how does amazon fba work

How to Start an Amazon FBA Business (2022) - Amazon Seller Guide for Beginners

It’s undeniable that Amazon is the go-to for home shopping in America. Responsible for over 50% of all ecommerce spending today with over 148 million Amazon Prime subscribers as of January 2022. Amazon has completely reinvented online shopping as we know it today. They've tackled a consumer need by supplying nearly any product you can imagine, for a competitive price, and with fast free delivery directly to the customer's doorstep. These standards that we have come to expect has allowed Amazon to grow to the giant that it is today, with no other ecommerce platforms even come close. When you think of the millions of hyper targeted and impulsive customers, all with credit cards preloaded on their account - selling on Amazon's platform becomes an absolute no brainer.

What is Amazon FBA?

FBA is short for Fulfillment by Amazon. FBA is a service offered by Amazon that affords the opportunity for you to send products to be stored in one of the hundreds of assigned Amazon FBA warehouses throughout the country. When a shopper buys one of your products, Amazon will pick, pack, and ship the item directly to the customer. They charge a small fulfillment fee from the sale, and you get what's remaining.. it's that simple.

What is a Private Label Business?

Private label is the process of finding a generic/non-patented product, placing your own company logo on it, and selling it under your own brand. Think of store brand companies (i.e. Great Value is Walmart's private label brand).

Why is an Amazon FBA so powerful?

Combining private label and Amazon FBA offers an incredible opportunity for single member entrepreneurs to easily run both small and large scale operations completely by themselves and behind the scenes. In many cases from a laptop on a beach in exotic locations around the world. That’s the beauty of it, you have all the resources of a full scale ecommerce company, and you can do it from wherever you have a wifi connection.

When Amazon is doing all the heavy lifting fulfilling orders, you won’t ever have to worry about stressful overhead costs such as employee payroll, insurance, rent for warehouse/office spaces, and so much more. This frees up an incredible amount of time and capital that can be put right back into the business. Or take advantage of the luxury of a true passive income. Where you’ll find yourself bringing in consistent money without doing any additional work, allowing you to do whatever you truly want to do with life.

FBA allows you to exponentially scale your thriving business entirely on your own without fear of the common growing pains found elsewhere in the ecommerce space. Amazon is such a massive well oiled machine, you can count on them to keep up with your growing needs, even when you’re selling 1000’s of units per month.

Exactly what kind of money can be made?

When it comes to Amazon FBA private label, you can think of the rule of thirds. This means 1/3rd of your revenue will cover landed product costs, 1/3rd to fees, and the remaining 1/3rd is your profit. With this ratio in mind, a “base hit” private label FBA product selling for $25-50, can be expected to pull a profit off around $10 profit per unit sold, with roughly 10 units sold per day. Thats over $100 a day, $3,000 per month, and $36,500 a year. This is $36,000/year, with just ONE product!

Keep in mind this is almost entirely passive income. Once your product is ranked on the first page, and your advertising campaigns are running smoothly, its just as simple reordering every 1-2 months. Essentially, just sending an email to your supplier.. thats about it. What would you do with an extra $36,500 a year?

No one says you have to stop at one product either. You can create a niche in a market that you’re interested in such as fitness or outdoors, and launch related products to building a brand in that particular market. Or you can keep an open brand and launch products that fit your predetermined criteria in any category you choose.

As I said, a product bringing in $3,000 per month is just a "base hit" conservative revenue goal to aim for. There's no ceiling to what's possible. If you do your due diligence, those “home run” products are out there. It's not unheard of for first time sellers to find themselves bringing in 5 figures a month profit on their very first product. For example, the clever individuals that decided to private label and launch this new innovative product called a "posture corrector" in 2018, have been making $300,000 PER MONTH for nearly 4 years, with no signs of slowing down. These products still exist, and they’re being launched on Amazon every day. It’s just up to you to find them early and take action. People just like you are changing their life forever with just one product, and you can too!

How do I find a successful product?

1. Product Research

As a private labeler, your job is to search through the millions of products on the Amazon marketplace for just the right one. Thankfully theres software available to help. A program called Helium10 scans through hundreds of thousands of Amazon products and pulls a list of potential winners based on specific predetermined criteria (click here to get my personalized criteria list for 2022).

The criteria is in place for you to verify a product potential success though concrete quantifiable data prior to investing. You do so by evaluating preexisting competitors to determine existing demand, competition levels, profit margins, mitigating risk, etc.

Once you have a handful of potential products that fit your criteria, you then verify the sale volume and competition in your list by searching for the item on Amazon and running the Jungle Scout Chrome Extension. This extension will show the best estimate of sales per month and is critical to verify a products potential. Once you’ve narrowed down a handful of possible options you can move on to the following...

2. Product Sourcing and Development

Figure out what can be improved by reading existing reviews on existing competitor products, and find solutions to make the product better.
Search the generic product name on Alibaba.com to find an overseas supplier that can create your own personalized version.
Get a quote for ~400 units of the product to be manufactured with your requested improvements, labeled with your company's logo, and shipped to a USA FBA warehouse.

3. Create a listing

Find the most relevant and highest volume keywords for your product using an Amazon tool called Helium10.
Write the listing copy using these keywords.

- Proper SEO is essential for ranking your product. Its necessary for your advertising campaigns to run optimally, and for your entire listing to work synergistically. - Expert Listing Services

Describe your product and express why it's better than the existing competitors.
Send a sample of your product from the factory to a photographer for professional white background and lifestyle photos. I personally recommend upwork.com for quality low cost work.

4. Promotion and Advertising

Set up Amazon PPC advertising using the keywords we found in step 3.
Sales from each keyword, both PPC and organic searches, will rank your product on Amazon for these specific search terms. The goal is to be on the first page - ideally in the number one spot.

- For example, if you’re selling a yoga mat, you want to run PPC ads for the “yoga mat” keyword. Each sale from the “yoga mat” keyword will help you rank organically on the first page for that particular search term.

- Organic ranking is mostly determined by sale volume. If the top 10 competitors are selling 20 units per day, you will need to sell 20 units or more per day to rank above your competitors.

5. Management and Optimization

Now that you've have enough sales for your major keywords to stick in the organic rankings. From this point on, only periodic maintenance is required.
PPC campaigns need to be adjusted every ~2 weeks to optimize spend and return.
You are responsible for specific customer support, but with Amazon taking care of logistics (being 90% of the problem most of the time), communication with customers tends to be very rare.
Tracking inventory levels and reordering prior to stocking out.

Can anyone do it?

Yes, anyone in the world can sell with FBA in any marketplace around the world. For example, If you are German living in Germany, you can still sell on the Amazon USA marketplace, storing your products in the USA fulfillment centers. In addition, you can also store and sell in your own country's marketplace if you so choose.

End game?

Amazon FBA businesses sell for over 50x their monthly profit. Therefore, the incentive to build something you can potentially turn around and sell for hundreds of thousands, if not millions of dollars is an incredible incentive to invest in yourself. Take a look at the current listings on Empire Flippers.

Is it for you?

Amazon FBA in my opinion is the best way for a solo entrepreneur to create and scale a wildly successful business and earn a passive income. By the model itself, startup fees are very mild, and with the tools and data available, risk is quite low. If you are looking for a way to remove yourself from the 9-5 trading your free time making your boss rich. Consider building something for yourself, and be rewarded for time and hard work. It's never too late to make a change, and its never too late to live free - It just takes action.

Have any questions on the topic, or want to learn more about private consulting or professional services? - click here.

Referenced Tools & Software

Helium 10 (Product/Keyword Research) - 50% OFF coupon for your first month with code KDM50

Jungle Scout (Chrome Extension) - 20% OFF three months of Jungle Scout Suite (25% OFF Professional).

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