The Ultimate Guide To Amazon FBA

This post may contain affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase.

Becoming an Amazon Seller is one of the easiest businesses you can start. Overall, there is a relatively small investment upfront, you have the backing of a big brand like Amazon and you can literally get started today.

I was inspired to start my FBA business after reading articles from The Selling Family. This husband and wife duo make over $100,000 part-time selling on Amazon! They’ve put together a free Three Part Video Series to help you decide is Amazon FBA is right for you.

Amazon FBA is a great business to pursue part-time or full-time. Here are some commonly asked questions and products that will help you get started.

WHAT IS AN AMAZON FBA BUSINESS?

Ultimately, you have an online store that is run by Amazon. You find products at a discounted rate (clearance, stacking sales, thrifting, ect.), ship them to Amazon and mark them up to the prices they are currently selling for. When a customer purchases one of your items Amazon ships your item from their warehouse. Amazon then takes a cut for storing, shipping and marketing your product. You receive the remaining profit.

This really is a super easy business model, and can be really rewarding to run! It is much easier to start than an independent e-commerce site because you have the traffic and credibility of Amazon.

WHAT STORES DO YOU SHOP? 

My favorite stores for sourcing products are Target, Kohls, and Toys R Us. If you are interested in selling Health and Beauty products then drug stores are a great place to source product. I highly recommend Walgreens and Rite Aid, they both have great in-store promotions, coupons and clearance. Your grocery store can also be a great place to source for product. Amazon has a dedicated grocery category and you can have great success selling those items.

WHAT IS THE PROCESS TO BECOMING AN AMAZON SELLER?

First, you have to set up your Amazon Seller account. Overall, this is a very simple process. You will need a credit or debit card (to cover any monthly payments or fees until you start getting sales) and a tax ID this can be your social security number if you have not yet set up a business EIN.

You have two options for which seller account you would like. The Individual plan or the Pro Seller. The Pro Seller plan is a flat $39 a month regardless how many items you sell. The individual plan does not have a monthly fee, but instead you pay an extra dollar in FBA fees for each item sold. If you plan on selling 40 or more items per month the Pro Seller plan would be the better option for you.

If you choose to be a Pro Seller you get your first month free. If you create a free account and then upgrade to a Pro account you will not get your free month.

HOW MUCH MONEY DO I NEED TO START?

I would recommend $500-1000 to start. You will need about $500 to purchase your inventory, another $200 or so to buy supplies depending on what you already have. It is possible to start with less of an investment, but your growth will be slower.

If you literally have no money to invest upfront, you can start with the Individual Seller plan and sell items from your house that you do not use. These items should be in new or gently used condition depending on the category (think about duplicated wedding presents or gifts from baby showers you never used).

WHAT SUPPLIES WILL I NEED?

At the minimum, these are the items you need in order to start your Amazon business. I have linked up some of the items to cut down your search time.

1.     A Computer – this will be necessary for work in your seller account.

2.     A Smart Phone – this one is so important! This is how you will do a lot of your sourcing. You will need to download the Amazon Seller App (it is free!) so you can start scanning products. (Scanpower has also just released a free version of their app. This has more features than the Amazon app and will help you streamline your processes.)

3.   Printer – You will need a laser jet printer to print shipping labels and product labels. If you have an inkjet printer you can use it, but you will need to tape over your labels. When ink comes in contact with water your labels may become unreadable. The printer I linked is what I use and is under $50.

4.   Paper or Labels – You will need these to print your shipping labels on. You can get 1000 free shipping labels from UPS when you make your business account.

5.    Product Labels – You can use Avery  or generic hipping labels for this.

6.    Scale – You will need a scale to weigh your boxes for shipping. You can start with a bathroom scale and upgrade to a shipping scale as you grow your business.

7.     Boxes – you will need boxes to ship your products to Amazon. If you do any Online Arbitrage you can repurpose those boxes. The boxes do need to be clean and should be in pretty good shape so they will protect your inventory. Boxes can also be purchased at many retail locations for about $1.

8.    Packing Tape – You will need this to tape and secure your boxes.

9.    Bubble Wrap or Filler Paper – You will need this to pack delicate items. Packing peanuts and shredded paper is not allowed.

10.  Polybags – These will be necessary for items made of fabric or extra small items.

11.  Heat Gun or Blow Dryer – This will seriously save you! You will have to remove clearance stickers and other unnecessary labels and it is so time-consuming. Hit them with a little bit of heat and they will peel off so much easier!

WHY WOULD YOU DO FULFILLED BY AMAZON INSTEAD OF MERCHANT FULFILLED (SHIPPING IT YOURSELF)?

First and foremost, for me, it is the ease of it! I do not have to worry about packaging and shipping each time an order comes in. This may not seem like a big deal when you sell a couple items a day, but when you start getting 20 or more orders in one day it will exhaust a lot of the time and energy you could be putting into the business.

Second, I do not have the space to store hundreds of items in my house. Storage space is expensive and I do not have room in my house to store all of my inventory.

Third, Amazon has amazing shipping rates! When you ship your inventory to Amazon you get a significantly discounted shipping price. When you factor that and the FBA fees vs Merchant Fulfilled you almost break even. I can make more money sourcing for product in that time than I can save by packaging everything myself.

Fourth, your products will sell more quickly when they are fulfilled by Amazon. When it has Amazon’s name and customer service people will value your product more. This allows you to sell the product at a higher price than many merchant fulfilled sellers. When your items are FBA your customers will also qualify for Amazon Super Saver Shipping or Amazon Prime Shipping if they are Prime customers.

HOW MUCH CAN I MAKE BY SELLING ON AMAZON?

This question does not have a concrete answer. There are a lot of variables, but the main two are the amount of time you put in and your initial investment. It is absolutely possible to make a full-time income with part-time hours but your income potential increases as you commit more time. The same is said to how much you invest in your business. If you start with $100 your growth will be slower than if you began with $1000.

I would recommend reinvesting the profits from your sales for the first three months in order to help grow your inventory and business overall. After that point, it is important to start taking a portion of the profit to pay yourself or you may begin to become unmotivated.

I made a comfortable part-time income working a few hours a week, but full-time sellers like The Selling Family make over $100,000 a year!

HOW TO DECIDE IF YOU WANT TO BUY THE ITEM?

If you want to make 100% return on your items (this means for every $1 you put in you get $2) you need to be able to sell the item on Amazon for about three times what you buy it for. For example, if you can buy an item for $10, but it is selling for $30 on Amazon it is a pretty good indicator that that would be a good buy. If you purchase the product for $10 and plan on selling it for $30 there will be about $10 in fees, shipping expenses etc. to factor in thus leaving your return $20. If you can effectively apply this method with each sale you should be doubling your money.

If you are content with having a lower return on investment you will have a wider selection of items to purchase and your turn around times may be shorter. It just depends on the business model you want to implement.

Personally, I do not like to purchase things that I cannot sell for at least $10-12. If you do less than that most of the profits will be eaten up by Amazon Fees. Some of the fees are a percentage of the sale price while others are set regardless of price. This is important to keep in mind for lower price items. If you have a great deal on an item but it has a lower selling price consider bundling it as a multipack to get above that targeted $10-12 range.

Another factor is the sales rank. The lower the sales rank the more recently and the more frequently the product sells. If your product has a relatively low sales rank it should sell quickly when it is processed by Amazon.

Items with a higher sales rank may take longer to sell. In this situation you have to weigh out the risk. Is it worth it to hold on to this long-tail item because it has a higher return on investment or would you settle for a lower ROI and have quicker turn around times?

HOW TO PRICE YOUR ITEMS?

Pricing is super important. You have to be priced competitively in order to make sales. There will be other sellers trying to sell the same product as you on Amazon. This usually will not be an issue. If your item is in high demand each seller should be able to sell some of their items.

A common phrase you will hear as an Amazon seller is the Buy Box. The Buy Box is the featured seller on the item. When you look at the item there is the option to add it to your cart, but if you look more carefully it will say Sold by xyz (the seller) and Fulfilled by Amazon. All of the other sellers will be listed in a column on the right side of the page.

The Buy Box is rotated through sellers within a specific price range so each is able to obtain sales. You want to be in this range. If you sell for too high you will be bumped out of the rotation and if you go to low, you are 1. Undercutting yourself and 2. Could be sparking a “race to the bottom.”

WHY I LOVE SELLING ON AMAZON?

This is a perfect income for moms. During the day, I can take my little guy out to the store and do a little bit of sourcing. Or if I feel like staying in for the day I can do some online arbitrage while he plays or naps. I can input my inventory at night when he is asleep and then I usually take a couple hours on Saturdays packaging all of the inventory I have collected throughout the week and take it to UPS.

It gives me the flexibility I need to focus on my family and still have an income. Selling on Amazon does require a lot of dedication, but I love that I can do it on my own timetable and it really is one of the easiest businesses to start and maintain.

If you want to learn more about how to start your own Amazon FBA business check out this Free Seven Day Email Course with everything you need to know about selling on Amazon.

BONUS WAYS TO SAVE

1.     Use Ebates for cash back when sourcing online.

2.     Purchase discounted gift cards to reduce costs.

3.     Get a store credit card. Ex. Target Red Card save 5% on every purchase + free shipping or Kohls Charge and get exclusive discounts, free shipping etc.

4.     Take advantage of your credit cards rewards program.

5.     Sign up for stores rewards programs and get cash back. Ex. Get $5 for every $100 you spend at Kohls with Yes2You Rewards.

GLOSSARY

Retail Arbitrage: Finding discounted items at brick and mortar locations and then reselling the item for a marked up price.

Online Arbitrage: Finding discounted items at click and mortar/online stores and then reselling the item for a marked up price.

Buy Box: The featured seller on an Amazon product listing. This can be achieved by staying competitively priced (usually within 2% of the lowest FBA offer). 

Race to the Bottom: When sellers try to repeatedly undercut each other in order to get the buy box, which significantly decreases the price of the item.

Return on Investment: Net profit / Cost of Investment x 10

Ready to learn more? Click here to start your Free Amazon FBA Course.