Amazon FBA is a fulfillment service offered by Amazon and allows people to sell their products on their platform. Before, we go into the review of Amazon FBA it’s really important to understand how big Amazon FBA is. Most people don’t understand how much Amazons’ total marketplace comes from private sellers through Amazon FBA. Reports from Bigcommerce show us that over 2 million people are selling on Amazon FBA worldwide. Amazon FBA sellers can also succeed and compete with large companies. Out of the top 10,000 sellers, 66% of them use Amazon FBA and are private sellers. This data shows us that there is a real opportunity within Amazon FBA.
Who can use Amazon FBA?
“Almost anyone can list an item for sale on Amazon, whether it’s something you’ve purchased wholesale, made yourself or simply a product you no longer want.”
That’s right amazon FBA is open for anyone who wants to sell their products on the Amazon marketplace. All you need to do is set up a sellers account. There are two types of sellers, casual and professional. Casual sellers are defined as those selling 35 items per month or less and have to pay a completion and referral fee for each item sold. While professional sellers are defined as those who sell more than 35 items. They have to pay a monthly subscription fee as well as the completion and referral fee for each item sold. Professional sellers also get access to bulk listing tools which make it easier to sell to high volumes.
The Amazon FBA business model
The Amazon FBA model is an aid for a businesses supply chain management. The advantage of Amazon FBA is that it takes out the logistics and customer-aspect out of the entire eCommerce selling experience. All you have to do is source the product and send it to an Amazon warehouse. That’s all you have to do. After this a Amazon takes over the entire e-retail experience. They put it on their marketplace and send it to the customer once they order it. Amazon also manages the entire custom support( order cancellations, disputes, refunds, etc). Amazon FBA also helps e-commerce companies grow internationally. For example, Amazon has unified all its marketplaces together so you can create and manage offers for marketplaces in France, Germany, Italy, Spain, and the UK. The reports of the UK marketplace show us that sellers experienced a 40% increase in its exports to Europe after the integration of the European marketplaces.
The risks of Amazon FBA
1> The upfront costs
Compared to other online side hustles which we’ve mentioned in this series, Amazon FBA needs a higher start-up cost. In Amazon FBA you need to own the stock that you’re selling. On top of that you also need to pay the fees that are associated with selling on Amazon. You have to consider these fees when pricing your products, so you can make a profit.
2> Storage and Inventory
Storage fees aren’t too bad if your inventory sells within 6 months. However, if your products aren’t selling you could be charged some sky-high storage fees. You need to optimize an inventory schedule by understanding how quickly your inventory sells and minimizing your storage fees.
3> Higher rate of returns
Selling on Amazon means you have to sell in accordance with Amazon customer service guidelines. This often translates to a higher rate of returns than if you were to sell on your e-commerce shop.
4> Commingling can hurt a sellers reputation
Commingling is an option that allows you to pool the products you’re selling along with the same products from other sellers. The benefit of this is that it saves you time and money while labeling and prepping products. The downside of this is there have been cases where some sellers you’re commingling with sell counterfeit or damaged products. As a result quite often the legitimate sellers receiving negative reviews. There have even been cases where legitimate sellers have even been banned from the platform.
Key points to starting on Amazon FBA.
1> Find a product and research it
Researching competitors will give you a good idea of what products sell best. You can also find a good niche and try and dominate within that niche. Remember that Amazon is the worlds largest marketplace even the smallest niche offers massive potential. You can gain a ton of data by using services such as Unicorn Smasher or AMZ Scout. You can get the estimated monthly sales, competitor intel, and fee calculator.
2> Start small
You don’t need to have hundreds of different types of products to get started. Start small, test out different strategies, and learn what works. Then expand, many successful amazon sellers started with one product and then expand once they understood the environment they’re selling in.
4> Use good SEO practices
SEO stands for search engine optimization, it’s a technique used by online marketers to make their products and services rank highly on a search engine. Like Google, Amazon is working as a search engine with ranking features that determine the specific products to display for a specific product search.
5> Optimise product profile
Product profiles are extremely important in amazon. You need to essentially fit in as much information in as few words. Amazon has been known to suppress product listings with excessively long listings. Optimizing your profiles means that you need to optimize your pictures, product description, pricing, and bullet points. These product profiles are key to increasing your conversion rate( from visitors to customers). This includes getting product reviews and answering customer questions.
Summary
Amazon FBA is a great way to start or even expand a business. It doesn’t matter how old or big the business is. The program pushes your products in front of all of their customers and join the largest fulfillment network in the world. Plus, customers are more likely to trust your products when they’re backed by Amazon, so it’s a great way to get more sales and increase brand recognition.
