Amazon FBA 101 – What & Why

Adam Entrepreneurship 10 Comments

Like I’ve mentioned before, I’ve been quite preoccupied with my new side hustle. Like I talked about in The Importance of the Side Hustle, diversification is key, so beyond my day job and the blog, I’ve been working on a physical products business.

I was super inspired to try this out after listening to some great podcasts with Pat Flynn over at SPI with Ryan Moran, Jessica & Cliff Larrew, and Ryan & Daniel.

We’re a few months in to the process and are up and running with 2 styles of the same product selling. In our next post I’ll talk about how we found a product, sourced it, and started selling, but today I wanted to do a true Amazon FBA 101 for those who aren’t aware of what it is or why they might get excited about it.

What is Amazon FBA

First Amazon’s description:

“You sell it, we ship it. Amazon has created one of the most advanced fulfillment networks in the world, and your business can benefit from our expertise. With Fulfillment by Amazon (FBA) you store your products in Amazon’s fulfillment centers, and we pick, pack, ship, and provide customer service for these products. Best of all, FBA can help you scale your business and reach more customers—in a 2014 survey, 71% of FBA respondents reported that their unit sales increased on Amazon.com more than 20% since joining FBA.”

If you’re a Prime member like me, then there’s nothing you love more than free 2 day shipping. What a lot of people don’t realize is that the vast bulk of the stuff sitting in Amazon’s warehouse isn’t actually owned by Amazon. Businesses of all shapes and sizes, ranging from billion dollar conglomerates to solopreneurs making a few hundred bucks a month, use Amazon as a distribution channel.

Why Amazon?

Scalability

It’s so scalable. SOOOO scalable. If you have a day job (like me), running a side business is hard. If I had to actively field orders, pack boxes, head to the post office or be home for UPS, and manage all the logistics that go along with it, I might as well give up now. I’d either have to do it full time, or rent some warehouse space and hire some employees. Even just managing 5-10 orders per day would be a nightmare.

With FBA I can create a listing (the first time), load my products in to the Amazon system, and send them in bulk to Amazon (say 1,000 units). Once Amazon has them all I have to do is let the sales roll in and manage marketing and customer support. I’m suddenly a part of the giant selling and search system that is Amazon and essentially have their entire workforce at my disposal for a small fee. They pack and ship each order for me, either charging shipping or as a part of the Prime program.

Basically it lets me focus on what matters.

Automatic Search Volume

Amazon is the retail version of google. I don’t know about you, but most avid online shoppers search for a product 2 ways – google and amazon. If your a prime user, you probably go to Amazon first. I know I do. Amazon is the biggest consumer product sales search engine in the world. It’s the first place people look and by listing with them you are tapping in to their enormous number of customers.

If you creare a website to sell “widgets” and somebody googles you are they likely to find you on the first page? Not likely. It will takes years and may be impossible if your product has even the tiniest bit of keywords elsewhere on the internet. They’ll see news articles, features, other sellers like amazon, walmart, or major retail brands. You’ll be stuck on page 10 and nobody is going to find your site.

If you choose your product wisely, there’s pretty good odds that people will find you using both Amazon or Google, because Amazon product listing are almost always at the top. In this scenario you simply need to make it to a reasonable position in the Amazon rankings to make sales. This is a vastly easier task than winning with Google. If your product listing is at all optimized you should be able to reach a decent position in the rankings.

People Trust Amazon

Even if you manage to rank your site well on google, that doesn’t assure sales. You need a brand, beatiful images, smooth checkout options. Your website needs to be attractive and look modern. You can do this. In fact, you SHOULD DO THIS. Over time you need to build your site, your own traffic, and your own brand. BUT this is not step 1. It’s what most likely stops 99% of people from ever getting started. That amount of effort can be expensive and overwhelming and potentially yield you zero benefit.  If anything seems off at all, people are going to quickly bounce because they don’t know your brand, your quality or your product.

But listing on Amazon is easy. You need decent information and a description and some high-res photography on a white background. People trust Amazon and people trust the review system. Once you’ve managed to notch a dozen reviews or so, people will trust that you sell a quality product. They don’t need to know your brand. They don’t need to know your company. They know they can trust Amazon to do the right thing if your product isn’t high quality and that over time reviews will show who is a quality seller and who isn’t.

People Love Free 2 Day Shipping

Prime members love free Two-Day shipping, and all Amazon.com customers can get free shipping on orders over $35. This is a huge win and will really increase orders.

Amazon lets you sell on your own site

EVENTUALLY, when you are ready to build your own site, brand, and audience, Amazon has the flexibility to let you sell from whatever platform you want and still use Amazon Multi-Channel Fulfillment to store your inventory and streamline your fulfillment operations.

It’s simple and affordable

There’s no minimum number of units. No high fees. And you only give amazon a cut when they sell the item (which they deduct from the sale price) so there’s no issue with cash flow.

Conclusion

I’m sure I bored some of you to death who have seen the huge number of blogs and podcasts covering Amazon FBA, but at least among my friends, they haven’t heard of this business yet. I think it may be the best opportunity out there at the moment to start your own small business with an actual product at the moment, so I encourage everybody to stick around and learn about our journey and we scaled up to $5,000 in sales in our first month.


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Comments 10

  1. Kyle

    I started roasting coffee recently and a small business friend of mine was spit balling ideas that included selling it on Amazon’s FBA. I probably wont start with selling coffee, but I’ll have to see if I can come up with something to sell through amazon. Like you said, it’s all the shipping logistics that have usually put me off from selling online. Unless it’s bigger items with bigger profit margins.

    1. Post
      Author
      Adam

      I have a buddy with a coffee roasting company (small one) that he runs part-time. Happy to connect you if your ever interested.

      Amazon FBA definitely makes it easy which is causing a bit of a gold rush to the site. I expect its time to get in now before profit margins get crunched.

    2. Travis Jamison

      Hey Kyle,
      Amazon software owner, and big seller myself. I definitely recommend starting with FBA. So much less hassle, and even more importantly you will sell a boatload more via FBA. Amazon rewards this, and so many people have “Prime” memberships now that they all want the free shipping from it.

      Selling coffee isn’t really a bad idea, especially IF you can find a small niche you can dominate. If you try and rank for “coffee” in Amazon then you’re going to have a bad time. But if you can do plenty of research and offer something really niche that doesn’t have much competition for its keywords then you can create something awesome in a short amount of time. Here is a basic Amazon SEO guide for you: https://www.amztracker.com/blog/course/

      Also, I was just on the Niche Pursuits podcast talking about all things Amazon and give away all kinds of knowledge-bombs on getting started and how to get started with your products: http://www.nichepursuits.com/podcast-72-travis-jamison/

      1. Post
        Author
        Adam

        Hey Travis,

        Thanks for commenting. I checked out the site. I haven’t tried your software before, but I definitely will in the near future and give it a review. I did a lot of keyword research but in the end stumbled in to my niche by seeing my product out in the wild, realizing it was a trend, and that it fit all my criteria.

        Thanks for commenting.

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