What is Amazon FBA

Amazon FBA is one of the most exciting new business opportunities for the average Joe. Never before has starting a new e-commerce business been so accessible, and many of the barriers that would stop someone selling product only have been taken care of by Amazon.

Going Solo

Let’s look at a typical online store. There are so many moving parts that would put it beyond the capabilities of your average guy on the street. The capital requirements, and time commitment would also exclude most. Think about it for a moment. You need to have inventory, you have to store that somewhere. Who is going to lease a warehouse for a startup gig unless they were to quit their job and start from scratch. The risk is too high for most.

What about packing the orders? Would you do it yourself, or will you bring on staff? How many items will you have to sell to cover your warehouse costs, staffing costs? We haven’t even covered marketing yet. How will you sell if no one knows you exits? Will they trust you enough to send you money?

Who will handle your customer service? Answer questions, deal with complaints, process returns. Even a simple online store idea becomes a complex commercial venture before you even get your website up. Speaking of which, who is going to build and maintain that for you?….

What FBA Does For You?

The answer is a very simple (almost) everything! Warehouse storage… Check! Order packing & distribution…. Check! Customer service…. Check! Marketing… they have hundreds of millions of visitors already! Does a customer trust Amazon? You bet they do!

Of course you have to pay for the privilege, but when you weigh up everything that you don’t have to do not only is it worth the money, it makes the idea of going into business possible.

Let’s summarise the process start to finish:

  • Order your products from the manufacturer
  • You organise to ship the goods to the FBA warehouse
  • Amazon store your goods
  • When an item is ordered Amazon pack the order, and send it to the customer using their distribution channels – which are lightning fast!
  • Amazon collect the payment, take their cut, and pay you the rest.
  • Any returns or other customer service issues are dealt with directly by Amazon.

It almost sounds too easy doesn’t it? While there is a bit more to it than the above process, that pretty much sums it up. You will pay a very reasonable 15% of the sale value to Amazon, and then a fee for packing the order that will vary depending on the size and weight of an item. This fee starts at $3.01.

Having access to this kind of infrastructure and customer base is a game changer for anyone looking to start a business selling physical products. No longer will you need to go heavily into the red for years at a time to build up a viable business. Doing so takes a lot of courage, risk and some luck too. In the past building your own company was just out of reach for many due to these barriers to entry.

You can have your product online with Amazon, and selling in volume in a matter of days. Profitability is instant if you have the right product, and you can achieve some serious sales numbers. The instant exposure to customers allows you to prove you have a viable product/business before you look to build out your own channel.

If your product is a winner you can fund the building of your own channel from your Amazon profits. This sounds a lot more inviting than putting your life savings on the line upfront. This opportunity may not be around forever, but for now it is one of the most accessible business models around for someone just getting started. Once you are up and running it is incredibly passive. A great side gig to compliment your full time income, or if you want to go hard at it you can build a proper business.

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