It's every digital workers desire to generate passive income streams, and to earn an income by doing as little as possible.
This has driven many young entrepreneurs to affiliate marketing, or into the world of e-stores and dropshipping. Some have succeeded, and most have not.
The Amazon marketplace is very often overlooked and provides plenty of opportunity for a lucrative passive income stream.
Fulfillment by Amazon (FBA), is a great way to sell products without having to deal with the sales, the shipping, or the customers. All you have to do is source a product, list it, and send the products over to Amazon to stock your inventory.
The FBA service takes care of the rest. Your product is placed in view of Amazon's astronomical marketplace. The items that you send to Amazon are stored in their warehouses. When a sale is made, they deliver your item and even take care of customer service.
It doesn't get much more passive than that, but before your dreams get too wild, this is no get-quick-rich scheme. To succeed, you will have to plug a good few hours of hard work into the venture.
Most of your input will involve researching products to sell, and finding suppliers who can give you the right price.
To buy the products, you will also need some startup capital.
The initial amount that you invest is entirely your choice. You can simply stock a product in your price range, and an amount of products that you can afford.
If you do your research, and buy and sell the right products at the right prices, you will be ready to make sales and profits in no time at all.
Amazon takes care of everything once they have received your stock. The FBA process is simple enough. So where do you come in?
This may seem like a lot of work, but once your products are shipped to Amazon's distribution teams you don't have to do anything much at all.
When you find a winning product that sells well, and pulls a healthy profit, you can repeat the process really easily.
Find products that you can profit from
Source and ship products to Amazon distribution
'Sit back' and make sales
This is not dropshipping. Before you start selling on FBA, you will need to have some money to invest.
You will have to deal with the purchase of a physical inventory, and then pay to ship these items to Amazon. Buying from suppliers, and then shipping the products to Amazon, will be your main costs.
There are also several fees associated with using the FBA service:
Once you have listed a product, you can use the FBA calculator to work out the exact costs of these service fees, according to your product's cost, sale price, and shipping costs.
The actual amount of money that you invest is entirely up to you. You could buy 10 products for $50 each, or 1000 products for $100 each, or whatever you want or can afford. If you are new to the game, and don't have much money to spare, it is perfectly fine to start small and scale up later.
If you never invest more than you can afford to lose, and always choose products based on proper research, then there isn't so much risk, and profits are likely.
When you come to subscribe to FBA (covered soon), how do you know which subscription fee is best for you?
It all depends on how many transactions you make.
The first plan allows you to sell up to 40 products in a month, at a charge of $0.99 per item transaction. This could be the best option if you are dipping your toes in the water for the first time, or if you sell expensive products but less of them. If you plan to sell less than 40 products in a month, then choose this option.
If you are likely to make more than 40 transactions, then you should pay $39.99 for the monthly sign up. If you want to get serious and sell hundreds of products, then this is by far the best value. It also comes with more features, such as the ability to charge sales tax, and generate business reports.
Why pay these fees to Amazon, when the other option is to promote your own listings and ship your own orders?
Well, the first reason is that FBA is a much more passive process. Once it is up and running you have to do much less, and you can let Amazon process and ship your orders.
We are aiming for passive income after all. Once you have set up your supply chain, all you really have to do is restock your inventory once all of your products are sold. FBA takes away all the fuss.
FBA also provides a number of other benefits:
The FBA service gives you an awesome sales platform, higher rankings, and a pretty much automated sales system that can generate large amounts of profit.
For most sellers, Fulfillment By Amazon is certainly a better option than shipping the item yourself.
Okay, this is it! You are sold on the idea of FBA, and you understand that you have to put in some work to make it happen. You are nearly ready to hunt some bargain products that will sell like hotcakes.
First, let's get you signed up.
This is a pretty straightforward process:
Now you are signed up as an Amazon Seller, but the final step is to register for FBA.
Head to the FBA registration page, click 'Get Started' and you can easily add FBA to your seller's account. All you have to do is read the T&C and then agree.
Before you go any further, you need something to sell, right? We're not doing this so you can clear out your garage. We want to make a nice amount of money, with a decent product stocked and ready to sell.
The first method is the 'product first' approach. You will hunt for bargain products, and then compare them to the Amazon listings to see how well they are likely to sell, and how much they will sell for.
This is a very simple method, but not necessarily the one that can give the highest profit margins. Effectively, you are on the lookout for opportunities to buy products at a reduced wholesale value, and then list them on Amazon FBA.
Here is how:
This is one of the simplest method available for finding products that are cheap, and can fetch a profit. All you have to do is shortlist your potentials, and then research the Amazon prices.
Say you find a mobile phone from Walmart, and it has a discount offer. It seems cheap. You check Amazon, and see that you can get this phone for considerably less than it is being offered. You see that it has a high ranking (on the Amazon Best Seller's list), and is selling well. That would be a potential winner, and an opportunity to make money using FBA.
Make sure you always take into account the FBA fees when you are considering your products.
You have to be able to buy the products, ship them to Amazon, pay the fees, and still take a decent cut for yourself. A golden opportunity like that is rare, but it does happen, and when it does you are in for a smooth ride!
There are limitations to this method. Although it is the most passive process, it can be difficult to find the right product. There can be a lot of waiting around, and margins are usually thin.
If you want to maximize your opportunity for profits, then it is time to cut out the wholesaler, and go straight to the supplier!
This method is much more full-on, and requires a greater amount of input from you, but if done right you can source products at a much lower cost, leaving you a lot more room for profit.
You are going to research Amazon's existing products, and then go straight to suppliers to see if you can source your own version.
To maximize potential, you can private label products, and sell them as your own.
This might sound scary, but it's really not all that bad. It's a doddle if you are willing to put in the initial time.
A private label product is one that you can sell under your own brand.
You can buy a large amount of a particular product directly from a supplier. Then, you can have the product branded with your own labeling and packaging, and effectively market the product as if your own company supplies it. More on this soon.
The best starting point for your research, is the Amazon Best Sellers list. It makes life really easy. The best sellers list is designed for customers to be able to see what is popular, but it also gives you the opportunity to see at a glance what already sells well.
The lower the number (closer to #1), the higher the product is ranked within its category. Rankings values are relative to the breadth of the category. A rating of #400 would be pretty good in an overarching category like 'Kitchen & Home', and not so good in a really tight niche category like 'Scented Oils'.
A ranking of below #1000 in a broad category is generally considered to be pretty good, and it means a particular product is selling well.
What can you take from that? The top-and-bottom of it is, you need a product that will sell fast.
If you can source a top selling product at a decent price, then you have the chance to make some money...
Scrolling through the Best Seller list could leave you with hundreds of potential options for FBA selling. It's time to start narrowing down your search. The first step is to disregard any product that is impractical.
First of all, it would help if the product can be lightweight. This can make postage, packaging, and storage less costly. Small light objects that fetch a decent price, offer the best value on shipping costs and storage.
Bigger objects should not be ruled out, but they should be valuable and profitable enough that the extra shipping and storage costs will be worth it.
This is one of the most important considerations. Why? Think about it. If you find top selling Nike shoes, then it's impossible that you will be able to sell these as a private label – i.e. as your own product. You would be sued in a heartbeat.
Furthermore, the product could be a bestseller precisely because it is a Nike brand. You might be able to find a supplier of generic sneakers and package them up, but this doesn't mean you will achieve the same heights as an established brand.
Your best bet, for the sake of practicality and for sales, is to find a product that sells well for the actual product itself, and one that could be branded and sold by you.
You will be left with a bunch of products that are selling well, and that are suitable for your fine self to sell on Amazon.
For each of your potential products, make a note of the following, using a spreadsheet:
From this data, you should be able to work out roughly what your best options are. Armed with this spreadsheet of shortlisted potentials for your FBA sales, it is time to contact the suppliers and see what you can get for the right price.
Please, don't run away in fear at the thought of this. Contacting a supplier is just as easy as using any other service. This is especially true when you know where to look.
You don't have to stick to suppliers within your own country. Actually, if you live in the US, then it is probably more cost effective to source your products from abroad, from a country such as China.
If you have local suppliers, friends in high places, or any other tricks up your sleeve, then go ahead and work with what you have. For everyone else, there is no better place than Alibaba, a global platform for connecting buyers with suppliers.
On Alibaba (or any other platform that you prefer), you can search for the products that you shortlisted. Just type the name of the product into the search box, and you will be shown a grand list of suppliers who can offer what you are looking for.
This list will contain details such as price ranges, product styles, and supplier's options for private labeling, as well as their minimum order quantity (MOQ). Pick a supplier that seems to offer the best price for the style and quantity of product that you are looking for.
You will need to contact the supplier directly to get a direct quote, usually by email.
Don't be afraid to negotiate with the potential suppliers that you contact. Usually, they will want to make the sale, and you're going to have other options available.
A supplier's starting price might not always be the best they can offer, and they may also be flexibility on their MOQs.
You should already have an idea of how cheap you need to source your products in order to compete with similar items, and make a tidy profit. Be confident, and willing to walk away if a supplier can't come down on price.
It can help to talk to two or three suppliers at once, to make sure you can get the best price and/or the best quality product.
You are also well entitled to request a sample to see if the product is up-to-scratch.
This is highly recommended. A tacky and flawed item will soon feel the wrath of Amazon reviewers, and sink your hopes of profits. Make sure you are selling quality goods.
If you are buying produce from a supplier who allows private label, then you will need to send your designs for packaging, logos, and labels.
Unless you are a professional graphic designer, then it's time to call in the freelancers.
You don't have to break the bank balance. You can use freelance platforms like Upwork and Fiverr.com to find great value services.
How much you spend depends on your budget.
If you can afford it, try to splash out a little on this initial design phases, as professional branding could really set you apart as a seller.
Once you have the finished design files you can go ahead and send them over to your supplier, with clear instructions on how to proceed.
It will take a week or two for your products to arrive from your supplier, perhaps even longer. In the meantime, you can add your products to your FBA inventory.
This is a very simple process:
The inventory items will appear within minutes of adding them. You will see that their status is set to 'inactive'. This will change once you have delivered the products to Amazon.
Now is also a good time to set your FBA options.
Go back to your Seller Account, and check out the settings. Scroll down to 'Fulfillment by Amazon'.
Take a good look through and check that all of the settings are how you want them. The most important setting, for now, is the 'Inventory Placement Option'.
You have two choices: Distributed Inventory Placement (DIP), or Inventory Placement Service (IPS).
The first, DIP, asks you to send your items to several Amazon warehouses ready for delivery. This is the default option, but not always the best choice for sellers.
If you choose this option, you will have to split your stock and make several different shipments of your products, to reach multiple warehouses.
With IPS, you can send all of your items to a single warehouse, the location of which is determined by Amazon. They will then distribute your items from that single warehouse.
For this, you pay a per-unit service fee according to the size and weight of products – anything from $0.30 for a small 1lb product to $1.30+ for a 5lb large item.
Try to calculate your delivery costs for the two options. For example, if you are selling 40 cameras, how much would it cost to send all 40 to a single warehouse - with the IPS service fees added on? How does this compare to sending four lots of 10 items to different locations, without the service fees?
You don't have to commit to
For a more detailed break down of the pros and cons of both the DIP and IPS, see this article.
Once your items arrive from your wholesaler or manufacturer, it is time to have them shipped. Amazon makes this easy for you.
Remember your inventory list, full of inactive items? Now is the time to make them active, by arranging their shipment:
If you want to, then you could call it a day right now. Your products have been sourced at a rate that will earn you some profit, and you have branded, labeled, and shipped them off to Amazon. It is likely that you will make some sales, and you can watch the income roll in.
You may have managed to undercut the competition on price, in which case the product might sell itself. However, you have an unfamiliar brand name, and no customer reviews.
Promotion and proper marketing can never hurt, and will usually bring you much more potential for profit.
You might want to help sales along, especially in the early stages when your product might need a bit of a push.
First up, create your product listing. This is what your potential customers will see when they click on your item, so it needs to be spot on.
First impressions really are everything.
Consider having the description written by a professional if you think it will help. You should add plenty of high quality images to attract buyers.
If you want to write the description yourself, then you can also use headings (<h3></h3>), bold text, (<b></b>), and bullet points (<li></li>) to make your content more attractive. Understanding more about the Amazon product listing algorithm will also help.
The key to a compelling product description is to demonstrate what the product does, how it works, why it is valuable, what sets it apart from others like it, and why it should be purchased immediately. Try to cover all of these points in an engaging tone, and a voice that speaks to the product's target audience.
Remember during your research earlier on when you looked at competitor's listings?
What was missing?
What made some of them bad?
What made the good ones stand out from the crowd?
Now is your chance to really sell the product, and you have to make the most of that chance.
Compose a sales masterpiece!
One of the best ways to give your product the push it needs is to start off with a promotion, which could include a discount rate. Think about it. If you are the new kid on the block, why should a customer choose you? They will probably see your product as a risky purchase.
If you offer a discount, you will reduce this perceived risk, and increase the chance of making those crucial first few sales. If your product proves to be good, then you can expect delighted reviews from customers.
You might have to take an initial hit to your profit margins if you make a price reduction, but it will be well worth it to see a boost in your rankings, reviews, and brand identity.
Once you have gained a more solid reputation, you might not need to continue your campaign. Your sales ranking will increase, and you will appear naturally higher up in searches. With even just a few customer reviews, you can earn the credibility that can drive sales.
You can also use Google Adwords in a similar way, in order to gain visibility and sales. This tends to be more expensive, but you can reach an audience outside of Amazon, and this can be extremely effective.
If you plan on creating a long-term brand that specializes in a certain type of product, then you should consider putting together a social media campaign that targets your niche. Create profiles and pages for your business, or for individual products, and do what you can to share them around.
You can also pay for social media advertising, like Facebook and Twitter, in order that your posts reach more people.
Post your product on relevant groups, forums, blogs, and anywhere you can online.
If you are anything like me, then you want to start out small when it comes to Amazon FBA selling.
You don't want to go ahead and invest your life-savings buying as many products from your supplier as you could possibly afford. You want to buy a reasonable batch of something affordable, ship it, sell it, and make a bit of money.
Fair enough. I don't blame you one bit.
When you find out that FBA actually works, what will you do then? Armed with more confidence in FBA, will you scale your business up, and take your profits to the next level?
There are many ways in which you could continue to scale up your business. Here are some tips that will help you to advance as an FBA seller:
Amazon FBA selling is no a
The process is fairly straightforward. Your main concern should be researching and finding the right products. If you are willing to do that and do it well, then you will likely be rewarded nicely.
What's great about Amazon FBA, is the opportunity it provides, no matter how much or little you want to make and invest.
You could start up your FBA business with just a few hundred dollars, and still make a tidy profit. You can build it up slowly, or you find a real money-spinner and invest more. It's all down to you.
If you follow all of the steps and advice contained in this article, then you can make a nice amount of passive income as an Amazon FBA seller. Enjoy!
Have fun, and feel free to add to the discussion in the comments. Have you had any experience FBA?
Andrew is an entrepreneur, digital marketer, wine enthusiast, hustler (in a good way) & the guy behind BrandBuilders.io. His business helps both FBA sellers and Amazon Affiliate marketers build out their brands and manage their portfolio of sites.