Amazon Fulfilment by Amazon
(Amazon FBA) is an Amazon business opportunity that encourages business owners and entrepreneurs to list their products on its marketplace.
Amazon provides the option for users to send their products directly to its warehouse and have them “fulfilled” by retaining giant (it sends them off) after a successful purchase.
Amazon would do this partly because they want to give away niche products that are unique and valuable (you have the products, they ship them for free), and partly because they can make use of their vast infrastructure (which they would already be paying for).
This adds to the business’s offering since it allows them to offer a wider range of products (which is their main competitive advantage).
It is important to remember that the “FBA model” is indicative of a new “digital business culture” that has become more common since the 2008 crash. Companies are no longer reliant on large stockholdings, overheads, and large teams. They now use the internet & social media to find customers & start lean businesses.
The days of distributors deciding the fates of products are gone. Entrepreneurs, small businesses, and the everyday person can create income streams of $10,000+ per month without owning any land. Amazon handles all the marketing, fulfillment, and infrastructure. You just need to source a product.
This tutorial will help you determine if this investment method is right for you. The new digital realm is a better way to get into the new world of business than scraps from local markets.
How it works
Every business operates in the same way: buy/build a product and offer it to the market. Any “profit” that you make can be used to either live off or reinvest into better products.
Most people have two problems: 1) They don’t have a product and 2) They don’t have access to a market.
Both are valid problems, but they are not a major drawback. In a world without the internet, the barriers to entry were so low that one really needs to spend several thousand dollars to sell to a global audience.
The “Amazon” opportunity exists for nearly 10 years (anyone can list products on its marketplace), but the “FBA”, which is completely hands-off, has only begun to gain popularity in the last 24 months.
Even if you haven’t gone to business school, I will briefly describe how to run a successful business. You must be able to provide a product/service for a large audience. You should aim to achieve a 30% net profit margin after COGS and advertising costs. You can do it however you like. The key to this is to sell low and buy high.
However, the digital realm is not devoid of traditional market mechanisms. The competition is a significant force. Also, the idea that something “easy” can be copied relatively easily by others is a key factor. This could lead to a reduction in your profits.
Amazon sellers often have the ability to sell products that are not available locally or can obtain locally with restrictions such as color/size or reliability issues. The Amazon marketplace is huge, but you cannot outwit demand and supply.
With “digital” businesses, the trick is to give access to exclusive products (typically created by you or your company) that are only available through them. These products must be unique and offer a solution that is not available to the general public. This makes it legitimate to purchase them online.
It is not easy to create a unique product. The trick is to solve your own problems. You can improve your skills and be able to apply them to a wider audience. This will allow you to identify products that you can create to solve problems you have experienced.
There are several steps you can take to get started selling on Amazon.
Register for an Amazon Seller Account. The first thing you need to do is get an Amazon “seller account”. There are two types: “individual” or “professional” seller accounts. The individual allows you to list items that already exist on Amazon. Each time a product sells, you pay a small fee. The professional fee is $40/month. There are no additional “per sale” fees. However, there may be other fees like a stocking fee. This account is the only one that allows you to add new items to Amazon’s catalog.
Register for GS1 to be able to create barcodes. You can choose from two formats: EAN (European Article Number) or UPC (Universal Product Code). These can be purchased for as low as $10, but Amazon, Google, and eBay highly recommend using GS1 to standardize your products. Using GS1 will allow you to have your products recognized on Amazon. Although the downside to GS1 is its cost, it doesn’t really matter. We recommend that you set aside at least $500 for administrative costs. This would be a great example.
You can create a legal company (optional) In order to establish a real FBA business, you will need a legal entity (and a bank account). It allows Amazon to open a business account. Additionally, it helps you manage taxes. Taxes are notoriously difficult to invest your own money in a personal capacity. It is easy to set up, but it is not necessary if you are going to deal directly with Amazon FBA. You can also sell products through the system under your own name.
You can then buy/build boxes products. You will need to pack the product in standardized boxes if you are making it yourself. There are many ways to do it, so we will just say that you should hire a printing/boxing company to handle it. Many are capable. Amazon has guidelines that will help you determine what type of packaging is acceptable.
Send the Products to Amazon You can arrange this through Amazon’s seller system. This allows you to choose a time for the products to arrive at the Amazon warehouse. Due to the variability in the process, we recommend that you follow the Amazon guidelines to ensure this happens.
Sell This is the most difficult part. We’ll explain it below.
Selling the Products
The final step is to sell the products. This step is the most difficult because you are almost completely dependent on the market (both Amazon’s as well as any other markets you might bring to the platform).
Effective marketing is key to getting products purchased from Amazon.
Marketing boils down to several factors. The most important is that you must be able to attract potential buyers first and then create demand. This will allow them to purchase your product to satisfy their demand.
There are many ways you can do this. However, it is important to remember that you need to be able to market your product without relying on Amazon. You will have more success selling through Amazon if you don’t need it.
Last but not least, sales must not be considered pure profit.
After all other costs are accounted for, your profit is only when you have made a profit. This includes the actual product itself and boxes as well as marketing. It’s a mistake to assume that Amazon money will be your “take-home” profit.