Launching a Fulfillment by Amazon (FBA) business is a smart way to sell products without having to worry about shipping to customers. With an FBA business, you can earn money while relying on Amazon’s expertise to get products where they need to go.
If you’ve been intrigued about starting your own business, an FBA company is a good option to consider. Here are 10 steps to launching your own FBA.
- Know What an FBA Is
An Amazon FBA business is one where you are responsible for selling products but rely on Amazon to fulfill orders. You choose your business structure, the products you want to sell, the suppliers and pricing.
Products are listed for sale on the powerful Amazon online platform. The products are housed at one of Amazon’s fulfillment centers. When you sell a product, you notify Amazon and they take care of the rest.
You’re responsible for listing, marketing and selling goods on your Amazon store. However, you’re not responsible for storing items, packing them or getting them ready to ship. Amazon also handles customer service questions from customers and returns.
It’s an increasingly popular business option for several reasons. There are low financial barriers to entry, growth opportunity and the ability to launch a business with little capital.
- Create an Amazon Seller Account
The first step when establishing an FBA business is to create an Amazon seller account. Creating the account is free and it is necessary to list items on Amazon’s platform. It will be different than the account you use to buy items on Amazon.
Amazon will verify the account after it’s created so it’s important to make sure that your information is accurate. You’ll need to provide the following:
- Business name
- Business email address or your Amazon customer account
- A government ID
- A credit card that can be charged internationally
- Tax information
- Phone number
- Bank account information where Amazon will send sales proceeds
When creating your business name on Amazon you’ll want to be sure to check it against your state’s registered business names and trademark databases. Make sure to consider a name that represents your business, is easy to remember and will work well in our marketing materials.
You’ll also have the option of two types of seller accounts, both of which charge a sales commission on top of the fees noted below:
- An individual plan, which has no subscription fee but charges your business a fixed fee for each item sold
- A professional plan, which has a fixed monthly subscription fee regardless of sales volume. Generally, if you sell more than 40 items a month, the professional plan is the smart choice
Once you’ve established your plan, you can sell products via Amazon. You’ll need to use a Global Trade Item Number (GTIN), which is a unique identifier for each product. Common GTINs include UPCs, ISBNs or EANs.
- Determine the Legal Business Type
You’ll need to select the right legal business type for your business. Which business type you choose depends on the kind of business you want to operate. Each has advantages and disadvantages.
Many owners choose the business type based on liability and tax considerations. Here is a brief look at the most common business types:
- Sole Proprietorship. The most basic business type, a sole proprietorship requires no formal documentation. The business owner is responsible for all losses and judgements and records profits on their individual tax returns
- Partnership. This type is a type that involves an agreement between two or people who will run the business together. Partners share in the business profits and losses. It’s an easy business type to create but all partners are jointly liable for any debts or judgements. Profits and losses are passed through to partners’ individual tax returns.
- Corporation. This is a formal business structure that establishes the business as a separate legal entity from its owners. There are many different corporation business types but most are one of two kinds:
- C Corporation. This type of business has its own tax ID and shareholders. Owners are generally not personally liable for the company’s debts or liabilities. However, this business type has “double taxation” because the company itself is taxed and any dividends issued to shareholders are also taxed
- S Corporation. This business type allows owners to avoid double taxation by passing through business income to personal tax returns. However, there are limits as to the number of shareholders
- Limited Liability Company (LLC). This is a very popular business type with small businesses. An LLC provides owners with limited liability, meaning they are not personally responsible for debts or judgments against the business. There is great flexibility in how the business is managed and profits and losses are passed through to owners’ personal tax filings. An LLC formed in Delaware is an ideal option for FBA businesses, especially those without physical storefronts and for non-U.S. citizens
- Do Your Research
Market research is an important component of any new business. When considering an FBA, be sure to dig into the following:
- Product Offerings. What kind of items do you want to sell? Are they related to an interest or hobby? Knowing the kinds of items that are necessary for a particular niche can be a major advantage
- Best Seller Rankings. The Amazon Best Seller Rank (BSR) shows what products sell well; however, there’s usually more competition in those categories. Look also at the spread of products across a category
- Price. What price point you sell needs to generate profit and be competitive
- Competition. Who else is in the space where you want to sell? Knowing your competition helps position your business and create a compelling unique case for your business
- Build Your Business Plan
No matter what business you launch, having a business plan is essential. A business plan provides structure and strategy to your business.
Here are the core components of a business plan:
- Executive Summary. A summary of your business that provides a brief snapshot of your company and what it does
- Overview. This section details your business history, business type and leadership
- Industry Analysis. Based on your research, this section documents the industry and your position in it
- Customer Analysis. This section details profiles of your ideal customers and their demographics
- Competitive Analysis. Here, you detail your competitors and how you will create a competitive advantage
- Marketing. This section details your products, pricing, promotions and messaging strategy
- Management. This section provides details on the background of your company’s leadership
- This section details how you will operate the business, including your supply chain, operating expenses and how it will run as an FBA business
- Finances. This section answers questions about startup costs, budget, how you will attract customers and generate sales, your sales projections and how you will raise funds for your business
- Understand Start-Up Costs
While there are fewer start-up costs for an FBA business than most, there will still be some expenses that need to be covered before or once you launch. Here are some of the costs your FBA business will face:
- Inventory. You’ll need to buy products to start selling. You may be able to negotiate longer invoice payment terms from your suppliers, which would allow you to pay for inventory after you’ve sold some goods
- Advertising. When you launch your business, you will likely need to purchase ads to get buyers interested in what you’re selling
- Shipping. You will need to pay to send stock to an Amazon fulfillment center before selling it
- Fulfillment Fees. Amazon charges fulfillment fees based on the type, size and weight of each product you sell
- Source Your Products
Where will you find the items you sell? There are many options to find good suppliers, including online searches, trade shows and trade publications. Some digital wholesalers, such as Alibaba, are good sources for wholesale products at inexpensive prices.
Having good relationships with suppliers is important. They can help you with order management, special pricing and invoicing. In some cases, domestic suppliers are preferred as shipping prices are typically lower. Also consider using local outlet stores or even Target and Walmart to find clearance items that can be flipped on Amazon for a higher fee.
- Write Good Product Descriptions
Compelling product descriptions provide the right details and inspire customers to buy what you’re selling. Good copywriting means being accurate about your product titles, descriptions and details.
You’ll want to be sure that your product descriptions include the right keywords that will optimize search engine results and send customers to your Amazon listings.
Product listings should be concise and full of details. Bullet points are a good way for customers to skim your products and get the major features. In addition, your product listing should include more details. Add a specifications section that includes sizes, materials, colors and additional information.
- Market Your Business
Marketing is essential, especially when launching your FBA business. Amazon will not help you sell your products. You’ll want to create a marketing strategy for each product line and make the case for why to buy from your business.
In addition to good product listings and images, you can consider using blogs and social media to spread the word. Think about the pain points that potential customers have and how your products can solve those issues.
You can also consider using online advertising, especially on Amazon and Google. Be sure to start small and see what works.
- Package and Send Products to Amazon
You’ll need to send your inventory to Amazon. Managing your inventory is important but simple to do as long as you’re organized. Be sure items have an Amazon-provided barcode that covers other barcodes. Then use the provided shipping labels and follow Amazon’s packaging guidance.
You’ll pack up boxes (or pallets for large goods) and have them sent directly to a fulfillment center. This process can take time at first, which should be factored into your planning and operations.
An FBA business is an exciting way to sell products. By thinking strategically about the kind of business you want to run and the products you’ll sell, you can generate income while leaving many logistics to Amazon.