How to Start an Amazon FBA Business

When you research different online business opportunities, one of the first suggestions you’ll find is selling through Amazon FBA. It’s been a popular way to make money for a few years now, but is it still worth it in 2021?

We decided to chat with an actual Amazon seller to find out. After speaking with Alex Shelton and hearing his story, we can safely say this is definitely still a profitable business model. Keep reading to hear how Alex found success on Amazon, along with his five tips to help new sellers get started.

What is Amazon FBA?

Fulfillment by Amazon (FBA) is a program where Amazon fulfillment centers handle storing, packing, and shipping orders as well as returns and exchanges. With a flat monthly cost, plus selling fees, you are able to simply send your products to these fulfillment centers. The actual shipping, tracking and customer service experience is then handled by this larger team, allowing you to potentially scale your business and reach more customers.

How Alex found success selling on Amazon

Alex’s background is in marketing. While he had a successful career he got to a point where he was looking for a change.

“I wasn’t unhappy with my life before getting involved with selling on Amazon,” he says. “But I knew that there was more.”

Eventually, an opportunity arose that Alex couldn’t pass up. A client came to him looking for help promoting their product. He recognized right away that this item had a lot of potential, and eventually it was decided that Alex would sell the product himself through Amazon. And that’s how his journey began.

He ordered his first batch of inventory for £1,000, and after only six months he was so successful that he started expanding his venture into other countries.

Today, Alex is still a full-time seller on Amazon. He also teaches a course for beginners that helps them learn the skills they need to build their own businesses.

How to start an Amazon FBA business

If you’re wondering how you can start your own Amazon FBA business as Alex did, you’re in luck. He gave us his five most important steps that beginners need to take when they begin selling on Amazon.

1. Conduct niche and product research

Amazon sells billions of dollars worth of products a year, but that doesn’t mean you can sell any item and expect to be successful. The very best sellers do many hours of research to find the products that will make them the most money.

Alex recommends thinking of embarrassing items people don’t like to buy in person, eco-friendly products, or items you can bundle together.

Specifically, though, he looks for products that meet six important criteria:

• A high search volume on Amazon
• High average monthly sales
• Consistent sales all year long
• Not many competing sellers
• Easy to acquire from suppliers
• Small and light (this reduces shipping, storage, and fulfillment fees)
• A sales price between $10 – $70 (these prices are low enough to generate a good sales volume but still high enough to leave some profit)

You may be wondering how you’re supposed to gain access to all this data. It turns out there are many different tools available to Amazon sellers that make finding this kind of information easy.

“I love the AMZScout Pro Extension,” Alex says. “The information it displays is invaluable to any new startup or existing seller looking for ideas.”

That being said, there are many other options to choose from. We encourage you to do your own research and find the software that works best for you.

An example of Alex’s ideal product

Using the tools described above, do your research and try to uncover items that have high-profit potential. Alex supplied us with an example product that meets his criteria:

These kitchen shears generate an average of 3,393 sales per month, which shows there’s plenty of demand. They’re also the type of item that sells consistently well, no matter what the season is. 

The competition isn’t overly strong, they’re readily available from suppliers, and they’re small and light which reduces your costs. Finally, while the sales price of $11 is on the low end, it still falls in Alex’s target price range.

Identify items that can become private label products

Alex offered one more tip when it comes to niche and product research. Look for items that can be turned into private label products.

“Private label products are branded with your own logo,” says Alex. “I focus on these types of items because they’re unique to you and your business.”

If you find products that you can make your own and create a brand around you’ll have something that no other seller is offering, which is a huge advantage.

2. Create an Amazon seller account

Before you start selling on Amazon you need to register for a seller account. When you do this you’ll have a choice between two account types:

Individual

This account doesn’t have any monthly subscription fees, but you’ll have to pay $0.99 to Amazon every time you make a sale. Plus, the features that come with this type of account are rather limited.

Professional

With this account, you’ll pay $39.99 per month but the $0.99 fee for every sale is waived. Plus, you have access to extra features like Amazon ads, in-depth inventory data, and additional categories you can sell in.

According to Alex, a Professional account is what most sellers should choose.

“If you’re taking Amazon seriously then I would recommend going for a Professional account,” he says. “You have access to Amazon’s advertising platform with the Professional account and it can be a very powerful tool to generate sales for a new product.”

You can sign up for an Amazon seller account here. To complete the application process you’ll need a piece of ID, a valid credit card, and your tax information. 

After Amazon approves your account (it usually takes around three days), make sure to familiarize yourself with the Seller Central platform. This is where you’ll build new product listings, create Amazon ad campaigns, and update your inventory.

3. Find a supplier

Once you know what you want to sell you’ll need to find a company that can supply you with the product. Most sellers source their inventory from abroad, primarily from China, since it’s generally cheaper than purchasing items domestically.

In the old days, business owners would travel to China to visit suppliers in person. Or they’d attend trade shows to discover companies that offered the types of goods they were looking for. While some entrepreneurs still do this, technology has made it easier than ever for Amazon sellers to find suppliers online.

Alex recommends using Alibaba, an online marketplace that has thousands of manufacturers and wholesalers. When looking for suppliers on Alibaba here are a few tips:

• Use Alibaba’s star rating and certification system to find reputable suppliers.
• Ask them to send you a sample before committing to placing an order.
• Don’t accept the first quote they give you. Most suppliers are willing to negotiate on price.
• Don’t pay the entire cost of the order upfront. Pay half when the order is placed and half after it’s completed.

4. Choose your fulfillment method

Order fulfillment refers to the method you use to ship your products to your customers. Amazon gives you two options for this:

Fulfillment by Merchant (FBM)

This requires you to store all your own inventory. When someone buys one of your products you pack and ship the order yourself.

Fulfillment by Amazon (FBA)

With this method, you send all your items to Amazon. They store them in their warehouses, and when you receive an order they ship the product to the customer for you.

When you use FBA you pay Amazon a storage and fulfillment fee every time you make a sale. But Alex still recommends this method for most new sellers.

“Before discovering the power behind FBA I was shipping products out of my garage,” says Alex. “Orders were going well but FBA took things to the next level.”

Another benefit of using FBA is that your items are eligible for Prime shipping, which is a big selling feature for Amazon Prime members.

5. Product promotion

Once your products are live on the site you need a way to get traffic to your listings. For new sellers, one of the best ways to do this is to run ads.

Amazon has its own advertising platform that’s very effective. It works similarly to Google Ads, in that it allows you to show up at the top of Amazon searches in the “Sponsored” section.

According to Alex, Amazon Ads are “often used to get your product seen ahead of the competition, to start generating some sales, and to increase the number of reviews your product gets which helps with search rankings.”

To get even more exposure, you can also advertise on social media platforms like Facebook and Instagram. The great thing about these ads is that they’re very affordable and allow you to target specific demographics that you know are interested in your products.

Just make sure that your ads are actually making you money. In other words, you want your average cost of sale (ACOS) to be low enough that you still have some profit left over. Alex says he usually likes to aim for an ACOS of 10 percent or lower.

Start small and grow

Starting an Amazon business is a big commitment. But as Alex shows, it’s definitely possible to find success. If you use the right tools, and you keep Alex’s tips in mind, there’s no reason why you can’t follow in his footsteps.