We sent out questionnaires a few weeks ago to some of our SellerLift testers in the hopes of getting feedback from them for the new features of our Amazon feedback tool. Of course, we didn’t want the questions to sound super clinical, so we inserted a few things about how they leverage Amazon for their business. And one of those questions related to Amazon FBA.
To our surprise, we saw that a huge chunk of our users asked what an Amazon FBA was.
After we compiled all the data, we realized two things. First, and most importantly, the sleepless nights we dedicated to making SellerLift work is paying off. Yes, our testers are loving the features. Second, most of them don’t have the slightest idea that they can use Amazon itself to store and ship their products for them.
And if you just found yourself saying “what?!” after reading the previous sentence, yeah, you read that right.
It means “fulfilled by Amazon”, which means that if you have a product to sell, you have the option to send it to an Amazon fulfillment center. Once there, Amazon itself will store your product. And when someone buys said product off your Amazon store, Amazon will ship it to your customer.
In a nutshell, it’s about finding a product that is on sale, and then selling it on Amazon based on whatever price the product has on the platform.
For example, if you bought teeth whitening strips on sale for $10, and if the price for the said product on Amazon is at $30, you sell it for that amount.
Why Would People Pay Full Price For A Discounted Product?
Good question. And in truth, I also did ask that myself when I was starting out. Luckily for me, I had a few good mentors at that time, and this was how they explained it to me.
Product price/deals can vary based on location
Take this for example, we pay a premium for bamboo products here in the US right? Have you tried going to Asia and see how much the price difference is?
Location plays a huge role when it comes to trade. A product that is common or slow moving in a certain area can sell for a premium at another location.
No driving to the mall, standing in line and driving back home. That’s why people choose to shop online, and would even pay more for a product.
Why You Should Use The FBA Option
As an Amazon seller, it really is up to you how you want to sell and ship your products. Either you keep them at your house and personally ship items when a sale is made, or just leave everything up to Amazon.
Now which do you think is more convenient?
And if you need more convincing, here are a few reasons why leveraging Amazon’s FBA option is much better.
Access to Amazon Prime users
By using the FBA option, your Amazon Prime customers can benefit from free and fast shipping. And if you think Amazon Prime users are a rarity, you are highly mistaken as 52% of US based Amazon customers are Prime members.
A 2016 QZ article places the spending habits of Prime members at $1,200 per year while regular Amazon users spends an average of $500. So by registering for an FBA, you are tapping into a huge demographic that is already willing to spend money on products.
You save money in the long run
Aside from the fact that you have the option to charge more when selling FBA, it actually saves you money.
For example, if you have 20 products on your Amazon store, you have to factor in the cost for buying 20 individual boxes for them, 20 shipping labels, 20 trips to the post office, and not to mention finding time to prepare them if you wish to fulfill the orders yourself.
On the other hand, using FBA allows you to use Amazon as your personal storage and shipping platform. Yes, you might have to pay an additional fee to use the service, but that’s a small price to pay for your own convenience and assuring that your packages are safely delivered and on time.
Now if all this talk about Amazon FBA got you interested in it, you might want to continue reading as I have a few tips to maximize your productivity and sales potential.
Top tips for new Amazon FBA users
- Take it slow and find good products to start with
- Don’t invest money that you aren’t ready to lose
- Focus on ungated and restricted categories as it’s a good way to increase your inventory and income
- Join Amazon selling groups that are newbie friendly and don’t hesitate to ask questions
Best places to look for retail arbitrage products
Of course, the usual places would be Target, Walmart, Walgreens, CVS, etc. And yep, I have found some products on there that have earned me quite a good profit before. But if you ask me, the best places are those little thrift stores that are hidden away in some back alley.
Garage sales and auctions are also a good way to find those one of a kind products for cheap.
Top FBA tools you need to have
- Amazon Seller App
- Amazon price tracking website camelcamelcamel.com
- Amazon revenue calculator
- Ebay completed listings (so that you can counter check with the site what products are not yet on Amazon)
- Godaddy bookkeeping (for you to easily import and organize all of your business accounts together as well as generate income and expense reports)
- JoeLister.com (if you also sell on Ebay, the site allows you to create eBay listings from your Amazon store)
- Vendio.com (checks your eBay and Amazon inventory between eBay and Amazon)
- Merchant Words (an Amazon keyword tool that finds the most used keywords Amazon users are typing into the search engines when looking for Amazon products)
- SellerLift (so that you can automate your after-sales emails)
Things you should be aware of
- If you’re new, don’t sell too many items at once. Not that it isn’t allowed, but you might have a hard time taking care of your feedback rate. And if you don’t have any idea why you should keep it up, read this article of ours about The Importance Of Feedback and Reviews on Amazon and How to Get Them
- Amazon Prime members are keen to pay more for a product
- Be mindful of Amazon rules and policies
- Be creative. Dont settle for what other are selling. Look for unique products to set yourself apart from the rest
The Downside To Using FBA And Online Arbitrage
I would be a hypocrite if I were to end this article without talking about the flip-side of the program. And yes, it does have a few “proceed with caution” signs tied to it.
Don’t get me wrong though, it still is a good program. And all I’m doing for this part of the article is to present the program objectively. Because the more you know about what you’re getting yourself into, the more informed your decisions become.
Here are a first hurdles new FBA users will surely encounter.
Ridiculous number of sellers
It is without doubt that when someone tries to sell something online, one of the first platform they go to is Amazon. And with thousands of new sellers popping up every day, it is no surprise that the FBA program has become super competitive, and saturated even.
And with most of these new sellers not being familiar with Amazon fees, they tend to price their products incorrectly. Though this may benefit consumers, it greatly affects other sellers making them unable to compete, or sell, products knowing that they are doing so at a loss, or with minuscule profits.
Add to that the influx of Chinese sellers that use the FBA program to sell products to Amazon portals in EU, EK and the US, and you can see how difficult it is to compete in terms of price difference.
Amazon brand gating is Amazon’s way of placing financial restrictions for specific brands in an effort to limit the number of counterfeit goods sold on the marketplace.
Brand gating is Amazon’s way of limiting the sale of counterfeit goods on its platform by enforcing financial restrictions and a sort of brand accreditation if you want to sell said “gated” products.
So how will this affect you?
Will this technically affects anyone selling on Amazon that is “not” Amazon. Meaning any third party seller that does retail/online arbitrage and dropshipping from other retailers will have to get approval from the actual brands that they are selling before they can sell said brands on Amazon. And the sad part is, unless you yourself is an established online selling brand, the chances of getting a greenlight from global brands can be very slim.
Now if you are lucky enough to source products directly from the manufacturer, then you most likely are in possession of needed invoices that are required by Amazon. But then again, there are some brands that requires nothing less than an authorization from the brand owner him/herself. Now I don’t know about you, but getting one is as close to me dating a Victoria’s Secret model.
*More about Brand Gating on a future article. So stay stuck.
Retail stores refusing bulk sales
With retailers seeing that they are losing out on potential online sales themselves through retail arbitrage, some of them are now refusing to sell products in bulk. This in turns affects the ordinary Amazon seller as the idea of “good deals” is slowly fading away.
In the past, when a retail store goes on sale, you can buy an entire product aisle if you have the money for it. Nowadays, you are limited to maybe 3 or 4 products of the same kind. One doesn’t need to be a math genius to see the huge profit potential lost here.
Should You Continue Doing Online Arbitrage?
Honestly speaking, it’s going to cost you a few headaches. But if you play your cards right, it can still be done. All you have to do is to tread lightly and stay away from “protected” products.
What you can do is source your products from several retailers and settle for lower order quantities every week. Yep, this may be a buzz kill, but it is better to be safe than sorry if you want to start, or continue doing FBA and retail arbitrage.
But if you are just starting out, or maybe a more seasoned seller that wants to keep his/her store going, think of it as stepping stone. Overcoming this speed bump will not only earn you a badge of honor, but might just be that motivation you need to establish yourself as a reputable seller in the future.
What’s Your Best Option Regarding Brand Gating?
You should not:
- Think that because you have yet to receive a gated brand strike/notification that you are off the hook. There are thousands of sellers on Amazon, and they send usually send said notifications in waves
- Try to be cheeky and list new items to “used” to try and slip through brand gating. They will eventually catch you
- Bundle non-restricted and restricted brand together in the hopes of, again, slipping through brand gating. Yep, they will eventually get you
- Think that omitting brand names from your listing is a loophole for you to sell restricted brand without needed authorization. They will get you
- Check to see if your are authorized sellers for the brands they carry. This way, you will have an idea if your documentation holds water when scrutinized by Amazon
- Talk to your supplies and see if you can ask them to get you an authorization letter from the brand, and the owner itself
- Sign-up for Brand Registry if you are a brand owner
And about Amazon’s Brand Registry, you might want to read this article.
To end, Amazon is a great platform to generate passive income.
Yes, I know that I may have blown your bubble a bit with the last part of the article. But like what I said, it is better that you understand fully what you are about to go into. I don’t want you to all giddy and starry eyed with the idea of starting your store on Amazon, only to have your seller account reprimanded or worse, canceled.
Amazon was a god sent for anyone who wanted to earn a few extra bucks then, and I still think of it as one even today. And though things may be more complicated now as it was before, that is just the nature of commerce. Be it online or in the real world, it is a complicated and ever evolving entity. We just need to find ways to adapt to it.
Anyway, good luck to you! And if you found this article helpful, do us a favor and share it with your contacts.
Cheers, and have an awesome day!