One of the biggest challenges any online business owner faces is figuring out how to ship products to customers. It can be such a headache that it can deter people from launching a business in the first place.
It doesn’t help that customers’ expectations are higher than ever regarding shipping cost and time.
With Amazon FBA (Fulfillment by Amazon), you list an item for sale and ship it to the nearest Amazon fulfillment center for storage. Once it sells, Amazon packs and ships the item to the buyer. It also provides customer service on the order.
Read on to learn how to sell on Amazon FBA and whether it’s the right business partnership for you.
What is Amazon FBA?
“You sell it, we ship it.” That’s Amazon’s business proposition to you. With Amazon FBA, just about anyone can sell products on the company’s marketplace. Then, Amazon takes its cut of each sale in fees.
These fees depend on the size and weight of your item, how long it remains in storage, and seasonality. For example, storage fees are higher from October through December because of the holidays.
How to sell on Amazon FBA
Although Amazon makes it easy to store your products and sell them on its website, that’s only one part of the business process. Your main objective is to find items that can generate a profit.
It’s not always easy to find the best products to sell on Amazon FBA. A lot of it depends on your strategy and how much time you can dedicate to your side business.
For example, some sellers focus on niche products that can’t be found at big box stores like Walmart and Best Buy. This strategy might take more time, but it can be profitable if there isn’t much competition.
Other sellers might employ a strategy called “retail arbitrage.” Essentially, it entails finding items that are sold at a high enough discount that you can profit by selling them on Amazon.
With your Amazon Seller app open on your phone, you can head to the store and scan discounted items to see how much they’re selling for on Amazon. Taking selling fees into consideration, you can do some quick math to see if the items are worth buying to resell.
Alternatively, you can use cash-back websites and browser extensions to get cash back and coupon codes and track prices to get the best deals.
Regardless of your strategy, the best items to sell on Amazon FBA will change over time. To scale up your business, you’ll need to stay on top of trends and react accordingly.
After you find a product, you’ll list it on on Amazon. But it won’t go live until the fulfillment center receives it. At that point, Amazon handles the rest.
Pros of selling on Amazon FBA
Amazon is the largest online retailer in the U.S. Getting access to the company’s customer base makes it easier to find buyers for your products.
Your items will get the benefit of free two-day Prime shipping. According to one study, fast and free shipping is the top incentive for people to shop online. Your item also will have the Prime logo next to it on the search page, making it more visible and giving you credibility.
On the cost side of things, using Amazon FBA means you don’t have to store your inventory yourself. That might not be a big deal if your inventory is small, but it can be hard to scale a business if you’re keeping your supply in your garage.
Instead of renting storage space, you can ship your product to Amazon’s fulfillment center and pass along the storage fees to your customers when they buy your products.
Since Amazon provides the customer service on FBA shipments, you can focus all your time and energy on selling.
Cons of selling on Amazon FBA
The main drawback of using the FBA program is the cost. There are several variables, making it hard to plan your cash flow. And if you send too much inventory, your items could end up collecting dust and costing you storage fees.
Sales tax compliance also can be an issue. Each state and county has different sales tax laws, but it’s not always clear in which fulfillment center your inventory ends up, so it can be hard to know where to register.
In order to collect sales tax in a certain state, you must register to do so. Amazon will pass on information about the warehouse and seller location once the sale is complete, but by then, it’s too late to register. Your best bet is to consult a tax professional from the start to avoid issues with the Internal Revenue Service (IRS).
Should you start a business with Amazon FBA?
Now that you know how to sell on Amazon FBA and understand its benefits and drawbacks, take the time to consider if it’s the right choice for you.
On the surface, it might seem like an easy way to make extra money. But turning it into a legitimate business can require a significant amount of overhead on your part.
Some successful Amazon FBA business owners have created courses to help you learn the tricks of the trade:
Also check out The Amazing Seller podcast to learn seller strategies and get access to free live workshops.
Starting a business can be daunting. Fortunately, Amazon FBA allows you to start small with your inventory to see if it’s a good fit. If it doesn’t work out, your losses will be minimal. But if it does, the extra money can help you pay off debt and save for the future.
Looking for more ways to earn extra cash? Check out this list of side hustle opportunities.
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