Amazon is one of those companies that everyone loves to hate, even when they love it. On one hand, this is the reason why we had a major publishing boom with more self-published authors than ever before. On the other hand, it has become one of the most notoriously rough companies to work for, often exploiting workers to the point that they can’t afford housing.
Among entrepreneurs, Amazon can be a true darling. It’s often a platform that first-time sellers use when they are just learning the ropes to internet marketing. The Amazon affiliate program has made millionaires of people who would have otherwise struggled with blogging. The self-publishing platform also launched several people to stardom.
However, one major profit route started to shine above them all: FBA, also known as Fulfilled By Amazon. It became one of the most popular ways to sell solid goods without really having to store them.
What is Fulfilled By Amazon?
Fulfilled by Amazon, or FBA, businesses are businesses where you buy the products but the actual busywork is taken care of by Amazon. Here’s a quick run-through of how it works:
- First, you find products you want to sell.
- Then, you ship the products to Amazon.
- Amazon stores them and fulfills the orders for you.
- If there’s a need for customer service, Amazon handles that as well, too.
In other words, your job is to market, market, market those goods you’re selling. As long as you keep shipping the products over to Amazon, they’ll keep doing the heavy-lifting for you. All you have to do is ensure that you keep selling your goods.
How much does it cost to start an FBA company?
As far as retail businesses go, you’re not going to have a lower entry price point than FBA. It’s just the plain and simple truth. According to JungleScout, the average startup cost is between $2,500 and $5,000. That’s really low considering the price of a typical retail store or stand.
But it’s worth pointing out that some people start making money with as little as $500. So, there’s definitely a scale and you can make money. With that said, most startups with FBA backgrounds tend to require $2000.
How much can an FBA business earn?
Honestly? A lot more than you’d expect. If you have a unique product that is available only to you (such as a patented invention), you can easily earn $30,000 a month or more. Such is the case with Washin’ Jacks, an invention that is simple, affordable, and wildly popular among those who want cleaner clothes.
I took a look on a business-selling platform called Flippa to find more companies that are FBA-based to take a look at valuations. Here are some examples of the prices I found…
With the current political turmoil, it’s not surprising to see a lot of FBA businesses getting sold off. After all, Jeff Bezos’s role in the current government has a lot of people angry. With that rage, consumers are starting to turn their noses up at all things Amazon.
One thing is clear, though: FBA businesses clearly have a lot to offer people. You can absolutely, positively still turn a decent profit off it. Judging by the asking prices of some of these FBA companies, it’s clear that you can make a million-dollar business through sales.
What can you do to maximize your profits on Amazon?
I’ll be honest. I did very cursory research on this and have worked at an FBA warehouse business when I was in my early 20s. Here’s what I’ve heard other people repeat ad nauseum when it comes to creating a successful FBA launch:
- Choose your products carefully. You do not want products that are easily found on Alibaba. I repeat: you do NOT want products that can be found on Alibaba. If you can find them on distribution sites, everyone else is selling them too. Go local, go handmade, and go small business.
- Work on your brand first. A pretty FBA site will get more clients. If the site has a cohesive collection or item specialty, all the better. People recognize branded sites on Amazon and tend to trust them more.
- Advertise, advertise, advertise. Yes, you should be paying for those little “Sponsored” slots on Amazon. I personally have noticed that you can search up specific items on Amazon and the number of alleged results won’t always show up on the page. This gets your product front and center.
- Keep a very close eye on your ratings. The cool thing is that if you get a negative review on an FBA item related to issues in shipping or package disrepair, you can give Amazon a heads up. They will remove that review for you, which leaves you with a much higher rating. (I mean, after all, it’s not your fault if things got shipped poorly via FBA, right?)
Here’s why you may want to think twice about an FBA business…
FBA has a lot of potential to help you make a ton of money. There’s no doubt about it. However, it’s worth noting that FBA is not always the best choice for people, especially when it comes to shoestring sales. Here’s why.
The Scary Secret About Making Money With Amazon
Alright, I’ll let you in on a little secret. This actually happened to me when I was doing Mechanical Turk work on Amazon’s platform: my turking account got suspended. Yep. I was banned, I couldn’t get customer service to tell me why, and that was that. I’m now done with MTurk.
This sounds like it’s unrelated but it’s not. Amazon reserves the right to ban you for whatever reason they want, without explanation. If Amazon chooses to ban you, getting your business back is going to be virtually impossible.
In other words, your business will shutter overnight and there will be very little you can do to recover. You won’t have access to customer information, you won’t be able to reach out to clients via Amazon, nothing.
This is one of the biggest reasons I warn others to avoid having a business that is entirely FBA-focused. It can get so ugly, so fast. Considering how many sites are starting to muzzle people based on their beliefs, you might want to watch out.
PRO TIP – If you want to have an FBA store, make sure you have a Shopify store where you have a communication platform that you control. Should Amazon shutter you, you will be able to recover through this method.
The Ugly Secret About Making Money With FBA
Do you have a really neat new invention that you made to sell on Amazon? A new invention, perhaps? Be very, very careful if you decide to sell it on Amazon. Both sellers and the site itself have problems with idea theft.
There have been reports of sellers with interesting products getting approached by Amazon asking them to partner with them or purchase the rights to the product. If they say no, a new nearly-identical product gets posted on Amazon by a different party.
Product theft is rife these days. It happens with SHEIN, it happens with Dolls Kill, and yes, Amazon does it too.
PRO TIP – It’s way easier to build your own site and protect your ideas via patents than it is to deal with fighting a juggernaut like Amazon. Of course, if you want to sell your idea to Amazon, this could work in your favor. Once again, FBA works best as a backup.
The Annoying Truth About Having An FBA Business
FBA means that you are going to have to pay a lot of hidden costs in order to keep your business running. Here’s what you need to be aware of with this industry:
- Amazon’s competition is always climbing, so you’ll have new competitors every day.
- The fees to work on an FBA basis increase every quarter.
- Yes, you need to build your brand on and off-site.
- Customer service for FBA business owners is handled by Amazon, not you, which can lead to difficulties.
If you want a lot of control and hate fees, this is not it.
Here’s the straight dope about creating an FBA business…
Look, I’ll be the first person to say that Amazon FBA has a lot of potential for people who want to make money. However, it’s not the perfect “press-button” goldmine that so many people make it out to be.
I wish I had a dollar for every time I’ve seen a semi-scammer tout FBA as a nearly no-effort business option where you can inhale oxygen, exhale CO2, and get paid for like one hour of work. Somehow, that effort will yield a million-dollar business.
This is not how this work. This is not how any of this works.
This is the truth: it’s a business with a serious amount of work and investment you need to put in. You should expect to put in more money than you think you should and you should expect to treat it like a full-time job sooner rather than later.
Oh, and as for your outcomes? It’s always a roll of the dice.
Leave a Reply