How to Start an Amazon FBA Business
If you’re looking to dive into the world of e-commerce as an online seller, you’ve probably heard all about Amazon’s Fulfilled by Amazon (FBA) business model.
What is an Amazon FBA business?
An Amazon FBA business is a setup where you, as the seller, get to choose what product you want to sell, find a supplier, order the products, package, and ship. Everything is housed in one of Amazon’s many Fulfillment Centers, and then they take care of the rest.
(It’s a little different from being an Amazon Affiliate.)
While it has its pros and cons, along with many details to understand as a seller, the FBA business model is a pretty enticing one, especially when explained in great detail.
So, if you’ve decided that the Amazon FBA business model is right for you, what’s the next step? To get your business up and running, of course!
Maybe now you’re wondering:
Is Amazon FBA profitable?
How can I launch my FBA business and make successful from the start?
The short answer to the first question is yes.
To launch and be successful from the start, you should create an Amazon FBA business plan. Having this will not only provide you with a stage-by-stage guide to follow, but if you ever need to raise capital to fund the growth of your business, then you’ll have a business plan to present to investors.
Your plan will evolve as your business grows, but it should consist of the following 7 elements:
- Executive summary – a summary of each section of your plan.
- Company description – a breakdown of your business model, the competitive landscape, and where your business fits in the market.
- Marketing plan – an analysis of your target market and a plan on how you’re going to address that market.
- Operations plan – an evaluation of the resources needed for the business and the planned operational processes.
- Management & organization framework – an overview of the team you plan to build to help you run the business.
- Financial statements – a rundown of your business’ financial structure, including revenue streams, cash flow projections, and balance sheets.
- Appendicies – a list of all supporting documents for your plan.
Before you get too excited about your new money-makin’ machine, there are a few very important details to hammer out regarding what you’re actually selling, where you’re sourcing your product, and how you’re going to market it.
If you’d like to see some businesses that are already successful, you can review many Amazon FBA businesses for sale on our marketplace.
Step One: Pick Your First Product
The first step in this process is the hardest (and can be pretty time-consuming), and it’s picking your first product.
Not to put too much pressure on you, but choosing the right product to start with will make or break your business.
Okay, it probably won’t break it, but if there is little or no demand for your first product, if it is competing in an ultra-competitive market, or if it is expensive to purchase in bulk, then you may not see the profitable returns you were hoping for.
You can avoid that heartache by taking the time to brainstorm, do market research, and explore different supplier options (we’ll get to them in the next step).
Remember: this first product might be the start of an ongoing process of trial and error. Even if you try your best to pick a product that feels like it will be a winner, there will always be better products to list or better ways to supply or market it. But you gotta start somewhere, right?
Brainstorm Your Passions and Pick a Niche Market
Start with what you’re passionate about and brainstorm product ideas. When you’re brainstorming, don’t limit yourself. It’s best to think broadly and outside the box; you can narrow your ideas down later on.
It’s good to keep in mind the idea of niche product categories versus broad product categories. A product line about “fashion” may be too broad, but “men’s fashion” may be more of a niche market. Current Empire Flippers FBA sales indicate there are still numerous opportunities for success across a wide variety of niches.
If you’re already running a blog or have a strong social media following, these web presences can help you figure out your niche, since you’ve already got a trusting audience that’s willing to hear about a new product you want to share with them. For example, if you love hiking or traveling, and your followers know that, they’ll be more likely to trust you when you start advertising your awesome new line of travel-sized backpacks or fashionable hiking gear.
Inspiration can also come from simply looking around your house — are you really into gardening? Are you a fixer-upper? Do you have an amazing bathroom that you love showing off to new visitors?
If you pick a product you’re passionate about, you’ll have a much easier time writing about it on your blog or talking about it in a vlogpost or on a podcast, and your followers will be able to sense your genuine enthusiasm. Plus, if you find that you’re already gushing about how much you love other people’s products on your blog, why not just make those products something you list on your own FBA business?
Do Market Research — and Lots of It!
Once you’ve picked something you’re interested in, start doing some preliminary market research—then dive a little (or a lot) deeper.
Let’s say you’ve decided to go with this travel backpack idea.
First, give it a search on Amazon, eBay, and other major retailers (or simply Google it) to see the list price in various places. Is your item generally listed for more than $10, but less than $50? If so, that’s good, because items that fall in that price range are more likely to be “impulse” buys, so you’ll be more likely to turn over a higher volume of stock.
You can also run a quick search on keyword tool sites, such as MerchantWords, so you can get an idea of how often people search for certain product keywords, like “travel backpack.” This can also help you figure out what keywords you should use in your product’s title.
Next, you have to check out the Best Sellers Rankings (BSR) on Amazon, but don’t let this list be the only determining factor in your decision. These ratings simply show whether there’s currently a demand for the product you’re interested in listing. If certain items are dominating a product category, this may be a clue that the category could be too competitive to break into for your first listing.
Andrew James at BrandBuilders.io recommends checking out the first three to five products on the seller rankings within a given category and seeing whether these items have a high BSR or a lower BSR. Essentially, the lower the BSR number the more it sells, since this indicates it’s more highly ranked.
If all the items in a certain category have low BSRs, this means you’re looking at a highly competitive category. A category that has many products with higher BSRs might be easier to start with, since it’ll be a little easier to compete in.
If you want to save some time while conducting market research, or you need more tools to dive deeper into the data, check out Jungle Scout. This site offers data and tools that can help you determine whether the product you’re interested in selling has sufficient demand, has high sales rankings, or has certain FBA fees attached.
Alternatively, you can perform your product research with tools like IO Scout or Helium 10.
Once you’ve narrowed down your choice to a few products, or perhaps even a product category, you can use Amazon’s resources to help you figure out the FBA fees associated with a product; these fees vary depending on your product’s size, shape, and weight, among other factors.
Avoid Competing with Brand Names or Super Well-Established Products
Especially for your first product, go with something that doesn’t have a crazy amount of competition in the form of brand name items. Keep this in mind while doing your market research—is a product (or its category) trendy simply because of its brand name? If so, this could indicate that the market won’t be as competitive as you’d think (because people love their brand names). If you want to break into a market that’s dominated by a major brand name, your product will need to be pretty revolutionary.
It can also be difficult to start your Amazon FBA business in a product category with many well-established, non-name brands boasting incredibly high ratings. If most of the products in a category have over 50 awesome customer reviews and they’re highly rated on the Best Seller Rankings, this could also be a sign that the market in this category might be too competitive to break into, at least to start with.
But perhaps while meandering through the products on Amazon, you realize there’s an opportunity to greatly improve on the way that a certain product is being marketed. Perhaps you also notice that it isn’t in a super competitive market.
When you find opportunities like this, you can try and break into the market with a product that uses your own private label, which allows you to use a retailer’s name (or your business’s name) instead of that of the product’s manufacturer. Doing this gives you way more freedom when it comes to creating a brand for your business and your product.
While private labels are definitely going to require more of an investment, this can be a great way to really establish your own brand, and it’ll help you in the future when you want to list more products (since customers will already recognize your brand).
Flip Clearance Items (or Bulk Items from Retail Stores)
Another strategy for finding your first product can be put into action during your weekly trip to Target, Walmart, or your favorite outlet store.
If you live near a store with awesome clearance aisles, entrepreneurial website The Selling Family suggests buying these brand-name clearance items and flipping them — in other words, performing “retail arbitrage.” Though, this is the less profitable route in the long run which is why it’s recommended you actually stop doing retail arbitrage, especially if you plan to sell the business.
By using a barcode scanning app, such as the Amazon Sellers app or Scoutify (an app by InventoryLab), you can scan individual products to find out how much they’re selling for on Amazon, and then calculate potential profits.
If you want to test out scanning items from the comfort of your own home, you can use Amazon’s Revenue Calculator and scan the barcodes of items that you’re curious about potentially selling in bigger quantities. While this method can be a little more time-consuming, you never know if you’ll strike gold, so it’s worth a shot.
Step Two: Source Your New Product
You probably feel pretty relieved now that you know what your FBA business’s first product will be, but don’t relax too much. Your next step is to figure out where you’re going to get your product from, and this step is almost as time-consuming as picking the product.
Find a Supplier
Since cost will drive where and how you supply your product, it’s a good idea to consider sourcing your product from outside the U.S.
If you’re searching for domestic suppliers in the United States (or you prefer using companies in your area), purchase a trade magazine online or at your local bookstore, or use Google to find local tradeshows that plan on hosting the big-hitters in the industry.
Perusing the pages of a trade magazine or wandering the sea of tables at a trade show might lead you to a supplier that distributes exactly the product you’re looking for.
When considering different suppliers, check to see if they manufacture other products you could potentially list in the future (since you’ve picked a competitive niche market). If they do, try to establish a positive relationship with them from the beginning to ensure long-term success.
“Ship” Your Product
Figuring out how to source your product will also involve considering if you can afford to source your products by boat, by air, or by train (which will also affect whether you’ll source your product overseas or domestically).
There are so many rules and regulations governing every method of shipment, but there are even more involved with receiving products from overseas.
Shipping by train is typically used when transporting goods from a port, and it can be especially helpful when transporting items over long distances. While it’s not as flexible as transporting items by truck only, which is another land-based method you can choose from, it can be a good option for larger bulk items traveling domestically.
If you’re looking to ship your product from overseas — from China, for example — your choices will be to arrange freight by boat or by air. Greg Mercer from Jungle Scout believes that, even with its extensive paperwork and lengthy wait-times, shipping by boat is 50 percent cheaper than by air, will help you grow and scale your business, and is more dependable.
Since international suppliers tend to have some of the most competitively priced products, shipping by boat is the preferred method for most Amazon FBA businesses, as it allows them to save money and securely receive their products.
If you’re shipping products internationally, then whether you’re using train, air, or boat, you’ll have to go through customs procedures and follow international shipping laws (and their taxes). But overall, ocean freights are still cheaper and will help you get a bigger return on your product.
Just make sure you know the rules (and all the hidden fees that arise with international shipping), and you’re good.
Another option you have is to ship your product directly from China (or from anywhere) and send it directly to Amazon’s warehouse. There are more risks involved here, especially since you can’t check the quality of your products before they’re placed on the Fulfillment Center shelves. Plus, there are middle-man fees involved if you choose to have someone else double-check the products. It’s also wise to take Amazon storage and fulfillment fees into account if you want to establish a profitable FBA business.
Once you’ve received your products from your supplier, you have to prepare them for the Amazon Fulfillment Center, and Amazon’s got some pretty specific guidelines to follow. But if you don’t have room in your garage (or time in your day) to package your products accurately and efficiently, consider outsourcing this task to a Virtual Assistant or a third party that will handle quality control and help you maximize your FBA business’ potential.
Step Three: Market the Hell Out of Your Product
Alright. You’ve picked a product, you’ve figured out where you’re getting it from, so it’s finally time to start spreading the word about your kickass product that you’re super excited to be selling on Amazon.
While having it listed on Amazon is already going to give it a fair amount of traffic, there are still several things to keep in mind when crafting your product’s description and marketing your product.
Optimize Your Product Description
I’m sure your product is awesome — otherwise, you wouldn’t have selected it! But you need to make sure your audience knows why it’s so awesome, and you can do that through clear, compelling copy and great pictures of your product.
Andrew Ilisin at Bplans recommends focusing on your copy first, and the first place to start is on your product’s page title, or simply its title. Using an understanding of Search Engine Optimization (SEO), you can hack your product’s title and fill it to the brim with highly-searched-for keywords.
This is where it’s important to consider how SEO keywords work, and keyword search engine sites can help you with optimizing your title. Make sure your product’s title not only incorporates your product’s specific name (and your private label, if you have one), but also utilizes those keywords that customers commonly search for.
With my “travel backpack” example, running a search on MerchantWords showed me that these keywords receive an estimated two million searches per month… but if I added “small” to the keywords, the full phrase “small travel backpack” only received about 4,000 hits. This tells me that “travel backpack” is searched way more often, so it’s definitely something I want to keep in the product’s title, no matter what other information I include.
The second most important part of your product listing may seem like a no-brainer, but it’s something you need to pay close attention to. You need a quality picture for your product listing.
No, I don’t mean a nice picture taken from your iPhone. I’m talking about professionally-shot photos of your product. How many times have you purchased a product on Amazon that didn’t have a photo? Probably not many times, if ever. People want to see what they’re paying for.
Take the time, pay someone a few bucks, and get a couple of professionally-taken product photos. Make sure the pictures showcase all the features or sides of a product.
Once you’ve got a strong, searchable product page title and several quality pictures for the listing, you’ll want to write up concise and error-free bullet points to showcase all the specific details of your product and a stellar product description.
For the bullet points, keep it simple while also explaining what makes your item great. For example, if I’m selling my travel backpack and one of my selling points is that it’s durable, I would write a bullet point that explains specifically how it’s a durable backpack. I could say something like, “Constructed with durable, water-resistant fabric and reinforced with extra-strong material on the straps.”
And please, re-read the description and double check the details — little errors can make a huge difference.
Simply listing the features and specs is too easy, so if you want your product to really sell, you’ll need to engage with your audience and get them to trust you through a product description that reveals a bit of your personality.
Your product description follows the bullet points, and can sum up all the major features of your product while also painting a picture of how or where a customer might use this product. If I was writing a description for my travel backpack, I’d probably describe places that people could travel easily while using my backpack, along with specific things they could pack inside for a beautiful hike in the mountains (“pack a water bottle and a snack, and don’t forget a first-aid kit!”).
This example below features some of the points I’ve been talking about: a search engine-optimized title for the product (using my favorite keyword “travel backpack”), several photos of the backpack from different angles, and bullet points that use engaging copy to tell a story about the product, in addition to bragging about its awesome specs.
Like I mentioned earlier, this first product listing might entail more than a little trial and error, especially due to the never-ending possibilities when it comes to crafting creative copy.
This is all to say, don’t leave the product copy until the last minute — it’ll impact your sales much more than you think!
Find Easy Ways to Advertise
Once you’ve got that awesome product listing, it’s important to look into advertising, and a great low-cost option is using a Pay Per Clicks (PPC) program, which can also help you gain a broader audience.
PPC marketing is basically the “Sponsored Content” that pops up when you’re searching for a product on Google or any major search engine. As an Amazon FBA business, you pay a small portion to the company or search engine that’s marketing your product for each click that your product gets.
Amazon has a great PPC option that’ll boost your product so it appears on the first page of their search results as a “Sponsored Product.” These targeted ads help customers find your product within the vast sea of Amazon products.
Where else can you find more customers from your product? Facebook, of course! If you choose to advertise on Facebook, you’ve got options to create PPC ads or customize different advertising campaigns depending on your budget, and you can even target a specific audience for the ad.
Gather Lots of Product Reviews
One of the best ways to market a product is by letting the product market itself through great product reviews.
While there are ways to remove negative Amazon reviews that might be severely impacting your sales, you can also check out product review groups on Facebook (listed in Ilisin’s article) to find talented people who would be willing to write quality reviews of your product without using cliché phrases.
If you’re feeling pretty confident that your product matches the vibe of a popular blogger or product reviewer, consider sending it to them — if you can get an endorsement from someone with thousands (or millions) of followers, you’ll be set.
Don’t Immediately Launch a Brand-New Website or Blog
So, most of these points have focused on things you should consider.
However, a word of warning: content marketing is a popular strategy that can actually be a little counterproductive for start-up FBA businesses if you don’t already have a blog or company website.
Content marketing consists of online materials, like blog posts, videos, or social media posts that promote a product or service without explicitly selling you the product, focusing on simply getting you interested in the product. If you’re already a blogger, then content marketing will probably fit pretty easily into your marketing plans.
But if you’re not a blogger or a social media guru, starting a content marketing campaign won’t necessarily give you the immediate returns you’re looking for compared to other marketing campaigns.
Especially when you’re first starting out, it’s hard to say whether your first product will be a hit or not. If you don’t already blog or produce content on a consistent basis, doing content marketing is a lot of extra work. It’s a major time investment to create all the content you need to advertise your product, and it’s not worth the work until you know how well your product is selling.
Creating a website or blog for your brand or your listings is really something to consider once you begin to see your product be snapped up by the masses.
Once you see that consumers can’t get enough of your product, you have more than enough reasons (and resources) to start a site and expand your business from only existing on Amazon’s marketplace. And with all the sales, you can invest in fancy graphics and quality writers who can do the writing for you.
This strategy can help you move your business into a whole different setup, and it’s particularly attractive to have a website for your Amazon FBA business and your brand if you’re thinking about selling it in the future.
I’m Successfully Running my FBA Business — Now What?
Once everything’s all set up, and you start seeing your product flying off Amazon’s Fulfillment Center shelves, you may want to think about hiring a Virtual Assistant to help you grow your business even more or research products so your business can reach an even bigger audience.
As your business grows, you may even consider selling it. Being such a popular and profitable business model, investors are definitely interested in successful FBA businesses. To find out how to maximize your valuation and prepare your business for sale, check out this guide: how to sell an Amazon FBA business.
Of course, you can “skip the line” so-to-speak by just buying an Amazon FBA business for sale that is already profitable. Register for our marketplace to make use of exclusive search functions to help you find businesses quicker.
Don’t forget, we also have ecommerce businesses for sale too. We help investors do this every single week, and help them create a lucrative strategy that works for them through our free criteria discovery call.
And there you have it — your very first Amazon FBA product listing for your brand-new Amazon FBA business. Now go out there and start selling those products like a boss!
Photo credit: kalinovsky