What is Fulfilment By Amazon?
Selling stuff on Amazon is nothing new and many people have Amazon seller accounts. The problem is that most people use them to get rid of items they no longer want and fail to see the potential for a real home based business with the largest online retailer in the world.
These people list their item, make a sale and then package the item before tripping down to the Post Office to send it to the buyer. There is a better way and it's called "Fulfilment By Amazon" or FBA for short.
So just what is FBA?
Very simply, it means you label your items with a bar code (which is produced using the Amazon website), pack them into a box with a couple of sheets of paper describing the items and then send the box via UPS to an Amazon distribution center.
The beauty of the system is that once the item sells, Amazon pick, pack and send the item on your behalf. You can send as many items or boxes as you like and then wait for the items to be sold. Approximately every two weeks Amazon will send you the proceeds from your sales minus their fees. Amazon even handle customer complaints, returns and questions.
Many of Amazon's millions of customers will ONLY buy from Amazon or sellers who are using FBA. This is because they know that their items are being sent to them from Amazon and they get Amazons excellent customer service as a result. The item will be delivered packed correctly, delivered quickly and they can return it if not satisfied. If they have signed up to the Prime Membership program then they get free two-day shipping on all items shipped from an Amazon warehouse - giving FBA sellers even more advantages over non-sellers.
So what's the catch? Well clearly Amazon won't do all this for nothing! They charge several fees but they are probably lower than you think.
Here is a description of the fees for a typical item such as a book, which we will assume you plan to sell for $10.
Seller Plan Fees
There are two plans available and most people start out with the individual plan which will make a charge of $0.99 per item when an item is sold. If you plan to sell more than 40 items a month then it's worth upgrading to the "Pro-Merchant" plan which charges a flat rate of $39.99 per month irrespective of the number of items sold.
You can think of this as the commission that is charged on the items selling price. Amazon typically charge 15% for a book.
Variable Closing Fee
This fee does vary substantially depending on the type of media you are selling. For a book it's currently $1.35.
Picking and Packing
Picking and packing is charged for the time taken for Amazon to locate your item in their warehouse and then pack it for sending to the buyer. This is normally around $1 for a typical book.
As the name suggests, this is a fee for handling and is based on the weight of the item. You don't normally need to weigh your item since Amazon know the weight of every item they sell. If it's currently listed on Amazon then the weight will be known. Amazon calculate the shipping weight of our book as 0.71 pounds and apply a weight handling fee of $0.55.
Amazon charge a fee for storing your item while it waits to be sold. The fees for this are very low for the majority of the year and increase slightly during the busier period of October through December. The storage fee for our book is just $0.02.
Overall the fees may appear extensive, particularly when you factor in the cost of the goods in the first place. An easy way to estimate your profit is to assume a ratio of 1/3 for the cost of goods, 1/3 for the Amazon fees and 1/3 for the profit. Is it possible to make money like this?
Many sellers find that the real trick to making money using FBA is identifying and buying goods which will yield the magical mark-up described earlier. This is not as difficult as it might first sound.
Many thrift stores have discounted goods which can be sold for full price on Amazon. Many full-time FBA sellers use a bar code scanner to scan items in the thrift store. This scanner then tells them the price being obtained on Amazon and they can therefore make an informed decision on which items to buy and yield the required profit. There are a number of different scanners available and a simple Google search will reveal most of them. Be aware that some have month fees associated with them. Try typing in the search term "Barcode scanner for FBA" and you'll not only see the scanners but also Youtube videos showing you just how to use them.
Another common way is to buy from a wholesaler such as Alibaba.com. You can spend a significant amount of time finding items which will yield the required profit. Another disadvantage is that you more than likely have to pay import fees to get them into the United States and this can eat significantly into the profit margins.
The other popular option is to buy items from eBay and then resell them on Amazon. You still have to take into account the mark-up requirement and also don't forget to include postage and packing from eBay on top of the price you pay for the item. There are a few programs around, such as Amatrage Pro, which will find item automatically and rank them in order of profitability.
This is not a get rich quick scheme. It takes effort and work to make it pay. The beauty is that it is scaleable. If you want to make a few hundred bucks for a few luxuries or to pay a few bills then that's certainly possible. If you want to make a full-time income then that's also possible. Many people, such as Jessica and Cliff Larrew, do this already and they report earnings into six figures for last year!
Overall it's a confirmed method for making money using the best online retailer on the planet if you are prepared to put in the required work.