Selling on Amazon. What is Amazon FBA?

Why sell on Amazon?

Think of Amazon as a sales channel like eBay, Qoo10 or even your own eCommerce website. You list your goods there and sell them to Amazon’s customers.

You can leverage on Amazon’s traffic and branding to help you reach hundreds of million of customers. And your customers won’t be just from the US alone.

Other than amazon.com, you can sell on amazon.co.uk, amazon.ca, etc.

You can also opt to turn on the FBA export option so your products can be available to customers worldwide simply from your listings on the amazon.com site.

In short, you can basically run a global eCommerce empire right from wherever you are…

Pretty awesome I would say.

I’m managing everything remotely from Singapore 😉

Getting started to sell on Amazon

To start selling on Amazon, you have to first register for a Seller’s account. You will get access to Amazon’s seller platform : Amazon Seller Central. This is where you basically run your business operations from.

To start selling, there are two selling plans available : Individual selling plan where you are charged $0.99 per item for each item that you sold, or the Professional plan at $39.99 a month, regardless of the number of items sold.

First month is free for new sellers, so I would encourage new sellers to sign up for the professional plan. You can always choose to downgrade from the second month onward.

Follow this link to read more about these two plans on Amazon’s site.

In short, if you are selling more than 40 items a month, definitely opt for the professional plan.

Fulfillment By Amazon

Once you get your seller account up and running, the next thing you want to leverage on, is FBA(Fulfillment By Amazon).

FBA is a world-class fulfillment service provided by Amazon to it’s 3rd Party Sellers.

Basically what this means for a 3rd party sellers is : You sell, Amazon Ship.

The best part about this? You don’t even need to handle your products.

This is what I do : I source in the US, send it my prep company in the US. They will prep it for me for as low as $1 a unit.

All I need to do at this point is to create a shipping plan inside Amazon’s seller central. Add product listings for the items I want to sell, and add them to the shipping plan.

My Prep company will then inspect, and prep the items for me according to Amazon’s specifications and send it in to Amazon’s warehouses for me.

I also get Amazon’s partner rate when shipping in to Amazon warehouses using their partner carrier, UPS.

Once my shipment reaches Amazon, they will check in my items. Once that is done, my listings will go live, and my products will be available for sale 🙂

If a customer buys the product, Amazon will pick, pack and ship it to the customer on my behalf.

It’s basically hands free after my items reach Amazon.

Amazon will also handle all the after sales customer services on my behalf as well. This includes returns, refunds, etc.

The beauty of Fulfillment By Amazon.

So… What’s the catch?

I love FBA. I really do.

That being said, nothing is free in this world.

Below are some of the things you need to take note of :

FBA Fulfillment Fees

Do take note of the additional fees which Amazon charges for each item that sells via FBA. Do run your items through the FBA calculator (google FBA calculator, and it’s the first link) to ensure you can make a profit off it.

Due to the relatively high cut which Amazon takes from each sale you make, not everything will be profitable here.

General rule of thumb : If you buy something for $10, and you want to earn $10 from that sale, you need to sell it for $30. Amazon’s cut is approximately $10. This is just an estimate of course.

FBA Inventory Storage Fee and FBA Long-Term Storage

There is also basic storage fees which Amazon charges for storing inventories in their warehouses.

To discourage sellers from sending in items that do not sell, there is also the long term storage fees. Amazon will conduct a semi-annual inventory cleanup on February 15 and August 15 of every year. If your item’s been there longer than 6 months, you will be hit with long term storage fees. Read the link for more detail.

Competing with Amazon

You will find Amazon selling on many product listings. Usually at a very low price, compared to what the 3rd party sellers can afford to sell at.

If you cannot afford to wait for Amazon to go out of stock, my advise is to stay off the listings that Amazon is on.

Also, do take note that Amazon is collecting all the relevant data from all the sales generated for their own market research.

Amazon’s word is final

Simply put : This is their portal, their rules.

If they decide to suspend your account, their decision is final.

The suspension is for life.

Branding

Take note : The customers who buy from you on Amazon are Amazon’s customers, not yours.

In fact, most customers actually think they are buying from Amazon, when they had in fact purchased from a 3rd party seller who is utilizing fulfilled by Amazon services.

As such, it will be close to impossible to build your brand, unless you are doing private labeling.

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