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What is Amazon FBA and How Does It Work?
FBA stands for Fulfilled by Amazon.
In a nutshell, Amazon allows 3rd-party sellers like yourself to sell your products on Amazon Marketplace. Instead of you doing the hard work, Amazon will pack and ship the products to the customer.
I will explain…
Here is what you do:
- First, you find the products which you would like to sell.
- Then you ship your products to one of the Amazon fulfillment centers.
- In the meantime, you promote your product by creating images, a listing, and a description…
- Once you start selling, you make sure that Amazon always has your products in stock.
What Amazon does?
- Amazon inventories and sorts your products as soon as they arrive from your supplier.
- When someone buys your product, Amazon packs and ships the order to them.
- Every 2 weeks, Amazon sends you money via bank transfer for the products you sold.
- If a customer raises an issue, Amazon handles it for you.
Nice! But there’s more…
What are the Benefits of Amazon FBA?
Let’s highlight some of them:
- There is no need for you to pick, pack and ship products to every customer.
- Amazon, which is a $100,000,000,000 company, provides you with discounted shipping rates.
- They provide customer service management 24/7.
- You can expand and scale as much as you want without the pain of moving to larger warehouses.
- Amazon can deliver your products in most of the countries around the world within a few days.
- Your listings become part of the Amazon Prime family, which now has 1-day standard delivery service in the USA.
Great, so what are the downsides?
Does Amazon FBA Have any Drawbacks?
Yes, there are some, but, in my humble opinion, they don’t outweigh the benefits of Amazon FBA. Let me know in the comments section below the guide if you think otherwise. Here is the list:
- FBA isn’t free. Amazon charges you a referral fee for every sale. It varies from 3% to 18% depending on the product category.
- Amazon charges a monthly account fee of $39.99 if you sell more than 40 units per calendar month; otherwise, it’s free.
- Fulfillment fees are charged per unit when Amazon picks, packs, ships and handles your customer order. Essentially, the fulfillment fee depends on the size and weight of your products. The detailed price guide is available here.
- The last fee Amazon charges is a small fee for every item you store in their warehouses. The idea is to keep just enough stock in Amazon fulfillment centers to fulfill your customer orders.
Apart from the fees mentioned above, there are some other costs, or I should say the initial investments, that you need to consider when starting an Amazon FBA business, and we will cover these costs in the next sections.
How to Sell on Amazon FBA:
Research shows that 70% of customers do not go to page 2 of their search results on Amazon.
Given that percentage, your goal is to reach the first page of the Amazon search results for a particular product keyword.
The best way to ensure that happens is to create a Private Label product, where you sell manufacturer’s products under your own private brand (label) on Amazon.
Otherwise, you must sell thousands of different products or compete with market leaders in highly crowded niches.
That said, what are the best products to sell on Amazon FBA?
Amazon FBA Product Research
How to Find a Winning Product?
I have never seen anyone share this strategy before, so read carefully
The idea here is to find a niche product that is not yet saturated.
Head to the Amazon Best Sellers List
On the left-hand side, you will see all the product categories that Amazon has.
Given the nature of the products, these categories below suits the best for Amazon FBA businesses, so choose the ones you are most passionate about.
- Arts, Crafts & Sewing
- Beauty & Personal Care
- Cell Phones & Accessories
- Computers & Accessories
- Health & Household
- Home & Kitchen
- Kitchen & Dining
- Office Products
- Patio, Lawn & Garden
- Pet Supplies
- Sports & Outdoors
You have to go to the latest sub-category in the department. Usually, there are 3-4 layers of sub-categories, so dig deep until you reach the end.
I do love cars, therefore as an example, I have chosen the Automotive category. The last sub-category for my interest which I will use an example is in “Cleaning kits”.
As you can see, there are yellow numbers in each product image’s upper left-hand corner. These numbers indicate the product’s position on the Amazon Best Sellers list.
Overall, the list consists of the Top 100 products, but, for now, we will look at only the first Top 30 products.
Find the product(s) which has no more than 20 product reviews.
Any one of these products could be one of your winning products when you start an Amazon FBA business.
Now, take the most relevant keywords which describe the product form it’s title and enter them in the Amazon home page search bar.
For my example, I will use “Car Headlights DIY Polishing Kit.”
In the results, you will see the competition you would have for this specific product.
Okay, so how do I know if this product could be a winner?
I’m going to use JungleScout extension to back up my findings.
They have a feature called “Opportunity Score,” which blends demand, competition, and quality data to determine a product’s potential.
I am looking for a score of no less than 6, which will give me the indication that there is a medium demand for the product and not too much competition.
Now, follow this same process and find at least 5 products from the Amazon Best Sellers list. They can be from different categories. It’s your choice.
Now you have to think about how you can differentiate yourself from the competition and find a manufacturer for your product.
Some ways your product can be different:
- Price (preferably lower)
- Color (black, white…)
- Size (larger smaller)
- Quantity (1, 2, …)
- Product variations
- Free small gifts (add something related to the product which does not cost much, e.g., a wristband)
- Instruction manual (for example, the top 10 ways the product could be used)
- Added functionality (pen with a flashlight)
- Images (creative images which stand out from similar products)
- Design (improved product design with added functionality)
- Description (better titles, bullet points and detailed description than the competition has)
- Size of the kit (for example, if the competition has 10 kitchen spatulas in a kit, you could bundle 14 spatulas)
It’s important to analyze the competition and brainstorm how your product could stand out from the crowd.
Choose a few products and start researching manufacturers!
Amazon FBA Wholesale Suppliers
Despite its trade war with the USA, China is still the number one place for you to find a manufacturer for your product.
And the number one choice is still Alibaba.
Head to Alibaba and enter a few keywords describing your product in the search bar.
You will see different products matching the keywords you entered. I have used “cleaning mitt” as an example.
Next, the golden rule is to look for niche large manufacturers instead of products.
To be clear, large companies in China have a large product selection, and, if they do not have something, they can usually make it.
The best way to find these large companies is to sort by “Transaction Level” using the right top corner filter.
This way, you will be able to eliminate any new companies and will likely end up with the best product selection with competitive prices from top companies.
Now go down the generated list and see what products best match your target product.
Pay attention to the Minimum Order Quantity (MOQ) suppliers have. Usually, you should be able to purchase 500 items for your trial order.
Next, sign up for free with Alibaba and send emails to your target manufacturers. In general, five manufacturers should be enough to give you an idea of the price range.
Remember, you need to add value if you want a buyer to purchase your product instead of someone else’s, so refer to the previously mentioned value characteristics.
Your email could sound something like this (this one is for my cleaning mitt):
My name is [[[Your name]]]. I am planning to add [[[Your Product]]] to the product line I sell through Amazon FBA.
After a lot of research, I have come to the conclusion that your company, with its extensive experience in production, could be a great supplier of this product. Could you please let me know if you could supply a product like this:
[[[Enter the URL of your target product]]]
[[[List the things you want to add and check if they can do that]]]
and provide me with the answers to the questions below:
1. What is the price for 500 units?
2. Can you make custom packaging? How much does it cost?
3. Can you supply a polishing towel?
4. Can you pack 2 cleaning mitts together with a polishing towel?
5. Do you have any Amazon FBA experience?
6. What is the lead time?
7. What are the dimensions of the product?
8. What color choices are available?
I really hope that we will be able to start a mutually beneficial relationship.
The questions you include in your email depend on what value you want to add, so conduct in-depth research and create the email template which suits your needs.
Don’t be afraid to ask all the questions which pop into your head, as the companies will be happy to answer.
Note that you may need to send 10 emails back and forth to clarify all the details. It is important not to rush because the lack of detail can backfire on you later.
So, you have a product. What’s next?
*Tip – if you can speak Chinese or if you are willing to hire a translator, you can also check 1688.com. It is the largest wholesale website in China, but most suppliers do not speak English.
Shipping to Amazon FBA
In this step, it’s important to figure out how much it’s going to cost you to ship your products to one of the Amazon warehouses.
I recommend using local freight forwarding companies to help you with that.
Search in Google for keywords such as “freight forwarder in China” or “Amazon FBA freight forwarder”.
Provide them your with your product details, including weight and dimensions, and they should give you an approximate price for shipping by air or sea.
Compare the quotes and choose the company that suits your needs.
Now you have a product and can get it to an Amazon warehouse. What remains to be done?
*Tip – We would be happy to share a direct contact with a reliable shipping agency with you. Send an email to email@example.com with the subject line “FBA Shipping Agency.”
The most prominent error people make when starting out on Amazon FBA is in pricing.
I appreciate that there are a lot of factors to account for, but you must estimate your profitability to avoid the disappointment of losing money.
Amazon has a useful fee calculator which you can use to set the correct product price and predict your profit margin.
Simply find a product on Amazon similar to the one you want to sell and copy the ASIN number from the URL at the top of the page. Next, enter this number into the calculator. I will use a computer stick as an example.
And enter to a calculator
On the next screen, enter:
- Target Price – this is the price you want to sell your item for.
- Ship to Amazon – includes all the shipping costs from the manufacturer to the shipping agency and from the agency to the Amazon fulfillment center you are using.
- Cost of Product – include the product and packaging price.
Once you enter your competitor’s ASIN number and all related costs, Amazon calculates the Amazon fulfilments fees and provides your net profitability.
You can play around with the calculator, but I recommend at least a 30% profit margin to cover your advertising costs and eventually make some money.
If you find that that it would be difficult to turn a profit, go back to the research steps and find alternative products. But, if things look good, read on.
So, you got the pricing right. Now it’s time to order some samples.
Samples will not have your custom packaging or branding because you have to check if the product is of good quality.
Use the shipping agency you found earlier to ship the samples from the suppliers to your agency, and they will combine them together in one package to reduce the cost.
Some companies offer free samples or refund you the cost once you place an order.
However, you may need to pay for shipping, and it can cost up to $40 to send a package to the United States for products weighting 1-3 lbs.
Once you receive your samples, make sure that you inspect the product(s) thoroughly.
In addition, ask your friends and relatives to evaluate your product honestly as consumers.
Don’t be afraid to order a second sample with any changes you would like to see.
Trust me, being careful now pays off in the long run.
Amazon requires that every product has EAN or UPC codes.
You can get them from eBay for a few dollars.
Sellers will send you the barcodes by email almost immediately after you place an order.
For peace of mind, when they arrive, enter them on Google or Amazon to see if any products come up with the same barcode.
This way you will know if they have never been used before.
Okay, you have your barcode(s) and are happy with your product(s). What’s left to do?
Amazon FBA Packaging & Logo Design
For as little as $5, you can have your logo designed at Fiverr.
It is good practice to check the United States Trademark office to see if your chosen company/trading name is not registered.
Also, thinking ahead, your brand may be successful one day, so head to any domain registrar, such as GoDaddy, to see if a URL with the name is still available.
Packaging designs on Fiverr start from $5 as well.
That’s why they call it Fiverr!
Pay attention to the fact that you may pay more than $5 for more complicated designs.
Google packaging designs, find some you like and explain what you want clearly to the graphic designer.
Sometimes you may feel a lack of effort for $5, so be sure to ask for precisely what you want.
And don’t forget to ask them to put a barcode on the packaging in addition to the country of origin.
Now that your product is packaged nicely, what else can you do to ensure success?
*Point worth noting – The most cost-effective designs for packaging use standard shapes such as squares or rectangles.
Quality control is crucial for Amazon FBA sellers.
A few negative product reviews or too many returns and your product listing or even seller account may be closed permanently.
The above is especially relevant if you are just starting a new partnership with a supplier. You may not that be 100% sure about the quality of the products delivered to you in large quantities.
There are quite a few different types of checks you can conduct on products.
In the beginning, stick with a pre-shipment inspection by a quality inspection company. So what can pre-shipment inspections check for?
- Packaging- the packaging can be checked for defects.
- Product functionality – testing to see if products perform their core functions.
- Labeling – checks if Amazon labels are added correctly.
- Quantity – counts the items in the shipment.
- Specialty test – you can create your own test and ask that it be performed.
How Much Does it Cost?
The best idea is to hire a quality inspection company to go to the factory and check the product on-site.
One of the largest quality inspection companies in China is QIMA.
They can send an inspector to any factory in China within 48 hours for $309 per man-day, all-inclusive.
So, if you order 500 units, the cost per unit will increase around $0.61.
And, before ordering, don’t forget to come to an agreement with the manufacturer as to what quality you are looking for and what the consequences will be if the quality does not match your requirements.
Sure, you can skip the middleman and have everything to your house for your inspection, but calculate the shipping costs before you do so and see if you are better off.
Later on, you can do random shipping checks to keep manufacturers on their toes, without the need to check every single product.
So, you have this great product. How can you convince people to buy it?
Images are a key element used to draw the attention of the buyer in the Amazon search results page.
First, it’s important to follow the Amazon product image requirements.
Second, be creative and think about how can you make your images better than those of the competition.
Imagine for the moment that you want to sell blind spot mirrors. The competition for the keywords you want to compete for is found below.
The question is, how are you going to differentiate your main product image from these images?
It’s not an easy task; therefore, take some time to figure out how to do it.
You can start by analyzing what the other images are missing.
Maybe you could reflect a brand new red Ferrari in the blind spot mirror’s background.
Or you could add bonus items, such as a cleaning wipes kit, and show them clearly in the main image.
I hope this example helps you come up with ideas!
In addition, you can upload a total of 9 images for your product. Once a visitor enters your product detail page, those images will help convince them to make a purchase.
With this in mind, you can show:
- Various angles of the product
- The packaging design
- The instruction manual
- An image of the product in a relevant, real setting
- A detailed weight/capacity/dimensions diagram
- Examples of what can be done with the product
Finally, you need to get those product images made.
If you’ve got the skills, great!
If not, go to Fiverr again and maybe speak with the same designer who did your packaging. You may get a discount!
Alternatively, there are services you can send your product to and have Amazon FBA images made according to your needs.
For instance, you can try Pow Photography!
At the moment, they offer one free test photo, which you can examine before paying them to make all the photos for your product.
Now that you have the perfect product images, you need some text to go with them.
People search on Amazon because they’re ready to buy something.
And they’ll find your item if their keywords match your product title or are related to one of your product description fields.
So, the first thing you need to do is research what keywords people are searching with on Amazon.
To this type of research, I prefer a free tool made by Sellics called Sonar.
Go to Amazon.com and get the ASIN number for one of your competitor’s products, then enter it in the Sonar search bar.
Click the “Download” button, and you will get a list of all the keywords used for the product.
Do the same thing with a few more products, and you will have keywords database which you can use to describe your listings.
If you need a more all-rounded keyword research tool, try “Keywords Inspector”.
The website design is a bit outdated, but they have a database of almost a half a billion keywords to use to your advantage.
You can also take advantage of their 7-day free trial and do research for your first product.
How to Write Product Descriptions
Product listing descriptions consist of the Title, Bullet Points, Search Terms, Item Description, and Product Specifics.
- Title – The key purpose of your title is to generate attention and clicks from visitors. Move the most important keywords upfront and use this title structure:
Brand + Main 2-4 keywords + Feature 1 + Feature 2 + Feature 3 + Size/Color
Example – Car Windshield Sun Shade + Bonus Gift – Heat & Sun Protector, Compact Storage with Strap, Quick & Easy Installation, UV Ray Deflector | Black/Silver Sides (59″ x 28″)
- Bullet Points – use up to 500 characters to describe 5 features and benefits of your product.
Example – QUICK INSTALLATION: Simply stick car sun shade to the interior of your windshield and use car’s sun visor to add an extra support
- Search Terms –Amazon has backend search fields where you can add additional keywords not already used in the title or bullet points. They are not visible to the buyer, but you can add them when listing a product.
Example for “Face Cream” – Moisturizer, Night Wrinkles, Anti-aging…
- Description – here, you have a chance to convince buyers further to buy your product. Write a human-friendly description and focus on benefits.
- Item Specifics – these are product-specific details which you enter during the listing creation. Make sure that you fill in all the relevant fields.
Now that you’ve described your product to perfection, the fun begins.
Launch: How to Make Your First Sale?
Finally, you are all set and ready to launch your product.
First of all, Amazon ranks your product based on your sales.
Given that, in order to outrank your competition and appear on the first page of a search using a particular keyword, you have to match their sales.
Where to Find Sales Information?
You can use a paid service, such as JungleScout extension, or a free version of Scope to discover approximately how many sales each product listing has made.
For this example, I entered the keyword “brush.” In this case, you would need to sell around 200 brushes every day for at least 2 weeks in a row in order to appear on the first page of the top results.
That’s around 2800 brushes, and that is not a small amount.
I would not advise you to compete in such a saturated market. Another example is the previously discussed “Car Headlights DIY Polishing Kit.”
This time, you’d need to make around 20 sales per day!
That’s much better!
So, how do you make those sales, particularly in the beginning?
- Email list – around 2-4 months before you launch a product, you should create a “buzz.” The goal is to obtain a list of people who would be interested in buying your products. One way to do so is to create a Facebook group and start sharing some useful and practical tips on, for instance, how to paint a wall if you decide to sell a paintbrush.
- Coupons – there are companies out there, such as Snagshout or Vipon, which connect brands and buyers of discounted products. Essentially, you list your product on those platforms at a 50% discount. You may lose some money, but if you keep your sales around 20 “Car Headlights Polishing Kits” per day, you may reach the first page of the search results in 2 weeks.
- Launch Services – we have not tried this yet, but there is a company called Viral Launch which helps you to launch your product and provides a step-by-step guide on how to do so correctly. The service starts at $350 for one product launch.
One thing which is often overlooked is that Amazon gives you more “Karma” points if you sell a product at full price instead of a hugely discounted price.
Of course, some other factors come into play such as product reviews, which are essential. Read on to discover the best way to obtain great reviews!
How to Obtain Excellent Product Reviews
It used to be that you could offer a free product on Amazon in exchange for a product review.
However, those times are gone and doing so is now against Amazon’s terms and conditions.
In 2023, the best way is to obtain your first product reviews is to join the Amazon Early Reviewer Program.
Basically, you pay $60, and Amazon incentivizes buyers to leave you a product review by providing them with a few dollars in coupons.
They keep sending out emails to buyers for one year or until you receive 5 product reviews, whichever comes first. You can find more information on the program on this Amazon page.
Next, you are allowed to send follow-up emails to buyers via services such as Feedback Genius, which has a Free plan to send 100 emails each month.
Under this plan, you send automated emails for each buyer to inquire if they are happy with the product they received.
They sound something like this:
Thank you so much for your order!
I hope that by now you have had an opportunity to clean your car headlines with your new polishing kit. It would mean the world to me if you could take one minute to help share your experience by leaving an honest product review at:
Even if you don’t have time to spare to leave a review, I still wanted to extend a big THANK YOU to you for helping my small business grow!
Sending these emails increases your chances of obtaining more reviews.
Keep in mind that you cannot bribe customers to leave a product review with these emails. Instead, you should ask for an honest product review.
As soon as you obtain as many or more reviews than your competitors, you are in the game!
Inventory Control: Re-order
You don’t want to go out of stock after you have launched the product because that makes Amazon unhappy and impacts your organic ranking!
For example, you order 500 products initially.
Let’s do the math:
If you have a successful launch and start selling 20 items per day, then you will be selling around 600 items per month.
Production depends on the manufacturer, but sometimes it can take up to 30 days.
In addition, you have shipping time to account for. Shipping via Air takes around 15 days, whereas shipping via Sea takes around 35 days.
So, depending on your manufacturer, you may need to re-order a few days after receiving your first batch since 500 items for 20 sales a day is simply not enough.
As you can see, it’s crucial to predict some numbers if you want to avoid a second launch.
Learn with the step by step Amazon business blueprint and make your first sale.
Amazon FBA is extremely competitive. However, if you develop a disciplined approach to the types of products you sell, it’s an excellent way to make money and grow a business.
If you have any questions or if you would like me to expand on some of the points, please let me know in the comments section below.
In the meantime, good luck launching your first Amazon FBA business!
Amazon FBA Tools
Here are some tools that will help you:
- Gathers accurate metrics and data from Amazon and transforms them into straightforward and easy-to-understand insights.
- Provides solutions for big and small businesses, as well as agencies
- Integrates keyword research that helps in the optimization of listings
- It is an all-in-one tool that incorporates all the required metrics