How to Start an Amazon FBA Business (2021)

Amazon FBA Statistics

1. 300 Million Active Customers.

Amazon has over 300 million active customers in over 180 countries across the world.

In the US alone, there are 195 million monthly unique visitors and 90 million Prime subscribers.

And if you utilize Amazon FBA, your brand will become accessible to even Prime buyers.

And Prime customers usually spend more money with Amazon than regular customers.

2. Prime Customers Spend More Than 2x the Average Customer

In a year, the average customer spends $700 on Amazon, while Prime customers spend approximately $1,300 per annum. (Source)

It means that if you use Amazon FBA and make yourself more visible to Prime buyers, you can gain more profit.

3. FBA Leads to a 30-50% Increase in Sales

Since Amazon FBA accounts get access to Prime members, it leads to a 30-50% spike in sales of an average brand. (Source)

It’s the simple art of correlation. Higher demand from loyal Prime buyers means more sales.

Amazon FBA Fees

There is a specific fee you need to pay if you are selling on Amazon. I mean, how are they going to pull a profit?

Don’t worry though, it’s not all that bad as long as you know what you’re doing.

1. Fees for All Amazon Sellers

• Amazon charges a commission for each item sold, depending on the category your item is listed. The cost is taken out post-sale. You can refer to Amazon’s list of referral fees for more details.
• Amazon also charges for refund fees. You will be paying either 20% of the charge refunded or $5.00, whichever is less.

2. Amazon FBA Seller Fees

• Depending on the size and weight of the item that is sold, packed, and shipped, Amazon will charge you your FBA shipping fees. Refer to Amazon’s current FBA fees, which are subject to change.
• The storage fees are paid monthly. The company also charges long-term fees. Monthly storage fees will also depend on the amount of storage you’re occupying, in cubic feet.

In the case of oversize items, the storage fee will be higher.

You will have to pay long-term storage fees if your item is in the warehouse for 180 days or more.

In case it stays longer than a year, you will be paying higher charges.

Remember how you were taught not to procrastinate? Yeah, it’s catching up now.

Refer to the list of long term storage fees for more details.

3. Miscellaneous FBA Fees

• If you have over 100,000 ASINs, you will be charged a monthly flat fee of $.005 per ASIN.
• Closing fees are charged for certain media products like CDs, DVDs, and books.

Pros and Cons of Starting an Amazon FBA Business

There are both pros and cons of joining the Amazon FBA program, but the pros outweigh the cons by a landslide:

Pros:

• Buyers trust Amazon: Since Amazon is an established name, your potential buyers already trust the company.
• Painless logistics and shipping: Amazon manages fulfillment for you. You don’t have to spend time packing and shipping. Thus, you save both time and cost.
• Returns management: Amazon will handle everything from customer inquiries to return shipping labels and reverse logistics.
• Lower shipping rates: Since the company has contracts with the major shipping carriers, they offer discounts on shipping costs. It is not only the sellers, but buyers also benefit as many orders can be shipped for free. Plus, Prime members are eligible for free two-day shipping on all FBA items.
• Excellent customer service: Amazon offers stellar customer service. Your customers will be receiving 24/7 support via email, chat, and phone.
• Potentially limitless storage space: You neither have to pay for a warehouse or face apprehensions about the size of the warehouse you require. Plus, if you make fast sales, you will get limitless storage space.
• Amazon will fulfill your orders from other channels: By using Amazon’s Multi-Channel Fulfillment (MCF) service, you get the opportunity to sell products on other channels, including BigCommerce. And Amazon will fulfill the orders.
• Fast delivery: The Company has several fulfillment centers worldwide. Thus, your products can be delivered anywhere within a couple of days.

Cons

The cons of Amazon FBA include:

• FBA fees: You will be paying for storage and fulfillment fees (including long term storage fees). You will also be required to pay for removal fees in case of defective items.
• Product prep isn’t easy: It is a challenge for newbies to follow the strict guidelines on how to prepare and ship your items to Amazon.
• Tracking inventory can get complicated: It is difficult to always check what products are available, what products need to be ordered, and what’s not selling. It is especially tricky if you are selling on several channels.
• Managing the sales tax is not easy: Each state in the US has different sales tax collection rules. And since Amazon has fulfillment centers in all the states, and they keep regularly shuffling inventory between warehouses, things can get complicated.
• Commingling merchandise might yield negative results: The default inventory setting commingles the same products from the same company. However, counterfeit versions of your product could be commingled with your products, and it can ruin your reputation.

How to Choose What Products to Sell on Amazon FBA

You probably already have something in mind you want to sell, but actually finalizing which product to sell on Amazon FBA can be challenging.

Don’t worry, you’re not the only one!

It’s only natural that you can’t decide what to choose from millions of products already sold on Amazon.

You also have to consider a product that gives maximum return on investment.

First and foremost, remember that customers on Amazon are usually seeking the “best deals,” which means they’d want to select the cheapest option possible.

At least in most cases!

1. Small & Lightweight Products.

Since you want to offer the best deals possible, it’s a great idea to choose the type of products that would require minimum handling and shipping costs.

This way, you’d be able to tone down the shipping costs and save yourself a bigger margin – meanwhile giving your customers a better deal too.

Remember that most customers expect free shipping even if they don’t have Prime membership.

So, the more you can save on shipping and handling of products, the better!

2. Private Label your Products.

Private label products are products created by one company and sold under the brand name of another company.

Usually, products are private labelled at the manufacturing stage and then later sold by another brand.

Or you can buy unbranded products and decide to private label them later on.

Naturally, branded products are going to wow your customers more as compared to unbranded products.

3. Sell Niche Products in Popular Categories.

Selling in popular categories is going to be competitive, but it will bear fruit as long as you follow the correct criteria and strategies.

Here’s a list of 2018’s top selling product categories at Amazon:

And if you think of it, these product categories can be vast.

For instance, a category like “Toys & Games” can appear to be very common and competitive.

However, if you choose to sell toys for 3-5 year old girls, the same category doesn’t appear all that competitive anymore.

Amazon isn’t the place where buyers browse around for hours, waiting for something to catch their eyes.

So, the idea is to narrow down to specific products since customers who come to Amazon usually come with the intention to buy an ‘intended’ product.

So, if you sell niche products from a popular category, then you’re good to go.

4. Conduct Proper Research Before Choosing a Product.

Conducting product research will help you pick the best products to sell on Amazon FBA.

It will also give you a perfect idea of what products to sell and identify the trends in your niche.

You can also use different marketing tools to gather data and find low difficulty niches.

Other than this, make sure to read product reviews, including those of your competitors.

You can use all this information to make more informed business decisions.

Types of FBA Business Models

Aside from the type of products you want to sell, make sure to consider your business model as well.

Yes there are different business models when it comes to Amazon FBA sellers.

Just like how B2B and B2C are different, FBA business models differ in quite a few ways too. So feel free to take your pick(s).

It will also help you choose your product since it’s a good idea to select a product whose ideal business model you can support.

Here are three primary business models for fulfillment by Amazon:

1. Resellers

As a reseller, you’ll be purchasing products in bulk from a wholesaler or even a retailer and sell them directly via Amazon FBA.

Obviously, you’ll take a fixed margin for each sale. In this case, you won’t have to maintain an inventory either.

Instead, you can get the wholesaler or retailer to get the shipped directly to Amazon’s warehouse.

2. Wholesale

You can buy branded items from manufacturers or suppliers and resell them on Amazon.

For that, you will need to reach out to companies and build a relationship.

Trade shows are great for sourcing and also provide a great platform to negotiate the rates and shipping costs.

And most importantly, try to keep your margins in a profitable and sustainable place. 

3. Brands

Many established brands are doing well with Amazon.

You can quickly get your brand registered and gain access to branded storefronts, Amazon’s sponsored ads, buy box, and more.

Once you register your brand with Amazon’s Brand Registry, you will also have more control over your product listings.

What’s more, you can also gain access to special features like A+ content and product videos. 

The only drawback to this model is that brands tend to boot most FBA sellers out of the competition.

But that doesn’t apply to my readers since we have the top Amazon FBA seling strategies coming up next, so you’ll be fine.

10 Strategies for Amazon FBA in 2021

1. Competitor Analysis.

By researching Amazon’s best sellers and researching your competitors, you will come to know which products get sold fast and are profitable.

Not too hard to find out if your competitors are big names.

You have a better chance of succeeding if you avoid going head-to-head with the highest sellers when you are new.

However, it is good to have an idea of what kinds of products mostly get sold so you can build, scale, then conquer those competitors.

2. Create Bundled Listings.

When everyone is selling the same products, the chances of selling your products and getting them noticed become lower.

This is where bundle listings come into the picture.

Bundle listings consist of products that are complementary and make it convenient for the buyers to buy them all at once.

For example,

“Kodak EasyShare C143 12MP Digital Camera Bundle with Rechargeable Batteries & Carrying Case – Blue”

Here’s another example of product bundling on Amazon:

Bundle listings also help you sell more of your products and give you a chance of upselling and cross-selling.

Another benefit of bundled listing is that it helps you create a unique listing that will still show up when people hunt for the main product.

In simple words, if people still search for one of the sub-products, the main product will also show up in the results.

Naturally, this is good for SEO (Search Engine Optimization) purposes as well.

If you also want to create bundle listings for your products, you might want to follow this guide by Amazon: Product Bundling Policy.

3. Be Picky About What You Sell.

Always conduct research on which products sell better.

High ranking products may sell quicker, but you will also face more competition.

This doesn’t mean that low ranking products are always a safe bet.

Low ranking products will not sell fast and you will have to pay long term storage fees at that.

That said, since the competition is low, you can easily become the dominant seller for products in your category.

Once you know the sales rank, you’ll know who your competition is.

So, avoid making any quick decision and be very picky about what you sell. Again, the best idea is to sell niche products.

Additionally, starting small can also prove to be useful.

Having only a few products will make it easier to create an organized, streamlined process.

Once established, you can scale up and add more products.

4. Branding.

Creating a unique brand allows you to stand out from the competition.

You will also be able to understand your potential buyers better and thus create styled product images, titles, and descriptions consistently.

The best way to go about it is by private labeling your products.

5. Amazon SEO (Search Engine Optimization).

To get discovered more easily, you will need to rank higher on search engines.

Thus, make sure to research which keywords will help you rank higher and what terms your audiences are precisely searching for.

You can use those keywords throughout your product listings to gain maximum traction.

6. Detailed & Optimized Product Descriptions.

It goes without saying that your product descriptions should offer complete instructions and answer all the questions regarding your products.

Moreover, your customers should be able to understand precisely what they’re getting and from whom they are getting when they buy your product.

And don’t just listen to what I’m saying.

Even statistics suggest that most consumers discontinue a purchase if they find a product description lacking in any way.

So make sure to include every important detail in your product description, including:

• A title
• Details about the features
• Price
• Size specifications
• Special instructions
• Expiry date if any
• Brand information (try to tell your brand story in a compelling way)

And product descriptions aren’t nearly enough; you should also add more product photos and videos to grab more eyeballs.

Here are some other things that are an essential part of your Amazon FBA product description:

1. Optimize Your Images.

First impressions do matter!

Just like landing pages for products and sales pages, what a visitor sees is extremely likely to influence their decision to buy or to not buy.

Upload lots of product images and make sure that you are uploading only high-quality images.

And since your photos are going to be the only thing that your customers see, make them as detailed as possible.

Show them from all angles. Creating 360-degree images and videos can also help engage customers.

2. Optimize Product Titles.

Amazon allows up to 250 characters for titles, but it also suppresses product listings with titles that are too lengthy.

Though you want your headings to be descriptive, keep it to the point and insert your main keyword into the title.

Consider starting with a brand name, product name, and key features.

3. Use Bullet Points.

Customers will be looking for bullet points once they click through your product since they are easy to read.

However, make sure that they contain all the details needed by your customers to make a purchase.

You can answer common questions, talk about your product’s benefits, and add vital product details.

7. Get Product Reviews.

Having positive reviews can increase the chances of getting your products purchased. But the problem starts at just getting those reviews in the first place.

This is where the real strategies come in. Utilize the follow up feature that Amazon has. More often than not, they’ll leave a star rating but that’s not enough.

You want a testimonial. In that case, use a tool like Jungle Scout to automate the entire process so you can track your progress.

8. Answer FAQs.

When you join Amazon, you will discover a unique question and answer feature.

Anyone can ask a query about a product, regardless of whether they have bought it or not.

And anyone can answer the question, whether they have already bought the product or not.

You don’t have to wait for customers to ask questions.

Try to increase engagement by asking your friends and acquaintances to post a common query about your product.

You can then go ahead and give the answer.

This will definitely make your customers perceive you as an involved and helpful seller.

9. Harness Amazon Marketing Services (AMS).

Once you open any product page and scroll down a bit, you’ll immediately come across many sponsored products and brands.

Something like this:

In fact, you’ll notice that these sponsored products way before organically listed products.

Naturally, such sponsored products are bound to grab more attention and have an obvious edge over other products.

Those ads are created via Amazon Marketing Services (AMS).

AMS offers three types of advertising solutions:

• Sponsored Products
• Sponsored Brands
• Amazon Stores

Amazon advertising solutions help you create ads for your products pretty easily.

You can then target these ads based on keywords or comparable products.

Moreover, you can also conduct performance analytics to optimize your ads.

10. Implement a return policy.

When potential buyers see that they have the option to return the product if it doesn’t turn out to be what they were expecting, then they’re more likely to buy your product.

However, your return policy shouldn’t end up burning a hole in your pockets either.

Make sure you add an appropriate return policy that not only benefits your customers, but is of benefit to you as well.

Exclusive Benefits for Amazon FBA Sellers

Aside from the most apparent benefits like shipping and handling by Amazon, you get plenty of exclusive benefits.

Perk 1. Amazon’s Special Buy Box.

Every Amazon seller covets that special Buy Box on the Amazon product detail page.

However, you must have a Professional Amazon seller account and have to be a seller for at least 2-6 months.

That being said, there have been instances when sellers got the Buy Box instantly after using the Fulfilment by Amazon (FBA) service.

It allows customers to add items for buying to their cart.

But this special buy box is not for all – usually, only the businesses with outstanding seller metrics are able to get it.

Perk 2. Amazon Prime Badge.

Since Amazon itself fulfills your delivery while using the FBA selling account, you get Amazon’s promise of fast and feasible delivery.

How? Amazon provides an Amazon Prime Badge to all your Prime-eligible FBA products.

It also provides multiple benefits, including unlimited one-day shipping and exclusive access to lightning deals.

Perk 3. FBA customer support.

When you are an Amazon FBA seller, you get plenty of help and support options, personalized to meet your selling needs.

Starting from registration guide to seller central support and Seller University that provides you self-learning material, FBA has got everything covered for you.

You can even hire a professional support team to sell for you.

Perk 4. FBA Returns.

Customers are allowed to request a refund of an order fulfilled by the FBA.

When that happens, the sellers will be notified by Amazon via email and funds.

Amazon will then inspect the products that are sent back to a fulfillment center to see if the product is sellable or unsellable.

If the returned product is deemed unsellable because of defects, Amazon will decide who is accountable for the damage before reimbursing the customer or the merchant.

3. The Wholesale Formula

The Wholesale Formula was created by Dan and Dylan to help you build a massively successful Amazon business.

They focus on methods used by big brands and help you effortlessly duplicate what’s already working well on Amazon.

Plus, the Wholesale formula will show you the easiest methods to build long term sustainable businesses.

Dan and Dylan accept new students once yearly to teach them how to build their own multi-million dollar Amazon business.

Hopefully, this guide will help you to sail smoothly and scale your business if you decide to join this amazing Fulfillment by Amazon program.

Since Amazon is an established company, people trust them.

It will be easier to sell your products on this platform than trying to set up your own store from scratch and start selling.

Plus, Amazon is known for providing stellar customer service. So if any issue arises, you can always resolve it.

And you don’t want to miss out on the millions of potential buyers out there on the platform, do you?