This post will lay the foundation for anyone wanting to start a profitable Amazon business. This enormous opportunity is available to you whether you live in the US or on the other side of the world. We are seeing a big change in the way people do their shopping. Many large brick and mortar retailers have been forced to close their doors after being unable to keep up with the online trend.
If you think you already missed the opportunity, think again. In 2016, online sales accounted for only 11.7% of total retail sales. There has never been a better opportunity in history for entrepreneurs looking to start an online business. Amazon’s FBA (Fulfillment by Amazon) program makes it possible for people to sell physical products online without even touching them. Amazon also handles most of the customer service, allowing you to scale quickly if you set up the right systems.
I know what some of you are saying to yourselves right now. Why another post about selling on Amazon? Aren’t there enough books and online courses out there on this topic already? Yes, I agree. There are plenty of books and online courses out there already, but most of them don’t give you all the information you need to really get started. They give you little nuggets of valuable information and leave out the actionable content. Trust me, I bought all the expensive courses (some that were thousands of dollars), paid for coaching and still spent three years figuring this all out. I promised myself that if I ever mastered it, I would share what worked with others so they wouldn’t have to go through the same brutal learning curve that I did. I am here to be honest and tell you that it’s not easy, but definitely achievable with the right guidance, patience and mindset.
This post is also for all of my friends and family who keep asking me how to get started with their own Amazon business. Once you get successful with this business (and you will if you follow the steps on this website), everyone will keep asking how you did it. This is also true for people that don’t even know you. When you have a successful online business and people ask what you do for work, you will cringe. Not because you don’t want to tell them or help out, but you open up the floodgates when you say “I have an online business.” They will ask what you sell, how you got started, how to find products, your advice, etc. I always ask them how much time they have because these are not easy questions to answer. Now I can direct them to this website.
If you are interested, you can read about my Amazon FBA story here.
Contents
What is an Amazon FBA Business?
FBA stands for Fulfillment by Amazon. There are two ways to sell on Amazon: Merchant Fulfilled (MF) and FBA. Merchant Fulfilled is when the seller ships the order directly to the customer themselves. They handle all the customer service themselves as well. FBA, on the other hand, is when you ship all your items to Amazon’s fulfillment centers. Amazon stores your products and ships them directly to the customer when they sell. These products are Prime eligible for Amazon’s 100 million Prime subscribers and it is much easier to get the Buy Box.
Merchant Fulfilled works great for some people if they have their own warehouse and employees, but FBA is a better option for most people just starting out. It allows you to scale quickly while using Amazon’s sophisticated logistics system.
How Do I Find Products to Sell?
There are five sourcing methods to find products to sell on Amazon: retail arbitrage, online arbitrage, liquidation, wholesale and private label.
Retail Arbitrage
Buying products from large brick and mortar retailers (for example, Target or Walmart) to resell on Amazon for a profit.
Online Arbitrage
Buying products from online retailers (for example, Target.com or Walmart.com) to resell on Amazon for a profit.
Liquidation
Buying products from liquidators (companies that buy overstock or discontinued items from large retailers) to resell on Amazon for a profit.
Wholesale
Buying products from authorized wholesalers or directly from the manufacturer to resell on Amazon for a profit.
Private Label
Buying generic products directly from manufacturers (for example, on Alibaba) and putting your brand logo on the product and/or packaging to resell on Amazon for a profit.
Recommended Sourcing Methods
I do not recommend retail arbitrage, online arbitrage or liquidation as sourcing methods. Many big brands are restricted on Amazon, which means that you need approval to sell them. Usually the approval process requires submitting invoices to Amazon from authorized wholesalers or directly from the manufacturer. Sometimes they also want a note from the brand owner saying that you are authorized to sell their products on Amazon.
If you are buying from retailers or liquidators, your invoices will not be approved. If you are an existing seller with outstanding performance metrics, you may be automatically approved to sell the larger brands without submitting these documents; however, I still do not recommend these sourcing models.
Big brands have been relentless about policing their Amazon listings and will not hesitate to file an inauthentic claim against you. If this happens, Amazon will request all invoices from you for that specific product to prove that you are selling authentic products. They want to see a clear supply chain from manufacturer to Amazon. This is what a proper supply chain might look like for authentic products:
- Manufacturer
- Authorized Wholesaler (Distributor)
- Your Company
- Amazon FBA
This is the biggest problem with retail arbitrage, online arbitrage and liquidation sourcing. Amazon will not accept retail receipts or liquidation invoices against inauthentic claims and your listing will be permanently blocked.
Even worse, your Amazon selling account may be suspended. According to suspension prevention expert Cynthia Stine, inauthentic claims are the hardest to defend against. While Amazon has no specific rules against retail arbitrage, online arbitrage or liquidation, they make it nearly impossible to defend against in the event of an inauthentic claim.
There are many things that can trigger an inauthentic claim:
- Brand owner complaint
- Customer complaint
- Amazon verifying a new seller account that is listing multiple products
- Amazon bots picking up keywords such as “fake” or “counterfeit” on product reviews or Buyer-Seller Messaging through the Amazon system
Sooner or later, you will receive an inauthentic claim and if you are using the retail arbitrage, online arbitrage or liquidation sourcing methods, your seller account is at risk!
For these reasons, I highly recommend wholesale and private label. As a new seller, it is best to start out with wholesale sourcing while you get the hang of selling on Amazon. The capital investment is much lower too.
So how much money is required to get started selling on Amazon? You can read my post and calculations here.
