The Beginners Guide to Amazon FBA Selling

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I’ve been doing quite a bit of talking about my Amazon selling in blog posts and tweets recently. To my surprise, quite a few readers have expressed interest in this topic.

In order to create a place to direct everyone that has been asking me how to get started, I thought it would be a good idea to create a post that contains everything I can think of about getting started.

Here we go….

Why Amazon FBA?

I’ve always liked the idea of reselling products. In something like 8th or 9th grade I begged my mother to give me money to start an eBay business. She thought I was silly.

In college, I found that I could make money buying Ralph Lauren Polo shirts in bulk on eBay and then reselling them in my classes for 2-2.5 times what I paid for them. The debate on their authenticity lingers to this day, but the money was good.

With those seeds planted, I was always overwhelmed by the idea of a standard eBay selling business where I would have to find a way to realistically store inventory and then collect payments and ship orders. Lots of logistics there, and flea markets seem really dirty.

Then, I heard an interview with Jessica Larrew on Pat Flynn’s Smart Passive Income Podcast that changed everything. In that interview, she discussed how she built a six-figure income selling products through Amazon’s FBA program without storing any products or fulfilling any orders herself.

With Amazon FBA, sellers are able to focus on sourcing their inventory. Then they send it all in to Amazon together and Amazon keeps it in their warehouses and takes it from there. When a sale is made, Amazon takes care of collecting payment and shipping the item, keeping a healthy cut of the sale for themselves.

In her interview with Pat, Jessica explained that she sourced most of her items from clearance sections in stores like Target and Walgreens. Once she sent the products in to Amazon, her job was more or less completed. Sounds like a pretty sweet deal, right?

She explains that many people are willing to pay full price for things that you might find great deals on because they want the simplicity of having it delivered right to their house. Also, if they are Amazon Prime subscribers, they receive free two-day shipping on anything that they order.

Getting Started

Being that I am the guy that loves to experiment with different ideas, that interview was all it took for me to get interested in trying out this idea. I instantly went to Amazon and clicked on the seller button!

As I started filling out the information to sell stuff on Amazon, I was introduced to what becomes the first roadblock for many sellers.

Amazon gives you the option of selling as a professional or an individual. My first instinct was professional, but then I found out that it costs like $40/month to do that. I was just in test mode, so I elected to sign up as an individual.

Looking back now that I have more knowledge, the professional account waives the 99 cent per item listing fee, so anyone expecting to list more than 40 items per month is better off going with the professional account anyways.

However, when I was just starting, I didn’t realize how quickly I would reach the point where I was listing more than 40 items per month. My very first shipment was more than 40 items, and I have been way above that number each month since then.

The reason that I actually went with the professional account was that the scanning app the Jessica mentioned in the Smart Passive Income interview, Profit Bandit, required a pro account. (I believe there is actually a work around for this, but if you are even remotely serious about selling, sack up and throw down $40 to get started.)

This was the first time that it occurred to me that there would be some expenses that went along with this business. That might seem obvious when you actually see it typed out, but at the time, it hadn’t occurred to me that operating expenses would show up that quickly.

Scouting for Inventory

After coughing up the $40 to open my pro FBA account, and another $15 for Profit Bandit (it’s going to be $9.99 per month from now on), I was ready to start looking for products. I started out by scanning anything with a barcode in my house and found that any FBA sellers looking to rob me would be very disappointed.

Then one night, after having a few beers over dinner, I let myself loose in Target on a mission to scan everything in the store. It was really fun, and to my surprise, I actually found some things!

Looking back now, I know that my Profit Bandit settings weren’t set up right. I also had no idea what “sales rank” was, so I bought lots of things that still haven’t sold. Other things that I bought sold for poor profit margins, and then there were the things like automotive fuel something-or-other that aren’t eligible for FBA, but I didn’t know….I’d been drinking.

Experience is Key

While that first few hundred dollars invested brought almost zero return, the experience gained was absolutely critical. That’s why I am going to stress that the biggest key to getting started is setting up your pro account and getting out into stores with your scanner.

Even if you have no money to invest in inventory, just getting out there and scanning products is how you will begin to understand how the scanner works and what type of numbers are good versus the kind that will sucker you into bad deals.

Let It Go

As I continued to gain experience by buying merchandise that wouldn’t sell, I got lucky and struck gold among the garbage I was wading through.

At this point, I still had no idea about sales rank, so I bought a bunch of toys from Walgreens that seemed profitable. Most of them are still sitting in inventory, but I hear that shit all moves during Q4.

The gold amongst all that junk was a Disney makeup kit promoting their new movie, Frozen. Little did I know that Frozen toys were basically the hottest thing since Tickle Me Elmo. Both Frozen Beauty Kits sold within minutes of hitting Amazon’s warehouse.

Because I am a trend follower by nature, I knew that there must be something here, so I hit something like six more Walgreens stores and was able to track down about seven more Frozen Beauty Kits. All of them sold really fast and I doubled my money after Amazon fees each time.

It then occurred to me that I should pyramid into this “Frozen Trade” and try to find some more inventory. Since that moment, the girls toys section is the first place I check in every Target, Walmart, and Toys R Us, and I have now sold hundreds of Frozen items.

Of course there are also some Frozen items that don’t sell, so I don’t get those. But basically anything that is Elsa specific seems to do very well.

Getting Frozen Out

While my Frozen sales kept pushing the envelope forward, I was shocked one day when I found out that Amazon had halted the selling on all Frozen merchandise due to a bunch of counterfeits.

This was a great reminder for me that I needed to remain diversified and avoid allocating too much of my capital to one specific category. It is important to have a broad product mix.

I have since been approved to continue selling Frozen merchandise. I didn’t do anything to get approved other than wait out the storm. I assume that when Amazon looked at my inventory and saw that it was legit, they decided to authorize me, but I’m still not exactly sure how that process works.

Expanding My Inventory

Because I had a few thousand dollars to invest in inventory and a stream of income coming from my freelance writing business, I was able to continue experimenting with different types of inventory.

I found a bunch of Pyrex baking dishes at Big Lots that sold really well. The standard 9×13 pans cost me $6 each and sold for $18. After Amazon took about $6 for their fees, I still doubled my money quickly on every dish I sent in.

I also did very well with some Kitchen Aid utensils that I found on clearance at Marshalls and TJ Maxx. I was able to get lots of different colored utensils for $4 each and sell then for $12-15, again doubling my money on each item sold.

Another great source for me has been Toys R Us, which has been having a tremendous clearance sale for the past two months. I was able to buy five remote controlled batmobiles for $26 each that all sold for more than $90. I almost tripled my investment on each of those items.

Another Critical Lesson

As any stock trader would expect, this success blinded me to the obvious risks in many areas. I fell in love with some of my trades and it affected my judgement.

When I sold the $4 Kitchen Aid utensils at $12, I did very well. But when I had to pay $5 for the same items and the sale price pushed down to the $8-10 range, I didn’t make any money. At least not enough for it to be worth my time.

I also spent too much time in the Batman aisle looking for my next batmobile trade. This got me invested in five talking Bane dolls and two talking Superman dolls that are all still sitting in inventory.

I should have known to avoid all of these mistakes based on the numbers, but my previous success with these types of numbers allowed my mind to rationalize away any concerns. Lesson learned.

Moving On Up

Another lesson that I have learned is that the big money is in the higher priced items.

There are plenty of $1-2 items that you can sell for $8 and maybe make a buck or two on, but having to bag, label, and ship each product makes them more hassle than they are really worth.

I have found that my best trades have cost between $5 and $30 and then sold for triple what I paid for them. These items actually bring home significant profits, but you also have to have the capital to invest in inventory.

My Workflow

As this little Amazon business has grown, I have turned a portion of my basement office into a product shipping center that handles all of my processing.

After a few days of shopping, when I have amasses a few hundred dollars worth of products, I switch gears into processing mode.

Removing Stickers

The first step in my processing mode is to remove any price stickers that the store I purchased the item from was using. This is probably the least exciting part of the process.

I prefer to spray the products with Goo Gone, let them sit for a few minutes, and then peel the stickers off. Because Goo Gone leaves a greasy residue, I then clean the products with some type of all-purpose cleaner and paper towels.

My wife, who chips in with sticker removal every once in a while, has found that rubbing alcohol and a kitchen scraper work better for her.

Bag It Up

After all of the stickers are removed, the next step is to prepare each item in an appropriate manner.  This means placing anything that could get dirty or lose parts in a ploy bag, and wrapping any glassware in bubble wrap.

Amazon will tell you what each item needs in terms of preparation and packaging, but I always try to overdeliver, so if it is questionable I throw it in a poly bag.

Amazon is very specific about the type of poly bags they want you to use. The should be a certain thickness (I think 1.5 mil), be self-sealing, and if they are bigger than a certain size they need to have a suffocation warning on them. I have been buying my bubblewrap from Walmart and Staples, and then getting different sizes of poly bags from Amazon sellers.

Entering Inventory

My current process is to enter my new inventory manually by typing the barcode numbers into a service called Inventory Lab. This service costs another $40 per month, but you can also enter your products straight into the Amazon database so it isn’t necessary.

The reason I use Inventory Lab is because it saves me the hassle of keeping a spreadsheet to track my cost and profit on each item sold. When you input using Inventory Lab, there are added places to put data like the purchase price, purchase date, and where you got the item.

Inventory Lab also gives me the ability to export a spreadsheet of all my sales that also contains purchase prices and ROI for each item. This lets me quickly scan my numbers to get a sense of how the business is doing.

Another great tip that I have picked up along the way is to enter your own unique SKU for each item. My unique skews follow the following format:

PurchaseStore.Location.ItemDescription.PurchasePrice

So an example for one of my products would be:

Marsh.Mon.KABastingSpoonRed.4.23

Now, anytime I see this item referenced anywhere in Amazon’s system, I can quickly see that it is a red Kitchen Aid basting spoon that I bought at Marshalls in Monaca for $4.23. This is very helpful when you are going through your inventory to update prices.

Pricing Strategies

Many of the FBA Seller experts I have read and listened to suggest that setting your product to be the second or third lowest FBA price is good enough.

In my experience, doing that doesn’t move products. Matching the lowest price does. Of course you still have to be able to make money, so leave yourself plenty of room for error when you purchase.

Multiple Shipments

When you have all of your inventory for a shipment entered, Amazon will then break your order up and tell you how many of each item to sent to each of their different warehouses.

I usually send most of my things to Tennessee and Virginia, and then send smaller packages out to Arizona.

Labeling

Amazon is going to require labels for some products. These labels are supposed to be printed on a laser printer, but I have heard of people using inkjet printers and covering the labels with clear packing tape.

I use the Staples brand shipping labels that come 30 to a page and print them on the laser printer in my office at work.

While just some of the products will need labeled, I have found that it is easier to label everything because it allows me to double check that everything is in each shipment.

My process is to print all of the labels that I will need for a shipment, then label each item as I put it in the box. Then I know that the entire shipment is in the box and nothing is missing.

Boxes

I’ve been getting my bigger boxes at Staples and WalMart for $1-2 each. Staples discounts down to that price if you buy five or more.

For smaller boxes, I just grab boxes from work because we go through a ton of them so they are always available.

You are also supposed to fill any empty space in your box with packing paper (no peanuts). I have some that I bought from Staples, but I don’t use very much very often because it seems unnecessary for most of my shipments.

Most of the things I sell are not very fragile, and the fragile items are already getting bubble wrapped. I haven’t had any major problems yet.

Weighing Shipments

Once you are done labeling your items and packing your boxes, you’re next step will be shipping them. Amazon gets great deals from UPS, so that is who you will be shipping with.

The shipping fees will be charged right to your Amazon account however you have that set up.

To calculate shipping, you will need to weigh each of your boxes. I wanted to get a scale for this, so I dropped $25 on one at WalMart only to find out that it has a limit of like 2 pounds. A bigger shipping scale at staples is like over $100.

Rather than pay for a shipping scale, I have just been stealing my wife’s bathroom scale. I weigh myself holding the box, then weigh myself without the box and subtract. The difference is the weight of the box.

Shipping Labels

Once you plug all the numbers into Amazon, it will give you a price for shipping. After you hit accept you will have the ability to print shipping labels.

Dont be intimidated by official looking labels. This part is easy. Just print the PDF they give you on plain paper (I use my home inkjet printer for this one).

The shipping label will have two parts. One is the UPS shipping information and the other tells the Amazon warehouse what is in the box.

I just cut out each label and then tape them to the top of the box with one on each flap (you aren’t supposed to put any across the crack wear they will cut to open the box). Then completely cover both labels in packing tape.

Shipping

Once the items are ready, you just take them to the closest UPS store and drop them off.

You can also get UPS to pick up at your house, but I drive past a UPS store every day, so that seems unnecessary for me.

Repricing

While many of the people who talk about Amazon FBA give the impression that you are finished with your products once you ship them to Amazon, I have found that this is simply not the case.

As other people find the same deals you found, they will bring the same products to Amazon. Many of these people will undercut your pricing, making your product less attractive to the Prime shoppers that we are targeting.

I have found that going through my inventory as often as possible and adjusting prices to be competitive, yet still profitable, has been the best tool for stimulating sales.

More Resources

As I mentioned a few times, Jessica Larrew was who introduced me to Amazon FBA. She has lots of products available on her website, but they aren’t cheap, so I didn’t buy them. I’d still highly recommend the interview she did with Pat Flynn, as well as the interview she did on the My Wife Quit Her Job Podcast.

Another resource that I have found is the Thrifting For Profit Podcast. These ladies remind me a bit of my mother, but they have a massive library of past podcast covering all types of FBA topics. They also have a great Facebook group that can be another source of information.

The Bottom Line

I have still dumped more money into my Amazon FBA business than I have pulled out of it, so I am by no means an expert or a success story of any kind. But I do believe in this concept more now than I did when I started.

From my experience to this point, I believe that the most important thing you can do to get started is get your account and scanner set up and get out in stores and start scanning things.

Even if you have no money for inventory, getting experience working through a big clearance section will allow you to understand what is out there and will make you more selective and smarter when you do have money to spend.

Another great way to get started with almost no cost is to sell things from around your house. I have sold probably a dozen things I found laying around my house and office and that money has contributed to more inventory.

As with anything in life, the important thing is to take action. If you think you want to try this, go for it. Stop talking about it and get your ass to work.

Photo Credit: postaletrice via Compfight cc