You have probably heard of Amazon FBA but are not quite sure how it works and how you actually get started. There is a lot of information out there and it can easily become confusing. Here is a simple guide which shows you how to sell on Amazon.
The Amazon marketplace is a huge opportunity for sellers
Amazon is the largest online retailer in the world and luckily they will allow people like you to sell on their website. It is similar to selling on eBay but easier and more profitable. Amazon has a huge customer base so you do not need to spend time developing your own website and instead you can just tap into this existing demand.
You simply set up a seller account and list your products. There is one product page for each product available. Offers from all sellers will appear on that single page. If Amazon stocks the product they will also appear on the same listing with you. You all compete on this page for the buyer’s order.
Amazon demand very high standards from sellers and will take steps to protect their customers and make sure they are getting the best service. If you stick to Amazons rules it can be very profitable. If you want to make money online I still believe selling on Amazon is the most accessible and realistic way of making a full-time income.
What is Amazon FBA?
FBA means Fulfilled by Amazon. You buy your stock and match it to a product listing on Amazon. You then send your products to the Amazon warehouse and Amazon will take care of the rest. They will ship the order to your customer and deal with any customer service. You can also sell using Fulfilled by Merchant (FBM). This is where you list your item for sale on Amazon and when you get an order you ship the order yourself and deal with the customer service.
Amazon FBA vs FBM
We always recommend FBA as it is usually cheaper than Merchant Fulfilled and you make more profit. To make things even better you do not have to deal with packing, shipping or customer service. Once you have sent in the stock your Amazon FBA business can almost run itself. This means you have the flexibility to go on holidays or you could still work a separate full-time job. Using Amazon FBA frees up your time so you can focus on sourcing more stock and scaling things up.
Another big advantage of FBA is that for customers buying from you is the same as buying from Amazon directly. They get the advantages of Prime shipping and free returns. This is why FBA products are more likely to sell. Customers who have Amazon Prime membership will tend to buy from FBA rather than Merchant Fulfilled sellers.
Amazon does charge sellers to store products in their warehouse but this is very cheap. If you sell on other platforms like eBay or your own website you can even ship orders from your Amazon FBA inventory to these customers.
Finding products to sell on Amazon
So you want to get started selling on Amazon FBA? Well, the first thing you need is some products to sell and there are a few options here.
Online arbitrage and retail arbitrage (OA and RA)
Online arbitrage is where you will buy products from a different online store and then sell them on Amazon. Retail Arbitrage is where you visit stores and buy stock off the shelf to sell on Amazon. Some people prefer being at home and using their computer to buy and some people prefer actually seeing the products in the store.
Arbitrage works because you can find the same products at a lower price than Amazon from a different supplier. Customers may not look at the other store or may just prefer buying from Amazon so you can make a profit.
“arbitrage is the practice of taking advantage of a price difference between two or more markets”
Amazon Private Label selling
You may have also heard of Private Label. This is where you get your own product made and then sell it on Amazon. Most sellers import their product from China although more sellers are now looking at local manufacturers. Amazon Private Label requires a higher initial investment than arbitrage and is riskier but the rewards are potentially greater.
You can also buy your stock from wholesalers and liquidators and this can be a profitable strategy.
For more sourcing ideas please sign up for our guide ’22 Amazon Product Sourcing & Selling Strategies’
So where do you start? If you are totally new to Amazon it is probably best to try out some online and retail arbitrage first to get a feel for how Amazon FBA works. You can then look at developing your own Private Label brand or start buying from wholesalers and distributors.
Setting up your Amazon account
You can have an Individual Selling Account or a Professional Selling Account. There are benefits to having a pro account, such as lower selling fees, but a pro account will cost £30 ($40) per month.
We recommend you test the system with an Individual Selling Account first and then upgrade if it is working for you. Amazon themselves recommend you should sign up for a Professional Selling Account when you are selling more than 35 items per month or if you are a registered business. You can still use Amazon FBA with an individual selling account.
Amazon selling Fees
There are a number of fees you should be aware of so you can make sure you are making the profits you expected.
Amazon Referral Fee – this is a percentage of the selling price. It ranges from about 7% to about 15% on most products depending on category.
Here are the current Amazon referral fees for the UK as an example;
Amazon referral fees for the UK
FBA Fulfilment Fees – this is the fee Amazon charges for picking, packing and shipping your FBA products to the customers. This is normally about £1-4 per order depending on the size of the item.
Storage Fees – Amazon charges a fee each month an item is stored in their warehouse. This is about 0.45 per month per cubic foot. As an example, a toy would cost about 0.05 per month and a large item like a printer would cost about 0.20. As you can see storage fees are very low and it is often a lot cheaper than renting a storage unit or warehouse space. If you had a product that did not sell for 6 months it would only cost about 0.30 if it was a standard size item. Don’t be put off by storage fees.
Additional Fees – you will pay extra if you get Amazon to label your products or add special packaging.
Additional Service Rate/Unit
Label Service £0.15
Opaque Bagging £0.50
How can a new seller compete on Amazon?
Price is the main decider but there are other factors;
1. Source your products carefully at low prices which mean you are able to undercut the competition.
2. Using FBA is a big advantage as you can be more expensive than other non-FBA sellers and you will still get the sale.
3. Amazon does not sell every product on the site and in fact, they are happier to leave a huge chunk of products to the 3rd party sellers. This means you will not be competing with Amazon directly.
4. Amazon is happy to share and if you have a good price then they might let you have the sale.
5. Target low competition products with less than 5 sellers.
6. Offer a great service. This way Amazon are more likely to give you the Buy Box. It may take a couple of months to build things up so start now.
The more you look into Amazon selling you will see people referring to the ‘Buy Box’. If you have the Buy Box then you are the main seller on the product page. So when someone clicks ‘Add to cart’ it is your stock they are buying. The seller with the Buy Box will get about 90% of the orders for that product so you really need to focus on winning it. It will make a huge difference.
Amazon Buy Box and Featured Sellers Example
Amazon uses complex algorithms to determine who is the Buy Box seller. It is not just price. It also depends on how good your selling stats are, your stock levels, how long you have been selling, your selling history on the product and whether you are an FBA seller. FBA sellers will normally win the Buy Box even if their price is 10% higher than Merchant Fulfilled sellers.
If you have been selling a product for a while you can be more expensive other FBA sellers and still keep the Buy Box. As an example, we currently have a product that is £140 which we have sold for about 6 months. Amazon is selling for £120 and there is another seller at £130 and we have the Buy Box. It is purely our selling history and stats that mean Amazon allows us to keep the Buy Box and make healthy profits. Amazon can be nice to sellers sometimes.
Featured Sellers are sellers who meet the criteria to have the Buy Box but are not the winner. Amazon will sometimes rotate all Featured Sellers so they will share the Buy Box. This means they take turns and for part of the day they might be the main seller and get the orders.
If you do not meet the requirements you are simply one of the rest. To see your offer the customers have to click through to a separate page. This is why you are a lot less likely to get an order. If there are no sellers that meet the requirements of the Buy Box because their pricing is too high or seller stats are poor then Amazon will place all sellers on this separate page.
How to get your first products live on Amazon
I always think it is important to take the first steps and then the rest will follow more easily. This means getting something live and for sale on Amazon FBA. You can list something you already own or just buy a low-cost toy from a local store. It is a great bonus if you can make a profit but even if you lose a small amount you will learn a lot. You will have got yourself over that first psychological barrier and taken action. Suddenly it is no longer theory it is a reality and you are now selling on Amazon!
There are different rules for different categories. In some categories, you can only sell new products. Amazon really wants you to be selling genuine products and you should have invoices for everything you buy. Some categories are restricted for new sellers so you will need to check if you can sell before buying products. You can apply for permission to sell in these categories but will have to supply invoices and buy from authorised suppliers.
Restricted categories for Amazon USA
There are also some brands that are restricted or you will need permission from the brand owner.
Remember if your products do not sell or you change your mind you can ask Amazon to return them for a small fee.
Getting your products to the Amazon warehouse
Adding products to your inventory
If you are doing Amazon FBA then you need to ship your products to Amazon once you have purchased stock. Firstly you need to add your products to your inventory. You do this from the Inventory tab – then select ‘Add a product’. You enter the barcode, ASIN or title of the product and it will find a match. If there really is no match, which is unlikely, then you will need to create the product listing yourself. I would definitely avoid this to start with.
You then enter your price, condition and your own code for the product. You can then select to have it fulfilled by Amazon. Remember to be honest about the condition. If anything you should err on the side of underselling it. This way the customer is likely to be pleasantly surprised and leave good feedback rather than disappointed and leave negative feedback.
TOP TIP- do not use ‘stickerless commingled inventory’. Amazon will mix your stock with other sellers and if other sellers have faulty items or poor quality products then your customers might receive these and you may get bad reviews as a result.
Shipping to Amazon using UPS
Once you have added the product to your inventory a shipment should be created and you can then enter the quantity of each product you are sending. Some products may require special preparation and you can choose for Amazon to do this for a small fee or do it yourself. If you are just starting out it is probably easier to let Amazon do it.
Then you print your labels and attach them over the barcode on each product. You can get Amazon to add the labels which again costs a small amount but is recommended for your first shipment.
Amazon will then ask you for the total weight and dimensions of the boxes and charge you for this. Ideally, you want to send a decent size full box to keep shipping costs down. Amazon will charge a minimum of about $5 shipping so you might as well send as many products as you can for this price. There is no minimum quantity though and if you wanted you could ship one single item. The shipping would still be $5 so would probably wipe out any profits.
A box about 50cm x 50cm x 40cm weighing under 15Kg should be around $5. You then make sure your products are well protected and packed in the box and seal it up and stick the UPS shipping labels on the outside. You can arrange for UPS to collect the parcel or drop it off at the UPS access point. Amazon will pay UPS for the shipping and then deduct this amount from your selling account.
An example of an FBA shipment ready to go with UPS
Here are some of the basic supplies we use in our Amazon FBA business
Make sure all the items you are sending are in the condition the customer will be expecting. If any are damaged in any way and you are listing them as new do not be tempted to send them in. Either return them to the store where you purchased them, send under ‘used’ condition or sell them on eBay. It is not worth risking negative feedback from customers.
TOP TIP – remember to remove all pricing stickers or any references to the stores where you bought them. To remove stickers use a hair dryer or heat gun to heat them up then carefully peel them off.
When boxing up the products it is all about protecting the product not what the parcel looks like. You can use any box you like as long as you cover barcodes up if there are any on the outside of the box. Then use bubble wrap, off cuts of card, or paper to pack out around the edges of your items so if the box does get damaged the items are protected away from the sides.
TOP TIP – before sealing the box take a quick photo of the contents that show they are in good condition and the quantities. This can then be used if there is any dispute with Amazon over damaged stock or missing inventory.
Your products should take between 2-5 days to get to Amazon and then a few days to be processed before going live. It can take up to two weeks so do not panic if it is slow. Remember as soon as the stock is booked in the products will go live on Amazon so make sure your pricing is right.
Once your products start selling Amazon will take their cut in selling fees and transfer your funds to your registered bank account roughly every two weeks.
So what now?
You need to get started as soon as you can if you want to make selling on Amazon a reality rather than another dream. Thousands of people make a full-time income from Amazon FBA. They have only achieved this because they took action and invested the time and energy required to build their business.
Lots of sellers will sign up for an Amazon course to help jump-start their Amazon FBA business. The only course we can currently recommend is Jim Cockrum’s Proven Amazon Course.
The course covers all aspects of selling on Amazon and thousands of people have used it to help them find success. So far we have only had positive feedback from our members who have taken the course. You can sign up with zero risk and a money back guarantee in case you find it is not a good fit for you. Please check out the details here.
Good luck and please ask any questions you have in our Facebook groups to help you get started. Along with other sellers, we can help you make a success of selling on Amazon and stay focused and motivated.