How does Amazon FBA Work? | Ultimate Way To Stand Out as a Successful Amazon FBA Businessman
Source: Jungle scout
Proven Ways to make your Mark and Stand Out as an Amazon FBA Seller
Amazon FBA is a service provided by Amazon that allows anyone to sell a product without worrying about storage or logistics. That in turn means that it’s now impossible to run a large-scale product-based business from your front room, with no need for staff, large investments, or warehouses.
This is great because it means you can live the dream of running a business with relatively little involvement. But therein also lies the pitfall: how do you set yourself apart from the competition, when you are sourcing the same products (from the same manufacturers) and letting the same company take care of delivery?
One key method is to ensure that your branding is front and center. You can do this with the packaging (more on this in a moment), but also by placing your branding on the item itself. If you are reselling a product from Alibaba, then look for a “white label” product.
That means the company will not use its own branding anywhere, and will allow you to use yours in its place.
Next up is the service and how well you treat the customer. If the customer has any problems or questions you need to ensure that there is someone available to answer those queries as soon as possible.
Good quality service will ensure that your customer feels confident handing over their money and knows that they'll get what they asked for in return. It also ingratiates them to you which hopefully results in their being more likely to want to deal with you in future as well.
Packaging is something that's highly important when it comes to selling anything – especially if you're delivering the item. Think about Amazon versus eBay. When it comes to these two companies you might find that you can get the same item just as quickly and for the same price from either online vendor.
Thus the only thing you know will be different is the packaging – which means you're likely to pick Amazon in that scenario.
Packaging can make an item seem more premium, can make it more enjoyable to open and can strengthen your brand. At the same time you will this way be able to strengthen your brand and get free advertising.
Of course, with Amazon FBA the exterior packaging will be handled by Amazon – but you can still add your own packaging for the product itself, which is a perfect way to really stand out and get people excited for what you’re selling.
Creating Better Original Products for Amazon FBA – Consider Design
Amazon is not all about reselling – it can also be a great opportunity to sell your own products! And it’s almost just as easy – just approach a manufacturer on Alibaba selling something similar to what you have in mind, and discuss making the necessary tweaks with them. Voila!
If you've come up with an idea for a product, then that probably makes you an 'inventor'. If you're now planning on turning that idea into a business, then you're also most likely an 'entrepreneur'.
There are many hats in fact that you will have to wear in order to make this project a success and many skills you're going to learn, but one that often gets forgotten and that might not necessarily come naturally is also one of the most important: you must also be a 'designer'.
An Idea is Not a Product
Strange though it may sound, it can often be quite easy to forget the design stage altogether if you are someone who tends to focus on creating products and selling them.
Most likely you will have had the idea for your product in order to solve a problem (known as a 'stress point') and from that point it might be a simple matter of choosing a colour and size as far as you're concerned.
Even those that do take design seriously and spend time thinking about it will often approach it in the wrong way – thinking about it from a purely aesthetic standpoint rather than a functional one.
Good design should be woven in the very fabric of your product. Great design focusses not only on looks, but also on the experience that the consumer has when they use your product. Is it eye catching enough to sell itself? Is it designed in a way that will fit neatly into a buyer's lifestyle? Is it designed in a way that makes it intuitive to use, and pleasant to operate?
Let's take a look at the iPod. Here the idea and the product was simple: to create a small mp3 player that could fit 100 songs on it. This was the specification that Jobs gave his team and it was a relatively straightforward one – in fact there were many superior mp3 players on the market already.
What made the iPod great then was the fantastic design. That includes the white headphones that made the product instantly recognisable and desirable, but it also includes the 'scroll wheel' which was an absolute masterstroke of design.
The scroll wheel enabled users to quickly scroll through a hundred songs in seconds in a way that was faster and more intuitive than any button would allow.
You don’t need to do this yourself – that’s where the manufacturer comes in handy. You can also outsource to other services like CADCrowd. But even if it just means picking the right “base product,” then you need to make sure you are thinking about design first!
Getting the Best Reviews for Amazon Products
Depending on the nature of your industry, a few reviews can even make or break your business success. A perfect example of this is the mobile app industry. If you release an app and the first 10 reviews leave a 1 star rating, then you can all but guarantee your sales are going to slow down or even completely halt.
The same is of course true for Amazon sellers, and it only takes a few bad reviews – which are displayed right in the search results – to ensure that people choose a different product over yours.
So, what do you do? Providing the very best product and service you can is one important step but these additional tips can also help a great deal…
Offer a Freebie
One way you can avoid negative reviews is to offer a free sample of whatever it is you're selling. That could mean standing outside your restaurant with tasters, or if could mean having a free 'trial version' of your app. This isn't just good marketing – it also works to actively turn away the kinds of customers you don't want.
Of course, this will cost you money as an Amazon seller and it only works if your product is inexpensive (ideally something people order in bulk). While it might hurt you upfront, it can pay off big time in the long run – it’s called a “loss leader.”
Give away one of your amazing razors from your website, then link your lucky recipients to your Amazon listing.
In turn, this will then help you to make sure that the vast majority of your reviews are positive. Why? Because anyone who tries your freebie and doesn't like it, won't become a customer. The only people entitled to leave a review are people who paid for your services and if they have all previously tried whatever it is you're offering, then you know that in theory they should at least be impressed. Meaning positive reviews only!
Another strategy is to over deliver on your promise by pleasantly surprising your customers. You can do this in any number of ways. One obvious strategy is to deliver a parcel faster than you say you will, another is to include a free gift. Otherwise you can just make sure that aspects of their experience are better than they would have predicted.
Either way, people will be so pleasantly surprised at getting something 'extra' that they will be almost guaranteed to leave a positive review.
Going International With Your Amazon FBA Business
When selling through Amazon FBA, you will first need to sign up for an account. This is a relatively straightforward process, except that very first bit: choosing which Amazon you want to sign up to!
That’s because there are actually three Amazon(s):
Amazon UK also serves other parts of Europe such as Germany, Italy, and France. Amazon US meanwhile will also cater to Mexico and Canada.
You can choose to sign up to all three of these, but it’s a good idea to start with just one – and Amazon recommends that you pick the one closest to you. Hopefully in future, Amazon can find a way to combine these sites for sellers and create a single portal. That would be much easier for affiliates too!
But it gets worse.
Sellers outside the US hoping to sell through Amazon.com will face other potential challenges as well. The US to GBP exchange rate offered by Amazon is very bad for example (around 3-4%) and companies will need to register for TAX in the US.
So even if your market is primarily based in the US, you will still need to pick the store that is closest to home in order to make this a viable business model. The good news is that if you live in the US, none of this is a problem!
But what if you don’t?
So, what is the solution?
There are a few. One is to find a business partner in that country to work with that you can make an agreement with – they will act as your representative and will share the profits in some way.
Another option is to use an alternative fulfilment company. There are actually many companies that offer similar services, and a quick search will yield many working in your region.
You can still list on Amazon OR you can choose to sell direct through your own website via – say – an eCommerce Store. As long as you have an audience and a brand that people respect and are engaged with, then this can be a highly viable strategy that works extremely well!
Finally, you could always go back to basics and sell direct from your home. Doing this is tricky, but with a freight forwarder it is certainly possible and can help you take back full control of your business.
How to Choose a Category of Product to Sell on Amazon
When you first start your Amazon FBA business, you will be faced with the task of choosing a product that you want to sell. This means finding something that people will want and that you can buy in bulk for a low price.
The great news – and big issue – is that sites like Alibaba make this extremely easy and provide you with nearly limitless options. So, where do you start?
What category of product do you want to sell even?
Pets? Grooming? Fitness?
Let’s take a look.
Stats and Audience
What might help sway your decision, is the size of the audience, the amount of competition, the appeal, and whether or not the category is currently popular.
Choose a broad niche like “health” and you’ll have a nearly endless market of buyers, but you will also face extremely huge amounts of competition. Choose a narrower one – like curling – and you’ll find it much easier to stand out, but you might not have quite the same large audience.
As a rule, finding a niche that is smaller is usually a good idea. The smaller your business, the lower your marketing budget is likely to be. And in that case, you’ll do much better if you can find an industry where you aren’t competing with giant corporations for advertising space!
Want vs Need
Another thing to consider is the emotional drive that compels people to buy in this niche, as well as the number of other options available to buyers.
For example, health products are often very successful because they have a strong emotional pull. People want to be in shape because they think it will make them happier, more attractive, and more energetic – these are all things that people NEED and don’t just want, and they’re things we feel stressed about.
Curling doesn’t have quite that same crucial drive.
On the other hand though, selling products that someone needs for their job can be something that has a much greater sense of urgency – which is something that can help you to sell.
Consumables and More
There are so many other factors to consider that can help you to choose great products – such as whether an item is consumable (or has consumable elements), the overheads, the competition… So of course you could opt to choose the products separately and not to worry about niche.
But if you hope to grow your business and create a brand, then picking an industry first is the smarter strategy.
How to Get Multiple Product Sales as a Seller
Selling a product is perhaps the oldest and most straightforward business in the world. This is a simple exchange where you give someone an item, and they give you cash in exchange.
To make this work you need to ensure that they consider that item more valuable than the money you're charging for it, while at the same time ensuring that you spend less than that amount of money in developing it.
Those are the basics, but when it comes to the difference between a successful product business and an unsuccessful one things get a lot more complicated. This is a very fine art and precise science where even slightly tweaking a single variable can make all the difference.
Some of this is to do with marketing of course, but more important is what you do once you've got the sale. Once you've sold something to someone once, how do you ensure that they want to come back for more? How do you capitalise on that opportunity and go from a single sale to many?
High Quality Products
The most important factor here is the product and this is why it's so important to invest money in researching and developing/acquiring the very best products you can. Many companies here will think too much in the short term and aim to simply sell a single item.
What they aren't recognising is how much damage a bad product does to their reputation and their brand. Investing in quality products means investing in your customers and going from one off sales to lifetime loyalty.
More to Buy
If your goal is repeat buyers, then you also need to sell a product that benefits from/requiresmultiple purchase. If you sell a TV, the soonest you can expect to get another customer is in a couple of years.
That's why some companies will cleverly create complementary products that allow them to take advantage of their customers' newfound familiarity with their brand.
This is also the benefit of having a brand in general. That way, you can sell multiple products but leverage the good will built by one in order to sell many more! Stick within a single product category, but create variation and encourage people to “double dip.”
Finally, if you want to go one step further, why not entice your customers to come back by offering them some kind of incentive? If repeat customers get money off, then that will give them much more reason to come back to you instead of going elsewhere.
Combined with the points above this is really just the icing on the cake.
How to Promote Your Physical Products – Beyond Amazon
Thanks to Amazon FBA, more and more entrepreneur are now taking a stab at selling physical products. But while selling through Amazon this way is extremely easy, it’s also crucially not your only option. Once you have a product, you can now sell in a variety of ways. Send some of those products to Amazon, and some to yourself!
And once you have your physical products you then open up some new marketing methods, here are just a few…
Through Your Own Site: If you're a webmaster or blogger who currently makes most of your profit from Google AdSense and affiliate schemes,
Then hopefully you will have begun to see the merits of selling a product and particularly a physical product which will mean you become the sole beneficiary of your own hard work and that you maximize the potential profit you can make from each customer.
Having a product on your site which you can sell means you keep the visitors on your page rather than sending them away, you strengthen your brand, and you don’t share your profits.
At the same time, you'll find that actual physical products still sell much more effectively than digital products and according to statistics they sell roughly three times as many.
You will now earn enough per visitors that you can afford to use some more expensive methods of promotion. That and you'll have something that you can display physically and that will be interesting enough to draw visitors in its own right. Here's how to promote physical items on the web.
Use Existing Channels: There are many different channels you can use to get word out about your product. For instance you can promote your products on eBay which will be a great way to connect with people who are searching for something like the item you offer.
Likewise, you can also sell your item on Fiverr (especially if there's an element of customization) or you can generate a buzz for it before you've even released it using Kickstarter.
Use a Mailing List: When people visit your site, what's the one thing you want them to do before anything else? The answer is easy – you want them to sign up to your mailing list so that you can start marketing things to them directly and addressing them right in their own inbox.
This is also a great way to invite people to get in touch with their feedback and suggestions which can help you to tailor make products for your audience.
Six Business Concepts for Amazon Sellers
Selling a product on Amazon?
Here are six business concepts that can help you to sell more!
Prototypes and Market Feedback: When you sell through FBA, this means you can sell items online without even necessarily seeing them – even if the product is something YOU designed with the help of an Alibaba manufacturer.
Still, seeing them is very important and you should always make sure to order prototypes. In fact, you should do this during the design phase too so that you can iron out any problems before they emerge and so that you can perfect your product.
Feedback Loops and Iterations: That said, if you are a perfectionist then you might work hard to make sure that your product is absolutely perfect before you release it and this isn’t actually what’s best for business.
Rather, it is generally agreed that what’s much better for your overall chances of survival is to release your product early and to then to continuously iterate based on the market feedback and what seems to work...
This way you can ‘evolve’ your product to suit the market and you will find that it gradually becomes more popular as a result.
You can also use this method as a reseller, by speaking with the manufacturer, or by trying slightly different versions and suppliers for your products.
Anticipation: If you can build anticipation for your product before you release it, then this is a fantastic way to increase the number of sales once it’s out.
People hate being made to wait for something, and if you can make your product seem desirable and then force the audience to wait then you can increase its desirability to a large degree.
Split A/B Test: A split A/B test means that when you’re making a change to your product line, you don’t make it to the entire line in one go, but instead change it for just a portion of the line and your audience so that you can then get feedback on those changes without risking your reputation.
For instance, you might do a beta test of a redesign to your products – letting just a small batch of customers try the iteration, and this way get feedback on the change before you release it to everyone.
You can also use a split test to “try out” changes to your Amazon listing, to see which sells best. Try running one image or description for two weeks, then switch to another. Which sold more units?
Top Challenges Faced by Resellers, Solved by Amazon FBA
Being a reseller and selling products from your front room is a highly entrepreneurial endeavor, and one that can certainly be successful. BUT it also comes with a lot of drawbacks and limitations. That’s why more and more sellers are moving to Amazon FBA (Fulfilment By Amazon).
Here are just some of the problems that this will solve for you.
One challenge for many front-room businesses is storage. If you are selling something relatively small and only putting in small bulk orders, then perhaps this won’t be an issue.
But if you hope to grow your business to sell to hundreds of people daily, then you will start to run out of space fast. That leaves you with two options: invest in an expensive warehouse, or use Amazon FBA.
The other big bottleneck for a small home business trying to grow is delivery. Even when you have roped your partner, kids, Mum and Dad, and neighbor into packaging and sending your items, this still limits the number you can shift in a day.
More to the point, this is soul-crushing work. Didn’t you start running a business so that you could enjoy what you do? Is this what you envisioned?
What’s more, is that Amazon FBA provides your buyers with the benefits of Amazon Prime – giving them an incredible experience every time.
Then there’s the issue of how to deal with returns, with damaged goods, with missing deliveries… all these things significantly add to the challenge and can certainly eat into your profits.
Too many businesses will forget this: they will calculate their profits based on COGs, keystone pricing, and other clever sounding strategies. But they forget that sometimes people return orders.
For particular industries – the clothing industry in particular – this can often be crippling.
Marketing and Promotion
And after all of this, you are still going to need to handle marketing and promotion. You could be giving away blocks of gold, but if you don’t tell anyone that this is what you are doing, then you won’t manage to shift any units!
While Amazon doesn’t quite solve this problem, what it does do is to put your products onto the world’s biggest distribution platform. That counts for a lot!
This is why so many people avoid the reseller business, even though it might be an appealing and straightforward model on the face of it. With Amazon FBA, many of these issues are solved. All that is left then, is to choose an amazing product and to market the heck out of it!
Why Amazon FBA Trumps Selling From Home Every Time
If you want to start selling products for profit, you can set that up from home with relatively little trouble. Just order the products wholesale and then deliver them to your buyers when they buy them from you.
This might make you question why you would need a service like Amazon FBA that handles the delivery for you.
In a typical reseller business model, a business owner or entrepreneur would first identify a product they liked the looks of, then go directly to the manufacturers/wholesalers.
They’d next put in an order for 100 units (or thereabouts) which would get delivered to their own premises. A small entrepreneur might keep the stock in their front room, while a bigger business might own a warehouse.
Either way, the individual then markets the product themselves, and makes sales. Each time they sell something, they will package up the product, place a label on it, and pop it in the post.
When you buy wholesale, you will typically be able to get products at a discount. Usually this is a very significant discount, as the sellers see the value in guaranteed sales and thus are able to offer the low price.
This means that for every pair of jeans, blank CD, or set of dumbbells you buy for $5, you can sell them onward for $10 or $15. Sell off your entire inventory, and it’s normal to make a solid 100% profit or more.
Except not quite: because you also have to think about things like storage and fulfilment. This is where things can become significantly more challenging. Many independent entrepreneurs for example are not going to have the funds to afford a warehouse for storage, and nor are they going to hire staff to attach labels.
Therefore, it becomes their job to store all those items in their own homes, while making sure they keep track of how many items are in their inventory (and preventing things like moisture and mold from destroying your goods.
Delivery is complicated too. You’ll now need to calculate the cost of the delivery, find the best couriers for buyers in all markets (including overseas in most cases), and make sure you have a smooth process capable of handling large influxes of orders without missing deliveries! Imagine if you have a sale and you sell 250 units.
Would you be able to manually package and deliver all those items?
That’s where Fulfilment By Amazon comes in.
(And yes, Amazon FBA does translate to Amazon Fulfilment By Amazon).