This article will explain what an Amazon FBA business. Next, we’ll explain how you can start your own FBA today.
Starting an Amazon FBA business seems really simple on the surface. You just pick your products, put them up for sale, create your listings, and you have a thriving Amazon business. Right?
Not so fast. There are over five million marketplace sellers on Amazon. Not only that, but you’re probably also competing with Amazon for supremacy in your product category, too.
How can you make sure that you have a thriving business on Amazon.com? Keep reading to find out.
What’s the Difference Between FBA, FBM, and AMZ?
As you’re starting your Amazon business, you’ll notice that there’s some lingo that you need to learn. Other sellers and software vendors will throw out terms like 1P, 3P, FBA and so on. What do they all mean? We’ll decode them here.
FBA (Fulfilled by Amazon)
Fulfilled by Amazon is also known as 3P or third-party selling. This means that you’re responsible for keeping your product in stock in Amazon’s warehouse, the product listing and retail price of the product. When a customer orders, Amazon takes care of the rest. You also are responsible for answering customer questions and responding to any negative reviews.
FBM (Fulfilled by Merchant)
This means that you are totally responsible for the selling and fulfillment of products sold on Amazon. You’re a direct seller to consumers and manage every part of the process, including returns.
Both FBA and FBM sellers manage their accounts through Seller Central, which is Amazon’s backend for 3P sellers to manage their accounts and get reporting on sales data.
Sold and Fulfilled by Amazon (AMZ)
If you’re a seller on Amazon that has seen some success, you may get an email invitation to join Vendor Central. By accepting this invitation, you change how your products are sold on Amazon.
Instead of selling your products on Amazon to consumers, you sell your products directly to Amazon at wholesale prices. Amazon then takes care of the rest. There are pros and cons to being a 1P seller. For instance, Amazon controls just about everything about how your product is sold, including the price.
The reason why so many businesses choose to start an FBA business is that products are eligible for Prime shipping. Amazon Prime members tend to have a higher income level and spend more on Amazon than non-Prime members.
Plus, Amazon takes care of all fulfillment, returns, and customer service issues. While there’s an FBA fee involved with the program, many sellers believe that it’s well worth it.
What Makes an FBA Business Successful?
If you ever had to sit through a marketing class, you’ve heard of the 4 Ps of marketing. The right product, price, place, and promotion. Believe it or not, the 4 Ps apply to your FBA business. Doing these well will help you become a master at selling on Amazon.
Right Product
You have to sell a product that people want to buy on Amazon. While there are some products that people will buy on Amazon.
This means that you need to do your research. There are many software tools that are low in cost that will help you determine what the sales are, FBA fees, profitability, how many other sellers there are, and the number of reviews each product has.
These are important metrics to look at to determine if a product niche is the right one for your business.
Right Price
The right price is crucial for success on Amazon. If your product already has a high-profit margin, that gives you the flexibility to price your product for a profit. As an FBA business, you have to take into account FBA fees for product warehousing and shipping.
With a high-profit margin, you can set your pricing to be competitive and profitable.
Right Place
The right place has to do with how your listings appear on Amazon. Remember that Amazon is a search engine that relies on an algorithm to display product listings. Similar to optimizing your listings on Google, you need to do the same with Amazon listings.
Keywords, product images, the number of quality product reviews, and a completely filled out profile all matter to your customers and Amazon’s A9 algorithm.
Right Promotion
One way to get your product seen high in search results is to advertise your products. Amazon’s advertising platform is a pay-per-click platform that targets keywords. Similar to Google’s AdWords, you’re competing with other sellers to bid on keywords.
Some keywords will be more expensive than others, but you can increase your chances to sell more products. This is where pricing again comes into play because you want to make sure that your advertising can deliver a return on investment.
Don’t Start an FBA Business Alone
Amazon’s Marketplace has become a bit like the Wild West. You see stories all the time of people who build $500,000 a year businesses just by selling cell phone cases on Amazon.
As you can see, there’s so much to learn about selling on Amazon. Starting an FBA business and going for broke isn’t the best strategy, especially if you have little business experience.
The most successful businesses have a team of support who can help them learn the ropes quickly and avoid costly mistakes. You’ll find that’s a common trait among successful people. There are mentors and coaching programs like FBA Coaching that helps FBA sellers start their business and be profitable.
Ready to Start Your FBA Business?
Starting an FBA business isn’t as simple as it appears to be. While it is possible to make a lot of money as an FBA business, you have to know what you’re doing.
You have to understand Amazon’s Marketplace, how its algorithm works, advertising programs, and how to optimize your listings on Amazon. Getting help before you get started can help you navigate the complexities of an FBA business.
For more tips on starting a profitable business, take a look at our blog.
