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[METHOD] How to Start an Amazon FBA business for about $500

Discussion in 'Making Money' started by kpetar, May 15, 2017.

  1. kpetar

    kpetar Registered Member

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    I'll try to make this short and leave details for questions in the comments I am hoping that I am able to create a free resource for people looking to start selling using Amazon FBA. Do not waste your money on a course when you could spend that on a product. Personally, I think it is better to watch some YouTube Videos, read a couple of blogs and just getting started on a smaller scale. You’ll learn more from doing than you will from any course out there when you could spend that on a product.

    This isn’t rocket science, you can do it with less than $500 and in about a month without Harvard MBA, million dollars on your bank account, reinventing the wheel, all you need is common sense, some work hours and as I said $500 of the initial investment.

    This is how to it, step by step, with sample product.

    Here’s a quick breakdown of costs for my first batch of 100 units ordered:

    • Manufacturing costs: About $280
    • Shipping/Freight costs: $150
    • Photo editing: $20
    • UPC: $8 from Ebay
    • Amazon monthly subscription fee: $40
    With some quick math, you can see my total costs are about $498

    PROCESS

    • Product research
    A product that meets the following basic criteria:

    • Obscure, boring item that sells well
      • Existing demand on Amazon (we do not want to try to create demand, just leverage existing demand)
      • Product without too much competition. Where there aren’t a lot of items with hundreds of good reviews competing for the top spot (1 product with 1,000+ reviews? Bad. Only one product sells. 5 products with less than 100 reviews? Good. 5 listing with 1,000 reviews? Bad, competition is too high. 6 guys with 10 reviews? Bad, no demand)
    • A national brand name does not rule the market

    • Lightweight and small products are preferred The ideal FBA product takes no storage space and sells within a month. The further you get from that ideal the less likely you are to make a profit.

    • Alibaba: order a product
    You can go to AliExpress and order several units to test the market with minimum financial risk but I suggest, go directly to Alibaba and order 100 units due to better rates. Delivery time is 3-4 weeks.

    Now look around your house and try to get an idea. Browse Amazon for each item you see no matter how obscure item is. Let’s say, I saw stretch lid and decided to compete with it. (Tip: do not compete in things like phone chargers (two much fake products, you can face with numerous refunds and get your account banned) and phone cases (too much competition, gross margin, and ROI are a disaster).

    How do I do it:

    • Search “stretch lids” on Amazon

    • Check out the first-page listing, how many reviews they have, photos and price of course. Seems like the 6 pack set is about $13-15. Sales price is determined by our competitors, so we will set our price at $13-15.

    • Search “stretch lids” on Alibaba
    After several messages I received an offer for a nice looking, FDA and LFBG approved, made from food grade silicone, BPA free, dishwasher and freezer safe, flexible 6-set silicone stretch lid. $2,8 per set for, minimum order quantity – 100 sets.

    This price difference looks great but there are some other costs to consider. Shipping and Amazon fees.

    A supplier can organize aircargo+UPS delivery for $150 ($1.5/set costs to ship from China). So that’s $4.30 per set. Amazon then takes their cut and for this particular product, their cut is $4.53. You Amazon fees you’re gonna use Fulfillment by Amazon Revenue Calculator.

    As you can see a product that costs $2.8 will actually cost almost $9. That’s three times more than you saw on Alibaba. In this example, we’re making a $3-5 profit/item. Not much all but eventually you’ll see that better selling products have even lower profit margins.

    I know, when you sell all 100 units it’s only $300 of profit but you can’t expect to earn more with such a low initial investment.

    A general milestone that Amazon sellers seem to strive for, is reaching $1000 a day. You may think that you do this by launching a hugely successful product and yes you can do it that way but it’s actually the hard way. You would need a product that makes $30,000 a month. The problem with most $30,000 a month products that have any kind of profit margin is that they will be highly competitive. The second problem is inventory. The simpler way is to aim for a product that sells 10 – 20 units a day and sells for between $15 and $25. Once you have this product up and selling on amazon you can start to expand into other items in this category which will lead to a reduction in your shipping costs in the long run. To get to the magic number of $1,000 a day you would just need to duplicate what you did with this product with 2 other products. Or 4 or 5 other products that sell between 5 – and 10 units a day.

    Waiting for a product to arrive – what to do?

    The most important parts of your listing are your photos and your title. Many people won’t even get past your main photo. Instead of hiring a product writer on Fiverr I suggest you write your own descriptions, bullets, title, and keywords button the other hand taking your own pictures is a bad idea if you don’t have a professional camera, lightbox and Photoshop skills. Photos could increase conversions by quite a lot, so hiring a professional for photos is one of the best investments for a successful product line. Additionally, you should research PPC, track your competitors (analyze their sales, keywords and targets) and lastly, look at your pictures once again and ask yourself, could they be better. If they can, retake pictures.

    Product lunch – strategy

    Product has arrived at the Amazon warehouses. Our listing is officially active and live, now what? Get reviews on the product any way you can and as soon as possible. This should be your main focus because reviews are KING but it is very difficult to get organic reviews. Last year Amazon banned incentivized reviews so you have to think out of the box here. Ask your friends, neighbors, family to find your product manually on Amazon and buy it at full price, hire someone (fiverr, Upwork, bartender from a local bar, your dentist…just find someone) to search for it and buy at full price. Are you noticing a pattern? Don’t send a link to your product – let them find it manually. Amazon will rank higher your product for that particular search terms. Let them buy at full price, so you won’t have any problems with Amazon and incentivized reviews. Additionally, along with a review, other potential customer will see it’s a verified purchase and you’ll have social proof. This is against Amazon TOS but trust me, without those initial sales and reviews your product will just sit and collect dust in Amazon warehouse.

    That’s all folks, now you have started your own brand.

    If they sell, don’t take money out of the table, re-invest into more inventory, decrease shipping costs, move on to a new product and start the whole process again. Except for this time, it should go much smoother and easier and eventually you’ll have your own company, your own small business.

    If you want to invest more, I would buy 4 or 5 different products rather than a lot of inventory of one product. You’ll maximize your chances of success by having multiple possibilities for success.


    Previously I posted this on Reddit
    https://www.reddit.com/r/Entreprene...started_an_amazon_fba_business_for_about_500/

    and originally is published on https://selleratheart.com
     
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  2. TheUnborn

    TheUnborn Elite Member

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    Thanks very interestinng, which tool do you suggest finding the right product?
     
  3. TheMasterOfMoney

    TheMasterOfMoney Power Member

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    Question: What are the requirements to start a FBA business? I mean, basically, what does Amazon asks you for? Do you have to send them the products or do you have to do anything else, and what requirements they need other than that (idk, country, specific shipping, etc)
     
  4. kpetar

    kpetar Registered Member

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    Most popular tool is a Jungle scout but it cost a lot. There is a free alternative called unicorn smasher.
     
  5. kpetar

    kpetar Registered Member

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    You ship your products to Amazons fulfillment center. When a customer orders one of those products, Amazon employees pick, pack, and ship your orders.Delievry to Prime customers is 48 h and they have more than 60M Prime customers.

    Basically, Amazon do all the hard work and sellers are spared from the hassle of shipping, packing, returns, runs to the post office, and other distractions.

    You need to provide a bank account in a country supported by Amazon. Currently, Amazon supports bank accounts in the Eurozone, United Kingdom, United States, and many other countries. Click here to see the list of supported countries. If your country isn’t on the list then you need Payoneer account.
     
  6. TheMasterOfMoney

    TheMasterOfMoney Power Member

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    Oh very interesting, thanks. I thought they needed many other things, like idk, shipping things to Amazon directly from the States, or with specific packing
     
  7. kpetar

    kpetar Registered Member

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    Yes there are packing, labeling requirements etc. but it isn't a big deal. You can send them from any part of the world (from China is cheap) 100 units of some product, create a listing or jump on existing one and after you sell they will ship to the customer, even they will gift wrap a product if customer require.
     
  8. thetoothfairy

    thetoothfairy Power Member

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    Interesting share. Thannks man
     
  9. Massacre

    Massacre Regular Member

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    That's a nice share. Thank you
     
  10. Pure Mint

    Pure Mint Registered Member

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    Thank you for this write-up. I wanted to know what are the profit margins you should expect with just $500 for startup? When should i see profits after reviews and first sales? 2 months 3 months, 6? Because from what i have read about amazon fba is, I would need to keep reinvesting my profits for a long time before I see any real profit margins, with very little startup
    I'm talking $1,000 to $3,000 in my pocket profit (before taxes) Please correct me if I am wrong and Thank you in advance.
     
  11. kpetar

    kpetar Registered Member

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    Amazon isn't get rich quick scheme. With this particular product I suppose that you can gain $3 profit per unit. Be aware, this isn't net/net/net - you should consider PPC, possible refunds etc. You can see profits right away but I strongly suggest to re-invest into more inventory, another product... It is the only way to viable and profitable business.
     
  12. aniyadoug

    aniyadoug Newbie

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    Thanks I'm gonna jump to amazon FBA so it's useful
     
  13. Tacklebox

    Tacklebox Junior Member

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    worth sharing the details...most of the guys not aware these details ...thanks in advance
    Shefali
     
  14. faisalmaximus

    faisalmaximus Jr. VIP Jr. VIP

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    Thanks for describing everything so nicely, Amazon FBA is always a great way to make money online. If you collect your products from Aliexpress, you can buy them at a cheaper rate and can sell them Amazon & Ebay to make more profit.
     
  15. Corydoras007

    Corydoras007 Regular Member

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    Thanks for this. Very short but very helpful.

    Quite curious but what did you do for packaging of the products?

    One problem I have is the supplier will make a product but put it in a simple shitty plastic bag. The product works but the packaging isn't marketable.
     
  16. strategynenergy

    strategynenergy Registered Member

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    Amazon FBA is definitely something you would want to have 2-3K for but if you are really low on budget I guess you can do it with $500 as well. I just feel like if you are living in a developed country and you are having trouble with finding 2-3K, then going into any business is probably not a good idea.
     
  17. SmartseoIndia

    SmartseoIndia Junior Member

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    Reading your post OP makes me feel i should also give it a try....only issue i see is sitting in other counter than US is not a disadvantage.
     
  18. QueenAshly

    QueenAshly Registered Member

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    Even if u get 30 people to search for a keyword your trying to rank for, get 30 reviews... depending on the product/keyword, your not going to even get to page 2 with 30 sales. If the top 5 sellers of "garlic press" sell on average 600 units per day. then you will need to sell(giveaway) 20 units per day for about 7-10 days in order to get ranked in the search results with them. there are several deal sites which help you sell your product with a heavy discount to achieve however many sales per day you need to rank where you want/need to rank
     
  19. kpetar

    kpetar Registered Member

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    If you order your item from China, you 100% want to get your packaging made in China. Every factory has local contacts for factories that make packaging. Tell them what you want and have them send you a template - that easy.

    If you are buying stuff from the US sometimes it is still cheaper to get the packaging from China depending on the size. If you have to get the packaging in the US I would go with brown remailer type boxes and design a nice color sticker. Purchasing retail packaging in the US is EXTREMELY expensive for some reason. They will have HUGE MOQs and crap pricing. For example an 8 X 8 X 8 (5) ply color box in China may cost me 0.20. Here in the US you will 100% be looking at more than 1.00 - Could be closer to 3.00 depending on what is needed. What that being said I would simplify your options if you want to purchase in the US by using plain packaging with stickers.
     
  20. kpetar

    kpetar Registered Member

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    You are probably right - undercapitalization is the main reason why businesses fail.
     
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