In this article we promise to give you a minimalist blueprint that will increase your odds of succeeding with Amazon FBA. To save you time we have compiled everything that you need to know about the program in one long post.
First things first!
Amazon is known to have some of the largest established customer bases in different markets around the globe and is still growing with currently over 300 million active users, that’s why we have to pay attention whenever they have an initiative where emerging entrepreneurs can cash in on the action.
If you are one of the pro-active entrepreneurs that don’t let big opportunities fly by you’ve probably searched for tips on how to succeed with Amazon FBA. As an expanding entrepreneur who is looking to invest in a future-proof business, you cannot ignore that Amazon benefits from over 50% of all e-commerce transactions in the United States happen on Amazon, and over 14% worldwide.
There have of course been negative headlines about people bashing Amazon, but as a smart business person, it’s wise to be only informed by the hard data and statistics.
Probably you’ve skipped through many YouTube guru ads about people who claim they were living in their mother’s basement and made it over night. However because you need a realistic and solid blueprint with a foundation of how to actually make money with the program you are here to learn as much as you can.
You are also probably asking multiple questions such as ,”What is Amazon FBA?” and “Is Amazon FBA worth it?” among many other questions which we will answer shortly.
First and foremost to get everyone on board we will explain what Amazon FBA, how it works, and how to get started before we look into the benefits of implementing it.
What is Amazon FBA
FBA is an abbreviation for “Fulfilled By Amazon”, this is to say that Amazon facilitates the process of product Fulfillment which includes packaging, distribution, delivery and even returns among other things. The seller, perhaps you in this case deliver products to their warehouses, so that they can handle the tedious processes involved in fulfilling the product.
This gives you ample time to deal with other parts of the business such as outsourcing, producing or marketing the product among other things.
The obvious benefits of using Amazon FBA
People Trust Amazon
One of the things most people over-look when they comment on Amazon FBA is the flow of trust.
Doing business with Amazon is an endorsement in itself because of their longevity in the business. Going forward your clients are likely to trust you more and to trust that their products will be delivered or even refunded in the worst case scenario?
A lot of people are still sceptical about punching their credit card details on a website they don’t know.
All business transactions are based on trust that both the buyer and seller will deliver on their end of the deal.
Experienced Customer Service
When you are starting out in business it’s very complicated to have all the ideal parts of the business in place. The probability is that your capital won’t be enough to have enough stuff to handle customer concerns and given that Jeff Bezos, founder of the multi-billion dollar company has always operated on principle of making things easier for the customer.
It is safe to say that Amazon emphasizes customer support and pours a lot into customer care research among other things.
It would be a benefit if some of these people who are to handle your customers queries and concerns because that would result in heightened customer experience.
Every one of us is customer in one place or another and even before we cite research on how customer experience can result in customer retention or customer loss. We already intuitively know that it makes or breaks the business that’s why it’s first on the list.
After-all if you are spending a lot in product research, production, and promotion you wouldn’t want to spill all those efforts in the drain by not meeting the customers’ demands in terms of answering their demands, as and when they need them.
How Amazon FBA Lowers Your Cost of Shipping
Price plays a role in customer acquisition. There is no logic in a customer choosing your product if someone is offering the exact same product for less. Thus it becomes important to lower any avoidable expenses to make more favourable price-points for the products you sell.
Amazon FBA Lowers your shipping costs by simple economies of scale. Remember if you are to ship products by yourself, your orders may not be enough to benefit from bulk pricing.
As a new business you’d probably not get bulk orders in the same location. However because Amazon has many products that are already going to certain location, they are able to combine them at a lower cost to you and thus to the consumer.
This by the way also adds to customer experience because the turnaround time is low whilst pricing remains fair and customer friendly. The probability of getting repeat business and customer retention when customers need more of what you sell becomes higher.
This means there can be faster shipping
FBA products are eligible for free shipping, this removes yet another barrier between you and your customer. If they are simultaneously a Prime member, they will benefit from free one or two day shipping. There is probably no way you would be able to do the same at a national scale without them.
Time is money and people will pay anyone who saves them time and trouble. Especially to offer them something they should have paid more for if they had gone elsewhere. It is a double win.
It is also important to note that even as you read this text the number of Amazon Prime members is growing exponentially. In 2019 CNBC reported that Amazon could already do Prime Shipping to about 72% of America.
Order Fulfillment from other sells channels (Omnichannel Fulfillment)
One of the most attractive things about Amazon FBA is that you can also get order Fulfillment done from other channels. They provide you an opportunity to reach the target customers targeted via new multi-channel Fulfillment solutions.
This MCF service (Amazon Multi-Channel Fulfillment) empowers you to cast your net wider and sell your products on various platforms and channels which include but are not limited to BigCommerce and eBay whilst still having Amazon fulfil them.
Now that you know what it is you probably want to know how to get started with the program and best practices on how to succeed.
How to Get Started With Amazon FBA
Given all the advantages listed above, you may be asking by now, “How do I get started with Amazon FBA?” and we are here to help you get a sure-fire blueprint that will ensure that you are set up to win from the onset.
Battles are always won before they are fought. As you will get to see, much of the work is about how good you can get with the numbers. So let’s get into it.
Thorough Product Research
We live in a beautiful time where there are multiple tools and verifiable information to tell us if something has a market or not. The click stream data collected via the many platforms we use on a daily basis makes it possible for us to extract accurate data of what is selling on the market, the search volumes for the product and the level of competition one has to surpass if they are to enter the race.
To succeed with Amazon FBA you have to choose your niche, the products with it and do as much as possible to understand the people that buy that product (in terms of psychographics and demographics).
Once you have chosen a niche. The rest of the process will be driven by fulfilling the requirements of that niche.
For instance if you are selling big things like durable equipment, you will probably sell less units at a time and require large profit margins, whilst if you are selling things whose usage cycle is smaller, they are probably going to be cheaper but sell faster in large units.
Understand the Ecosystem around your main product
As mentioned above, price points will rely on what you are selling and the economics around it.
A person will probably not buy a new printer daily, but they will frequently need to buy more paper, refill inks or buy cables as they become faulty. The best way to balance the cash flows of the business may be to sell both types of products. That is, products that move slow at high profit margins and the ones that sell frequently at low profit margins.
Sit down and map out branches from your main product.
Scout For Suppliers
Now that you are sure what you want to sell, you can start scouting for suppliers to get a real over-view of how much products are at wholesale at wholesale.
Perhaps you may make sample orders of what you are going to be selling so that you are sure it is suitable for your clients. Your negotiation skills on bulk pricing may come into play here and your bargaining power may rise across time if you prove to guarantee them repeat business.
However at this stage you are not buying anything. You are documenting the costs. So that you can sit down with your accountant and calculate the costs.
Calculate The Cost
At this stage you may need to work with a good accountant so that you don’t overlook any costs you may trivialize. In business even the so called “trivial amounts” have to be accounted for especially because they accumulate into large sums of money at scale.
It all boils down to, how much are you spending and how much are you getting out of it. With a new business there may be start up costs such as buying social media adverts, building digital assets such as websites and so on.
Some of these costs are likely to go down over time if you retain your customer acquisitions and some of them are once of, such as logo and website design.
So you really have o sit down and see which your once off costs are and which ones are periodic.
After all is said and done if it’s profitable. Proceed to the next step. (perhaps it should be the first step)
Setup Your Amazon Seller account & sign up for Amazon FBA
After ticking all the boxes above and being aware of the benefits. It’s now time to set up an Amazon seller account if you do not have one already.
Once you are established as an Amazon Seller proceed to sign up for FBA to tap into all the benefits we discussed earlier in this article.
- Experienced 24 hour Customer Support
- Lowered Shipping Costs
- Faster Shipping for your Customers
- Your customers are eligible for free shipping
- Multi-channel Fulfillment
Promotion ,Customer Aquisition, and Retention
Now that you have established everything as planned, the final step is to promote the product by all means legally available to you. We have listed some options but remember you are not limited to these options.
They can help you build more ideas of your own.
Optimizing Your Listing
The primary way is to have SEO optimized listings on Amazon so that you can get free organic acquisition. You may also look into Amazons own paid advertising tools as well. You may hire an SEO consultant to help you with this or make use of a good keyword research tool.
Content Marketing and Lead Magnets
Off-site you can establish a website and invest money in content marketing so that you can attract your ideal customer base and also have an opportunity to use lead magnets that will drive them to your mailing list.
The whole idea is to also capture who your customers are before sending them off to Amazon so that you can remarket future products to them and retain a great percentage of them.
Facebook Arbitrage
Facebook has relatively low costs per click, which means even though it may cast wide to people who may not end up clicking. The people who click may still be enough to turn around a profit.
A best practice may be to advertise something which looks like a special offer so that once you acquire the customer you can then up sell them on your higher ticket project. This is where the aforementioned knowledge of your products ecosystem comes into play.
In Conclusion
In the beginning we discussed that Amazon has an exponentially growing customer base globally and still has more potential to grow. Meaning it has not scratched the surface. It also means that it has earned the trust of the masses and business is about trust.
People are more likely to trust punching their credit card details into an Amazon shopping cart than a less known business. However by doing business with Amazon, you allow the trust of your brand name to grow with its growing user base.
Now is the time to take advantage of this opportunity.
Get started here
