you were purchasing them retail. 

Another benefit is that you will have more variety in your inventory because you are not limited by what is available at retail prices. You can buy items that are not available on the retail market. 

Buying wholesale also enables you to take advantage of bulk buying discounts. This is where you purchase many items for a discounted price. You may be able to save thousands over time with this strategy alone.

One of the most important benefits of buying wholesale, however, is that you will have a much greater chance at being successful when selling Amazon FBA because you have a larger inventory selection and more diverse inventory which buyers tend to prefer. The more options in your Amazon store, the higher your chances for success.

Some of the hazards for entrepreneurs when starting an Amazon FBA business are as follows:

1) Failing to do product research before starting

If you fail to do the proper research then you will be entering into a business that is very competitive and requires a great deal of work. You need to understand how much competition there will be for your product, what the demand is like, and so on. This information can be obtained by reading product reviews and doing your research.

2) Not understanding costs

The costs of selling products on Amazon include finding suppliers, paying for shipping, advertising, and so on. Another type of cost that many entrepreneurs forget about is returns or defective products sent back by customers. Money spent on shipping items back to China could have been used instead to advertise your product further improving the average monthly sales volume which offsets shipping costs.

3) Failing to manage inventory levels

Many entrepreneurs are lured into the Amazon business model because of successful case studies they have read where products sell very well with little effort. The marketing has made it sound easy but if you fail to understand that these individuals had products stocked up such as 1000 units of a certain item and also paid for advertising this is quite risky. To be successful on Amazon you need to produce enough sales volume to offset your advertising costs and shipping costs associated with returns or defective items.

4) Not understanding the fulfillment fees involved

There will be many selling fees associated with selling through an online marketplace such as Amazon and some people simply do not understand what all of these charges entail until it is too late. To find out what FBA fees are involved you will have to read the terms of service carefully.

5) Not understanding the FBA Program

Many people start selling on Amazon but do not understand why they are paying an additional fee for their products to be stored in an Amazon warehouse. If your product is being stored in the main Amazon warehouses then this is called Fulfillment by Amazon or commonly known as FBA. 

The benefit here is that when someone buys your product then it will be shipped directly to them from an Amazon warehouse which saves time and money. You can also use the FBA program to make more sales through other online marketplaces such as eBay because it makes you look like a professional business seller rather than just individual selling products.

You can find popular products to sell on Amazon by using the search volume for the product as a metric. One of the most popular websites for this is Google Trends.

Another way to find products with proven demand for your Amazon business is by looking at what other sellers are selling in your category. You can also check the BSR (best seller rank) of different items when deciding what to sell. Other people are making money selling what you are thinking about selling, or have tried to sell in the past. Use their experience to your benefit.

There are three different ways that you can advertise using Amazon’s advertising platform. You can use Enhanced Brand Content, AMS (Amazon Marketing Services), and Sponsored Products.

Enhanced brand content:  If you just want to add a little bit of text and a product image, then enhanced brand content is the right option for you. The downside is that it can only be added to your title page and there are no links allowed in the content.

AMS: Amazon Marketing Services refers to all services apart from Sponsored Products which involves advertising on Amazon's website directly. AMS includes Headline Search Ads, Product Display Ads, and Similarities ads. You can get started with a free trial here.

Sponsored product ads: This is an extension of your pay-per-click campaigns within eBay and Google Ads. With sponsored products you get two different types of advertisements; one where Amazon displays your ad on relevant search results and one where Amazon displays your ad on relevant pages of its site. You can get started and read more about advertising with Amazon here.

Using these methods will cost more when it comes to advertising on Amazon but they are generally more effective in attracting customers. The additional time and money spent here are worth the effort when considering the increased profits you may see due to this enhanced exposure.


 

Helpful Videos

COMPLETE Amazon FBA Tutorial In 2021 | How To Sell On Amazon FBA And Make Money (Step By Step)


 
10 Tips to Grow Your Amazon FBA Business

 
How To Advertise On Amazon Seller Central | BEGINNER Tutorial FBA/FBM

 

Additional Resources

Beginner’s Guide for Amazon Sellers

FBA Revenue Calculator

Camel Camel Camel

 

Other Helpful Business Plan Articles & Templates

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