If you have come across this article, you no doubt have heard all the fuss surrounding Amazon FBA and the supposedly amazing opportunity it offers. It might also seem like every Tom, Dick, and Harry is starting his own Amazon FBA business. This might prompt you to ask: “What is an Amazon FBA business? And what does it take to start one of your own?”
In this article, we will answer both those questions. We’ll assume that you already have some knowledge of how Amazon FBA itself works. If not, you might want to read our FAQ and beginners guide to Amazon FBA.
What does an Amazon FBA business look like?
Let’s start with a quick background. Amazon is the marketplace in the world. However, their own sales make just a small portion of the total sales made on the site each year. The rest are made by 3rd party sellers, like you and me or big brands like Nike or even Tesco. Today, it’s the biggest online marketplace in the world, at least in the Western hemisphere.
In answer to their own business needs, and to make it possible for as many 3rd part sellers to participate, they have made their extensive warehousing and shipping infrastructure available to sellers. This is called FBA (or, Fulfillment By Amazon). This means that you can sell products on Amazon but let them take care of the shipping.
As you can already see, this has vast implications for any online selling business. No longer do you have to build or maintain your own infrastructure to get merchandise to clients.
What is an Amazon FBA business? What is required to start one?
Even the smallest and leanest Amazon FBA will still need some amount of startup capital. Exactly how much you need is almost impossible to tell without knowing what you are going to sell, what’s an acceptable risk/reward ratio for you, and what your business model will be.
Rather than attempt such a feat and get ourselves into trouble, we will list some of the things you might need to spend some money on. We will elaborate more on some of these items later on in the article.
- Merchandise: You can’t sell if you don’t have items in stock. As you can imagine, the amount of money you need to spend depends entirely on what your product is and how many units you intend to start out with.
- Tools: We will talk more about tools later, but the best tools cost money or have superior premium versions that you may want to buy.
- Amazon seller account: Hey, if you’re good at something never do it for free. As far as fulfillment goes, Amazon is the best.
- Equipment: If you are manufacturing your own goods, you might need some equipment or supplies. You don’t need much else except a way to deliver your products to the Amazon warehouse as well as some simple packing stationary.
- Branding: Depending on whether you are labeling your own products or creating a brand associated with selling them, you might need to higher a freelance designer to create some branding elements for you.
- Marketing and ads: Few sellers will invest in this from the get-go. However, you can spend some money on purchasing ads or links to your products on sites like Facebook if you have the money available.
A Few Handy Tools
Most successful sellers on Amazon have one major thing in common: they make use of research tools to give them the edge on their competitors. Being able to do a little bit of “corporate espionage” is invaluable in a competitive and dynamic online market. You need to be able to know what your competitors are doing, if it’s working or not, and why it’s working. Additionally, you need this information in a timely fashion.
You also need the latest data on trends that are shaping the online marketplace or driving search engines. This will help you increase visitors to your products that are likely to convert into buyers.
Don’t forget about tools to help you run your business. If your business expands, you might find that your manual accounting stocktaking methods quickly become obsolete. These kinds of tools can also help you manage your taxes.
Here are a few essential tools you should consider when starting to sell on Amazon:
- Amazon product/Keyword research:
- Taxes: TaxJar
Knowledge of the Amazon Basics
A Business Model/Plan
Yes, Amazon and Amazon FBA does make starting an online business much easier. It (partly) takes care of providing a platform on which to sell your goods, connecting with sellers, fulfillment, customer service, etc. That means that your business will be a lot leaner and that there will be much less on your plate.
However, that doesn’t mean you don’t need a plan. The first thing you need to do is decide what kind of business model you want to pursue. These are common business models associated with Amazon sellers:
- Private labeling: Source inexpensive generic products, brand them, and sell them at a high margin.
- White labeling: Find an established existing product, brand it as your own and sell it.
- Retail arbitrage: Find products on sale locally and sell online for a profit.
- Drop-shipping: You only act as a middleman selling it for a manufacturer or wholesaler without ever actually touching the product.
- Original product: Obviously, your business structure will be a lot more complex if you manufacture your own original product.
Your business plan will be based largely on your model as well as your target audience, brand, marketing strategy, etc., etc. For more information on this, take a look at our article What Makes A Good Amazon FBA Business Model & How To Craft Yours.
It goes without saying, that your product is an integral part of your whole Amazon selling operation. If you have a specific product in mind that you would like to sell, this will largely shape your other considerations. It might limit your selection of business models or affect your initial investment.
The type of product will also determine your risk, how competitive the niche is, and how hard it is to source.
If you want more advice on choosing a product to sell on Amazon, refer to our Best Products To Sell On Amazon FBA And Why They’re Successful guide.
The Entrepreneurial Spirit
Anyone can sell on Amazon armed with determination, a willingness to learn, and a bit of luck. However, it doesn’t hurt to make a conscious effort to develop good entrepreneurial skills. In short, being a good Amazon entrepreneur boils down to:
- A willingness to learn
- Being disciplined in your approach
- The ability to be flexible when needed
- A belief in yourself and your goals
- Being honest with yourself
We have written an article that focuses on the best and worst characteristics of an Amazon entrepreneur here.
A Bit of Luck and Willingness to Learn From Your Mistakes
Ask almost any honest successful Amazon Seller what their keys to success were and most of them will include luck on the list. Luck can help you come across a golden window of opportunity, fell your biggest competitors at the ideal time, create the perfect conditions for you to succeed or just make you come across Amazon FBA in the first place.
This doesn’t mean you should start looking for four-leaf clovers or buy a bunch of lottery tickets when your business is going well. The nature of the internet is dynamic and ever-changing. It’s extremely fickle when it comes to dealing out luck or disaster, especially small businesses.
If your first venture doesn’t quite make it, it might not be because you did anything wrong. In fact, most sellers tried multiple models, products, etc. before finally striking it big. The ability to pick yourself up, see where things went wrong, make adjustments, and jump back in again is the best characteristic you can have.
What are you waiting for? Start your own Amazon FBA business now!
Now you know how to answer, “What is an Amazon FBA business?” However, if you feel like you might still need some help and guidance starting your own Amazon FBA business, you might want to take a look at our no obligation, free Amazon FBA events. They are conveniently located all across the U.S.A. Here, you can get expert insider advice on how to get started with Amazon FBA as well as the opportunity to further a working relationship.