Have you heard of Amazon? I am one million percent sure that you have. I am not very sure if you know that Jeff Bezos, Amazon owner, is the richest man in the world, but I have the deepest conviction that you have probably heard about Amazon one way or the other.
However, my concern right now is not if you have heard about Amazon or not, but the focus right now is to educate and enlighten you on legitimate ways you can make money with the platform and the advantage Amazon offers.
So for the purposes of this practical guide, we will be looking at step by step processes, you can take and maximise your own share of the Amazon “cherry profit pie”. There is no doubt that there are different ways you can make money by starting an Amazon business, but we will be looking at one of Amazon’s business model, called Fulfilled by Amazon (FBA) or Fulfil by Merchant (FBM).
Amazon FBA is simply a business model by Amazon, which allows you to simply send your products to Amazon warehouse, while Amazon will handle sales, shipping and everything else in between, and you simply take your profit.
Simply put, you create a product, you deliver it to Amazon warehouse, customers make their orders on Amazon website, Amazon process the order, package it and deliver it to the customer, without you getting involved in the process and hassles of processing orders, dealing with shipping and making refunds for cancelled orders.
I understand your feelings right now, as the thoughts running through your mind right now is, how come I am just letting you know about this information right now, and if the process is as simple as I am making it seem, how come everybody is not doing it.
The good part is that information is key and a business that everybody is doing is no longer a business. Hence, the reason why we will be providing you with all the detailed step by step guide on how you will start and profit from Amazon business, so you can get started today.
So to get started, you must be willing to religiously and committedly follow these steps below:
- Decide on a product idea/model.
In starting with your Amazon business, it is very important to note that you don’t have to necessarily reinvent the wheel. There are two options available to you. You can either start by creating a product from scratch or simply improving on an existing product.
Developing a product from the scratch takes a lot of hard work, and even much harder is convincing people to buy your new product.
This now leaves you with the option of looking at existing products and improving on them. With this method, you already know that people are buying the product, and your improved version will create more value for them.
If you have decided to improve on an already existing product, the next question becomes, how do you source for your product?
- Find a Manufacturer or Source for your Products
One of the best ways to source for product is to use a platform such as Alibaba. Alibaba is a China based market place where you will find the highest concentration of distributors, wholesalers and manufacturers. The beauty of Alibaba is that you will be able to find a manufacturer who will be willing to work with you to create your product.
So for instance, you can find a manufacturer of a product that is of interest to you and you can reach an agreement with the manufacturer, and buy the product in bulk, turn it to your own branded product for between $1 and $7 each, depending on the product type and sell it for between $15-$20 each, which gives a very good profit margin.
How to get your product from Alibaba to Amazon FBA
After you have secured a deal with your chosen manufacturer, the next stage will be how you will get the product across to Amazon warehouse. You must note that every country has different customs processes and Amazon also have some complex requirements for sellers, and it becomes more complex for sellers who don’t have detailed information on how to go about with the process.
But we made a promise that we will provide you with a detailed guide on how you will go about every step of the way, till you make your first sale. The easy process therefore is to get a freight forwarder. The manufacturer will deliver your product to the freight forwarder, who will in turn deliver them to your destination country and hand them over to Amazon partner courier companies, who will then book them to Amazon warehouse. This method is stress and hassle free as the freight forwarding company will deal with all paper works and taxes.
In order words, you will simply
- Find a factory on Alibaba.
- Open conversations with them and design your product.
- Get a large batch of the item manufactured.
- Use a freight forwarder to get the items from the factory to Amazon.
- Start marketing and selling your items.
In making your Amazon business profitable, you should understand that there are costs attached in getting your product from Alibaba and shipping them to Amazon. This costs must be factored into your selling price, so you don’t end up running your business at a loss.
Amazon have a calculator that you can use to calculate most of the costs, which include:
- The price of the item.
- Shipping to the country of destination.
- Tax and customs charges.
- Delivery to the Amazon FBA warehouses.
Here is a hypothetical example of how you can calculate your costs and know your profit margin.
- Let’s assume you want to sell the item for $16
- And it costs $4 per item to buy/manufacture.
- Shipping is charged at $1 per item by the freight forwarding company.
- Tax and import duties are set at $0.75 per item.
- Delivery to the Amazon warehouse will cost $0.2 per item.
- FBA fulfilment fees is $3.05 per item.
- Amazon closing fee is 15% of sale price, so that amounts to $2.4.
- Your profit then will be $4.6 per item.
Not bad for a new business right?
- Open an Amazon Seller Account and create your listings.
During the application process, Amazon may not require that you submit every piece of documentation while creating the account, but the following documents will be needed to verify your account before you start selling.
- Federal Tax ID or social security number
- A credit card
- A business license
- State Tax ID
- Phone Number
- Bank account number
- A utility bill
Amazon provides two basic methods, Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Please be sure you understand the difference before creating your account.
- Creating the Listing on Amazon
Once you have finished creating your account. To start creating your listing, from the homepage navigate to the inventory tab and select “Add a Product”.
You will then be taken to the details page of your new product. There are many fields to fill, but you can ignore some of them, and fill the most important such as:
– Item Name.
– Brand Name.
– Product ID.
– Fulfilment Channel (remember if it is FBA or FBM)
– Product Image(s)
– Product Description with keywords
– Product labels/ID
Though Amazon is a very big and popular platform, no one will actually buy your product, if they don’t know about your product. So it is very important that you market your products the best way you can. Efforts will be needed on your part as your marketing efforts is what will help your seller ranking, and when you achieve seller ranking, your products will start selling organically.
Selling organically means that Amazon algorithm has started showing your items to people when they search for products on Amazon.
When you are starting out in your new Amazon FBA business, it will only be natural that you will not have any reviews. It then implies that it will be difficult for Amazon and for people to trust your product, hence more marketing will be required.
A quick route then to improve seller ranking, which will lead to Amazon business success is to make sales, get good reviews and get many more reviews.
It is your duty then as a new seller to get as many new sales and reviews as possible within the shortest possible time. You can achieve that by:
- Asking all your friends and family to buy and review your product.
- Hosting a competition/giveaway.
- Sending free samples to professional & amateur reviewers.
- Paying for advertising.
- Asking previous customers to review your products.
How to get Reviews on Amazon
One of the most difficult task in running an Amazon FBA business is getting and managing reviews, as over 90% of people who buy on Amazon don’t leave reviews. So the best way is to convince your customers to leave reviews when they buy your product. However you should note that Amazon have strict rules on how you interact with your customers.
So in trying to convince your customers in leaving reviews, you can try the followings”
– You can email them using a service like the Jungle Scout Web App
– Use Amazon Early Reviewer Program to help get your original five reviews.
– Look for super reviewers that reviews everything they buy on Amazon
– Use your creativity to get reviews
Basic Startup Costs for your Amazon Business
Amazon business does not require so much physical equipment, but you will however have the following handy. But please note this costs will be dependent on the business model you choose. So this will be considered for instance, if you decide to adopt the option of Fulfil by Merchant (FBM).
- Computer or laptop
- Regular printer
- A label printer (Amazon gives you the option of printing items labels for you for a small fee per item)
- Large, open space for shipping preparation.
- Poly-bags (to protect items that could get dirty).
- Packaging Tape
- Pallets (if shipping freight)
- State and local business license and registration
- Advertising Costs
- Trademark (Private Labelling)
- Product Photography Equipment
- Amazon Professional Seller Subscription cost ($39.99/month)
- Shipping and inventory management software
- Inbound shipping (FBA)
Amazon Terminology you should know
As a new seller, it is very important that you should familiarise yourself with the following terminologies.
- Amazon API: a web interface giving programmers access to Amazon’s product catalogue data and seller’s account info (with permission).
- Brand registry: This is a program offered by Amazon for sellers who manufacture their own brand of products.
- Lightning deals: a special promotion on the front main page of Amazon where limited-time deals are offered on specific items.
- Vendor express: The program through which Amazon sells private label products from third-party sellers.
- Verified review: a product review left from a seller who actually purchased a product off of Amazon.
- ASIN: A Standard Identification Number, which identifies a product on Amazon.
- UPC: Universal Product Code. 12 digit number assigned to each item in the form of a bar-code.
- FEIN or EIN: Federal Employer ID Number. Most suppliers require this number to set up wholesale accounts.
- Resale Certificate: Certificate issued at a state level which shows you don’t need to pay tax since you are a reseller. Also known as “tax exempt form.”
- Minimum Advertised Price (MAP): The lowest price a supplier will allow you to sell a product.
- Manufacturer’s Suggested Retail Price (MSRP): The price point a manufacturer suggests a product is sold.
- Minimum Order Quantity (MOQ): The minimum dollar amount of product a seller must purchase in one order.
- Gated: Items or brands which require special permission to sell.
- Ungated: Products or brands which don’t have any restrictions.
- Ungating: Getting approved to sell a gated product.
- Product Bundling: Offering multiple products in one Amazon listing.
- Best Seller Rank
Common Beginner Mistakes to avoid as a seller
Amazon have the reputation of suspending sellers who run fowl of their rules, so it is important to know the common mistakes and avoid them.
Not knowing the rules is a common mistake you must avoid at all costs.
So you must be conversant with rules that relates to:
- Shipping overweight boxes
- Incorrect product labels or expiration dates
- Selling a restricted brand (even if the listing is unrestricted)
- Sourcing product from a bad supplier
- Packaging damage from the shipping process
- Items that does not match the listing
- Registering for more than one account (without permission)
- Luring customers outside of Amazon
- Miscalculating shipping
I am quite sure you are gearing up and all set to get started with your Amazon business. The point is and still remains that until you are willing to take action, nothing will change. So let go of any distractions right now and get started immediately.
What do you think about this guide and do you have any business idea you want us to write about? Let us know in the comment section.