Breaking into eCommerce can be daunting because of the work involved. There are the usual suspects of branding, marketing, and sales. On top of that, you also have to process orders, often one at a time. It doesn’t seem like much, but the need to package, label, and ship each individual order out by yourself is valuable time spent away from the core of your business. For this reason, FBA has become such a popular way to get into the game.
The “Fulfillment by Amazon” model simplifies things. Rather than having to provide your own storage and shipping arrangements, Amazon prep services handle it for you. They’re the ones that store the items, as well as sending them out when it’s time to fulfill an order. So let’s take a look at how you can get started on an FBA business model with minimal investment.
You Need a Product
The first thing you need is a product to sell. Do your research, figure out if there’s a market for what you want to sell and what the competition is like. Unpopular products, overcharging for items, and other pitfalls can cripple your business before it even begins.
Market research is important. Know your product and what details people look for when buying one. If you’re selling alcohol, for instance, check the size and weight, along with the proof. Price is also a crucial point that you’ll want to compare your product against since you don’t want to overcharge for a product that’s available cheaper but at the same quality from a competitor.
There are various tools that can help you aggregate the mountains of data you’ll no doubt find just by a quick Amazon search. Using these, you can get a look at what the field is like and plan accordingly.
The Seller Account
Your next step is an Amazon seller account. You’ll want to sign up as a “Professional,” which means a subscription fee. While it may seem like an unnecessary expense, it helps a lot when you begin to grow the business beyond small one-off orders. If you’re looking to be in the game for the long-haul, go with professional.
Find a source for your product. At the start, you might get away with being small-scale and making each item on your own. However, as you grow, this becomes increasingly unfeasible. Look to having someone who can manufacture it for you or buy a pre-existing product in bulk from that you can then apply your personal brand on. There are a few options out there, Alibaba is the most common one.
Talking to the Manufacturer
No matter who your manufacturing partner is, you’ll want to open up a conversation. Contact them, talk to them about the product you have in mind. If it’s something they already make, inform them about your brand and give them the necessary materials for applying it. If it’s something new, be sure to go into detail on how it’s made and what needs to be in there. In many ways, it’s like commissioning an artist, so expect a lot of back and forth.
Ordering a Batch
Once the contract is signed and sealed, wait for them to produce a large batch of the product. “Large” will vary based on what you’re trying to sell and the size of the market, of course. However, most of the time you’ll want something in the thousands unless you’re selling a highly-specialized niche product.
From Manufacturer to FBA Warehouse
Once you have stock ready to sell, you need to move them to Amazon’s warehouses. You’ll want to look into things like customs duties and taxes, along with freight costs. At this point, partnering up with a freight forwarder is a good idea because it can take away a lot of the hassle and make the process of international shipping much simpler.
Then you need to think about pricing. The cost of manufacturing could be relatively low, especially on Alibaba. Don’t fall for the trap of thinking you only need to cover manufacturing costs to make a profit. You need to factor in manufacturing, shipping, taxes, delivery fees, customs duties, and possibly even freight insurance. All of these are costs you incur per delivery, so you should factor those in as you calculate profit margins.
When it comes to pricing, there are two basic models. One is to sell a high-end product to a small market at very high price points. The other is to sell a simpler product to a wider market, but at a smaller profit per unit sold. In general, the latter is much more stable. We can’t all be Apple, after all.
Once you have all of that, you can set up a listing on Amazon and start selling. You’ll still need to make people aware that your product exists, but that’s what marketing is for. Don’t be afraid to spread the link to your Amazon listing around to increase awareness.
Setting up an Amazon FBA business is a lot of work. However, once you get going, the FBA model does take away some of the more tedious parts and simplifies so much of the process.