Amazon FBA

Amazon FBA

Amazon FBA (Fulfillment by Amazon) is a business model where items are sourced to be sold via Amazon. Items are generally sourced in countries with low cost manufacturing and then shipped to the U.S. to be sold at a price premium. What makes Amazon FBA a great passive income model is that once the product is sourced and arrives at the Amazon facility, all that is necessary is optimizing your listing and monitoring sales and inventory. Amazon takes care of order placement, item picking, shipping, invoicing and customer service. There is a lot of upfront work that goes into starting an Amazon FBA business, but once it gets going, you can sit back and watch the money roll in.

Steps To Make It Happen

Product Research

Generating Ideas

This is the first and most important step in starting an Amazon FBA business.  Think carefully about what item(s) to sell on Amazon and whether people will buy it. Here are some things you can do to generate ideas:

  • List Your Passions & Hobbies – Its always nice to find a product that you’re passionate about and use yourself. This makes things much more interesting and you’ll have a better understanding of what products the best and why. Of course, your product does not have to fall within your passion and hobbies, as long as it sells.
  • Browse the Web
  • Shop Around in Stores – Sometimes the best thing to do is stumble upon ideas. Physically going to stores and browsing around will help you generate ideas. Make sure to take a picture of each item that has potential so you can go home and research.
  • Ask Your Friends – Lots of people enjoy talking about their recent purchases and what they liked and didn’t like. Talking to your friends and family will help you generate ideas and give you insights on how your reviews might look.
  • Yiwu Wholesale Market – If you happen to be in China, Yiwu is the largest wholesale commodity market in the world. It is located about 1 hour from Shanghai on the high speed train. It is 5.5 million square meters with over 75 thousand shops. Wandering around will give you lots of ideas but can be overwhelming. If you decide to go, bring lots of energy and patience!
Validating Product Ideas

Once you have come up with a solid list of ideas its time to validate whether these items will work. Here is a list of things to look at:

  • Good reviews
  • Competitor reviews are below 500
  • Selling price around $19-50
  • Lightweight (less than 2 lbs.)
  • Best Seller Rank below 5000
  • Potential to create a better listing
  • Cost for product around $2 – $10
  • Not dangerous or hazardous
  • No product restrictions (check here)
Tools

We also suggest using some helpful tools to speed up the process. These aren’t necessary but have helped us significantly when looking for the right product.

  • Jungle Scout is a Google Chrome plugin that gives you an overview of the competition. This tool provides each sellers rank, estimated sales, estimated revenue, number of reviews, ratings, and information on how the item is being sold (FBA, sold by merchant, sold by Amazon). The aggregated data is extremely helpful in determining how well a product sells and saves a significant amount of time in researching each listing.

Jungle Scout - Amazon FBA Tool

Learn more about Jungle Scout

  • Keepa is another Google Chrome plugin that helps you track your competitors prices. This tool gives you a price history chart so you can see competitive price points. It can also be helpful if you want to buy a product on Amazon, Keepa will notify you when the price drops below your desired price.

Keepa - Amazon FBA Tool

Sourcing

Once you have found a product, the next step is to find the best supplier for your needs. Don’t be intimidated by this step! Most manufactures were hard to find before but thanks to the internet, we can easily get in touch with almost any supplier through platforms like Alibaba, AliExpress or Yiwubuy.

Before you create an account on these suggested platforms, we highly recommend creating a separate e-mail for your supplier search. This way you’ll be able to keep everything organized and do not have to worry about getting spammed in the future from all the suppliers you contact.

 

Sourcing Platforms

Alibaba is the leading platform for finding suppliers (B2B). For better search results, switch from “product” to “supplier” in the search bar. Alibaba will most likely give you a large list of suppliers that you will need to filter through. To do this, make sure you select the “Gold Supplier” and “Trade Assurance” box. This will help you eliminate low quality suppliers and potential scammers.

AliExpress is a global retail marketplace for consumers worldwide (B2B or B2C). Order quantities can be as low as 1 item but the prices are most likely higher than what you would find on Alibaba and customization is rare.

Yiwubuy is another option that connects you with the stores in Yiwu, the largest physical wholesale commodity market in the world located in China. We haven’t explored this option too much but have found some lower prices from suppliers. The site is not as easy to navigate around and there is no communication done through the website. You will have to call or e-mail the suppliers yourself and hope they speak your language.

 

Message Template

Here’s a template for contacting suppliers. Quick and simple, just copy and paste with the correct information and start contacting suppliers.

Hi,

My name is _____, I am starting a company in the U.S. and would like to order a large quantity of this item. Could you please provide the following information:

  1. What is your MOQ and price per unit?
  2. Are you the manufacture or wholesaler?
  3. Can this item be labeled?
  4. Can packaging be customized?
  5. Could you arrange a sample to be sent to ________?
  6. What form of payment do you accept? (Paypal, escrow, etc.?)
  7. Could you provide a product catalog of your products?

Look forward to hearing from you,

Thank you,

______

 

Samples

Always make sure you order samples from multiple suppliers before placing an actual order. This will allow you to compare product quality, reliability, and customer service. If it’s difficult to get a sample, the supplier will most likely be difficult to deal with in the future.

Unfortunately, samples aren’t cheap. Expect to spend around $30-50 per sample and make sure you use air shipping. Some suppliers provide free samples but the shipping cost (air) is what does the damage. Do not be cheap with samples, it’s a necessary investment to make sure you find the right supplier and the right product.

 

Private Labeling

If you decide to private label your product, you’ll need to create a logo & brand. Keep in mind that this logo will go on multiple products (if you expand in the future). Designing a logo can be a bit difficult if you have no Photoshop or Illustrator skills. Luckily, there are many logo templates you can buy for around $29 here (Graphic River). These templates, combined with free fonts from dafont will make it a much easier process.

If you want absolutely nothing to do with Photoshop or Illustrator, outsourcing is always an option! Here are some websites where you can get custom logos created:

Negotiation

Once you find a product that you are happy with, the next step is negotiating. You’ll want to negotiate on the MOQ (minimum order quantity) and price.

MOQ on most listings are 1000+ units but often may not be the case. Suppliers will usually let you order smaller quantities but for a higher price per unit. Tell the supplier “We are very happy with the quality of this product and would like to see how well it sells. We’d like to first order ____ units and look forward to building a long term partnership with your company in the future.” Just make sure your order is not too low, 100-200 units is pushing it and some suppliers may not want to deal with you.

Price is always negotiable. Make sure you shop around to get a feel for what the right price is. If your order quantity is low, I would not recommend negotiating too much. If you’re placing a large order, you can compare prices and let your favorite suppliers know what your target price is. They will often let you know if this is possible and negotiate with you (unless you hurt their feelings).

Payment

For smaller orders we suggest using PayPal. Most suppliers have a PayPal account and are happy to accept. If they bring up fees, ask them to split the fees or just pay for all of it. It is usually around 3% which isn’t much if you are placing a small order. Once you have developed some trust in the supplier, you can pay them through wire transfer (TT). If you’ve never done a TT before don’t worry, it is very easy to set up with your bank and usually cost around $40-50 depending on your bank. These are the only 2 payment options we have done so far.

Quality Check

We suggest shipping all the product to your home first so you can inspect the items before shipping it to Amazon. We’ve caught around 40 units being defected and are looking for a new supplier at the moment. There is also the option of hiring an inspection company in China who will go to the manufacture and inspect for you. Since we are currently in Shanghai, we inspect everything ourselves before shipping it to the US.

Set Up & Prep

Now that you’ve found an item and sourced it, create a Seller Central Account so you can get familiar with how everything works. You’ll find some detailed videos in “Seller University” if you need additional help.

Setup

To create an account you’ll need to complete 5 steps:

Setting Up Your Amazon FBA Account

Add a Product

Once you are done setting up your account and getting familiar with how seller central works, it’s time to add a product. If you are selling something that already exists on Amazon you can search for it and list the same item. If you are selling something that’s not on Amazon, create a new listing. You’ll need to Classify (find your product’s category) and Identify (input all listing information). Keep in mind you only need to fill out the info with red asterisks for now.

Listing Amazon FBA Product

Listing Amazon FBA Product

If you are sourcing from China and selling private labeled product(s), you will not have a UPC or EAN for your product. You’ll have the following options:

  1. Apply to enroll your product in the Amazon Brand Registry. If you are accepted, Amazon will give you a GCID (Global Catalog Identify) that can be used instead of a UPC or EAN. This applies to sellers who are:
    • Traditional manufacturers
    • Private label brand owners
    • Producers of branded white label products
    • Creators of custom or hand-made products
    • Sole or exclusive distributors of a product
      More specific details
  2. Submit UPC exemption request. This is usually only for private labeled or handcrafted products in particular categories. Click here to see when to apply for UPC exemptions.
  3. Purchase UPC or EAN for your product. There are a few ways you can do this. Normally, businesses pay to join GS1 US, which costs around $250 with annual renewal fees. This lets them create UPC codes for each product they sell. The option that most Amazon sellers go with is finding UPC code resellers. These are people who joined GS1 and are selling you the use of their identification number. You can find them by searching “buy UPC” on google or eBay. Note: We purchased 1000 so if you’re in desperate need, you can contact us for one.

 

Prep your Product

After listing your product, it’s time to prep it properly for shipment to Amazon’s warehouse. Failure in this step will most likely result in extra charges by Amazon for preparation or noncompliance.

  • Label Inventory – Each unit sent to Amazon’s fulfillment center has to have a scannable FNSKU bar code. Make sure:
    • Labels are white with removable adhesive or printed directly on the units (Do not tape your labels)
    • Labels are readable and scannable for 24 months. Do not use inkjet printers as they are more likely to smear
    • Cover all other barcodes to avoid confusion

Click here to see how to get a FNSKU. It should end up looking something like this.

Amazon FBA FNSKU

 

  • Label Shipment – Each box or pallet has to have proper shipment labels that are provided after you select your shipment type and carrier. We suggest using Amazon’s partnered carrier since they provide large discounts.
    • Print and place packing slip inside box on top of products
    • Place box labels on top of your box (do not cover box seams)
    • Cover all other box labels

Amazon FBA Shipping Label

For details check out Amazon’s Guide for Packaging and Shipping and How to Prep Products

Logistics

We wouldn’t consider ourselves experts in this area but would be happy to share how we currently ship our items. All of our shipments have been with DHL and by air. It cost about $2 per unit for our current items which are small and lightweight (less than 2lb). This may seem expensive but if you followed our criteria in step 1 you will have more than enough margins to cover it. You can also ask your manufacture to estimate shipping cost to one of Amazon’s warehouses. Some manufactures can take care of everything.

Shipping has been a lot easier than we thought and we haven’t ran into any big issues. We will continue to update this as we learn more!

Listing

Optimizing Your Listing

Here’s where it gets tricky… You’ve done all the work to find your product, source it, ship it to amazon and now you have lots of inventory ready to be sold. How are you going to get your product discovered? Of course there are several marketing techniques that can be applied but the first and most important step is understanding Amazon’s Search Algorithm and optimizing your listing so it organically ranks high.

We’ll start off first by explaining the algorithm created and managed by A9 Product Search engine. This search engine is significantly different than Google’s which most of you may be familiar with. The goal of this search engine is to find products that users are most likely to buy while Google’s looks for the most accurate answers to a searchers query. It’s actually much simpler. Google looks at several things: backlinks, social media, domain authority, etc. Amazon only looks at internal factors and their main goal is to maximize revenue per click by tracking customer’s actions and providing the best product suggestions possible so they can sell more!

So lets get down to it… What are some things to look at when you have zero sales and zero reviews?

 

Title

Start with your band and manufacturer number if you have it and then a descriptive title that is appealing to your target customer.

Many people don’t know but the words in your title also count as keywords. That means use as many keywords as possible! Of course, don’t over do it and make sure your title still makes sense to the customer… Place your wording wisely so it can be read.

Example: Kitchen Aid – High Quality Professional Grade Stainless Steel Garlic Press, Crusher, Mincer – Recipe ebook, Silicone Tube Peeler, Cleaning Brush included!

 

Features and Bullet Points

Use this area to highlight the features and benefits of your product that will be most appealing and important to your target customers. Think about what they want your product to do for them. Place the bullets in order of what you feel is most important! Do not assume that shoppers will read all your bullets and description. Amazon allows 350 characters per bullet but this ends up being too much text for shoppers to read. From doing some research, we believe 90-150 characters is optimal per each bullet.

NOTE: Words used in these bullet points DO NOT count as keywords so avoid stuffing them with as many as you can.

 

Description

This is where you can elaborate on your features and benefits a bit more. Keep in mind that this area is less likely to be seen since it is at the bottom of your listing so make sure you create a compelling description that is eye catching.

NOTE 1: Words used in your description DO NOT count as keywords so avoid stuffing them with as many as you can.

NOTE 2: Amazon does not allow the same formatting for seller central as they do for author central and vendor central. Most of you will be using seller central, which does not have buttons for bolding, italics, line breaks, bullets, etc. Do not assume that you can use images and videos in this area because others are.

 

Images
  • Products must fill at least 85% of the image
  • Images must only show product that is for sale
  • No logos, watermarks, inset images that are not part of the product itself
  • Main images must have a pure white background
  • Must be actual images (no drawings)
  • At least 1000 pixels on the longest side and 500 pixels on the shortest side to be zoomable
  • May not exceed 10000 pixels on the longest side
  • JPEG preffered

 

Specifications

Use this area to the max to include all the technical and physical details of your product.

 

Price

Whatever matters to customers, matters to Amazon’s search algorithm and price is definitely a major factor. Of course, this doesn’t mean sell your product really low, just set a fair price in comparison to your competitors.

 

Completeness

Fill out every single field you can in the listing setup as possible. Amazon places them their for a reason and they will maximize your chances of ranking higher in search.

 

Search Terms/Keywords

Amazon allows you five 50-character search term fields, which you can think of as 250 characters. Enter every single possible search term you can think of here.

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