Resources - Blog
5 Tips to Start an Amazon FBA Business
Stay on top of the latest e-commerce and marketplace trends.
This blog was originally published in January 2021, and has been updated with recent data.
Selling on Amazon remains one of the best money-making techniques available to entrepreneurs. The monolithic marketplace is expected to account for nearly 40% of all U.S. e-commerce sales in 2022.
When you sell on Amazon, one of the main factors you must determine is how you will fulfill your orders. For this, you have two primary options:
- Amazon Fulfillment by Merchant (FBM), where you handle the order fulfillment yourself
- Amazon Fulfillment by Amazon (FBA), where you send your products to Amazon and they handle fulfillment for you.
Amazon FBA offers many advantages, especially to new sellers, as you do not need to worry about storing inventory or shipping products yourself. There is also the added benefit of having Amazon handle customer service and returns for you, giving you more time to focus on growing your business.
Tips for Getting Started With Amazon FBA
If you are interested in starting an Amazon FBA business, consider the following tips to successfully launch your business.
1. Perform Keyword and Product Research to Find Profitable Opportunities
Finding the right product to sell is the most critical part of a successful Amazon business. If there is little demand for a product or if the market is oversaturated with competitors, it will be difficult to make a significant amount of sales.
The best way to discover profitable product ideas is to perform keyword research. Knowing the keywords customers are searching for gives direct insight into the products that are most in demand.
In the past, researching profitable opportunities was difficult, as there were limited data and tools available to sellers.
Today, scouting tools make it easier by providing a massive database of products on Amazon along with historical data on the products’ past performances. With these tools, you can take a data-driven approach to finding profitable products with suitable competition levels.
2. Optimize for Amazon’s Buy Box
The Amazon Buy Box is the white box on the side of each product listing that contains the product price, add to cart button, and shipping and seller information.
When multiple sellers sell the same product, Amazon will rank the sellers to determine who appears as the seller on the product page. The seller’s offer that earns the position in the Buy Box is called the Featured Offer. When a customer goes on to purchase the item through the Buy Box, that seller will be credited with the sale.
Earning placement as the Featured Offer is essential, as the majority of sales on the Amazon marketplace go through the Buy Box. If you want to compete for the Buy Box, you must have a Professional Seller account, sell new products, and maintain an eligible Featured Offer status.
Amazon will consider a variety of factors when selecting the seller for a product’s Buy Box including:
- Fulfillment method
- Shipping time
- Order defect rate
- On-time delivery
- Cancellation and refund rate
Here are a couple of ways that you can increase your chances of winning the Buy Box for your products:
- Have the lowest-priced item: Amazon wants to provide customers the best value and shopping experience possible. If you are eligible and offer a particular item for the lowest price, you will increase your chances of winning the Buy Box for that item. To accomplish this, use an AI-powered Amazon repricer that aggregates billions of data points in real-time to find the best price.
- Sell a product that no one else is selling: If you are the only one selling a product and are Buy Box eligible, you do not need to worry about competing with other sellers.
3. Optimize Your Listings for Search and Conversions
Amazon’s search function is a powerful tool for reaching new customers, as 56% of online shoppers begin their product search using Amazon.
To make your products visible to these searchers, you want to take the keywords you find in your keyword research and strategically add them to your product titles, descriptions, and attributes.
Once visitors land on your product pages, you want to maximize your chances for conversion by removing any friction from the purchase decision. This means having high-quality images, accurate product descriptions, and insightful reviews from previous customers.
4. Balance Your Prices for Exposure and Profits
Naturally, pricing will play a crucial role in how many products you are able to sell.
Many shoppers go to Amazon to find the lowest prices for the item they wish to purchase. Because the platform makes it easy to compare different options, if your prices are higher than the competition, you will likely miss out on sales.
While you want to offer low prices to win the Buy Box, maximize conversions, and stand out from competitors, it is important not to price your products so low that you have trouble generating revenue for your business.
To be able to earn a solid margin on your products, you need to consider the different fees associated with selling on Amazon.
To start, Amazon charges a referral fee for each item sold that tends to range between 8% and 15%. As an FBA seller, you will also need to pay fulfillment fees to have Amazon pack and ship your orders. Fulfillment fees vary based on the size and category of the product.
With AMZScout’s free FBA Fees Calculator, you can quickly analyze any product on Amazon to discover its profit potential. The chrome extension will automatically calculate FBA fees so that you can accurately estimate your potential profit per unit and net margin based on the price you set.
5. Proactively Manage Inventory to Reduce Storage Fees
Along with referral and fulfillment fees, Amazon FBA sellers must also pay storage fees for Amazon to house their items. The longer your items sit in Amazon’s storage, the more you will end up paying in storage fees.
A great way to minimize these costs is to use just-in-time inventory management. This is an inventory management method where you store as little inventory as possible and actively replenish your stock as you run low on products.
Amazon has a feature called Replenishment Alerts that you can use to monitor your FBA inventory without needing to constantly check each listing. With this feature, Amazon will send you an alert email when your inventory reaches the threshold you set.
You can set your alert threshold by the number of units or weeks-of-cover, which is the number of weeks your remaining inventory will last based on your sales over the previous month. These alerts will help you to store only the inventory you need while ensuring products are restocked in-time to not miss any sales.
With the rapid growth of e-commerce, there has never been a better time to start selling online. Use the tips we have shared here to launch an Amazon FBA business that will be successful in 2021 and beyond.
AMZScout is an all-in-one solution to start selling on Amazon. It helps you find a winning product to sell and get accurate data on every Amazon product. The AMZScout bundle includes all key features and covers all sellers’ needs.
Learn what Feedvisor can do for your business.
When you partner with Feedvisor, you automatically receive access to our true, AI-driven technology and hands-on team of e-commerce experts. Contact one of our team members today to learn more about our end-to-end solution for brands and large sellers on Amazon, Walmart, and e-marketplaces.