What is an Amazon FBA
So you have an e-commerce business and you’ve got some fantastic products that you’re busy handling all sort of things that is making your business run smoothly in order to fulfill customer orders, providing customer service, generating sales, sourcing products and trying to grow… so, what is an amazon FBA?
What if I told you there was this service that can make running and maintaining every step easier and would even help you find new customers simultaneously. I would like to describe it as… make more money, grow your business as fast as possible, save time and delight your customers.
Fulfillment by amazon or FBA helps to make your store and listed products more visible to millions of loyal and happy amazon customers globally while providing world-class fulfillment, fast shipping, and acclaimed customer service that can bring your business to the next level. Here below’s how it works …
A Summary of How Amazon FBA Works
Also, you get the opportunity for more of Amazon’s customers to become your customers as well when they buy your products. Amazon will then pick, pack and ship them and then will also manage customer service that will even be running 24 hours a day. Their technology will continue to work for you behind the scenes so all you need to do is to use your free time to focus on growing your business locally and globally not only are you continually selling via FBA they’ll also help you reach new customers around the world.
With Amazon’s ever-expanding fulfillment network, you can also use FBA to fulfill sales from your own website and other online platforms with just a click of a button. Whether you’re small or big, Amazon FBA gives you all the resources you need to run your company more effectively, from price management to business analytics and personalized customer business recommendations you can use to manage your inventory online from any device and from any location.
So the question is whether you should do it yourself or hire a service that will help you make more money, save time, and entertain your customers. Now you know what is an amazon fba. Click the banner below to learn more.
The Downsides of Running an Amazon FBA Business
You would think running an Amazon FBA business is all rainbows and sunshine based on the videos you see here on YouTube. Well unfortunately with any business you’re gonna have some downsides and cons that you’re gonna want to consider before you get started. Let’s be honest the only reason most people don’t talk about these negatives is that they’re trying to sell you a course. Lucky for you I have no intention of ever releasing what is an Amazon FBA and an Amazon FBA course so all the information I provide will be free here on Youtube. If you’re new here my name is Tom with Path to Billions.
On this channel, I’m documenting my financial journey and I’m taking you along so we could succeed together. My channel currently focuses on Amazon FBA so if you’re looking to start or grow an Amazon FBA business then you’ll want to make sure you subscribe and turn on notifications.
Before we get into the three main considerations before you start your Amazon business I would like to mention that in this video I’m gonna give you tips and tricks to help minimize the downsides so you can operate a really successful business. Also, this video is gonna be focusing on retail and online arbitrage but I will touch on those other business models as well. The very first thing you want to consider is the capital needed to start and grow on Amazon.
You have to keep in mind that this is a retail business with physical products. With a business like a YouTube channel, you can make videos for free on your phone, and eventually, you’ll start making money. However, it is completely different from a retail and online arbitrage business because you need to buy physical products in order to sell them. I’ll leave a link down in the description to a video I did recently where I broke down all the numbers from my first full year on Amazon. In that video, I reveal that I spent fifty-five thousand dollars on inventory in 2019.
Now a large amount of that money was money that I was reinvesting from my revenue but it is still a large amount of money regardless.
Besides physical products that you’re buying to resell there are also a small number of upfront costs that you’ll have to consider. These are things like tape, labels, boxes if you don’t have them to reuse, and other supplies. I have this video showing all the supplies you’ll need to get started on Amazon and in the description, I’ll also have direct links to all those products. The positive part is that retail and online arbitrage is probably the cheapest Amazon business model to get into.
The most expensive one would probably be a private label. The reason for this is you need to buy a large amount of product directly from a manufacturer.
Wholesale Is Probably The Second Cheapest Business Model To Get Into
Then you have to take that product and you have to brand it, you have to take pictures of it, you have to buy ads to start selling it, and there’s a bunch of other costs that add up. From my limited research, it looks like it probably costs a couple of thousand dollars to get started selling your private label product. Wholesale is probably the second cheapest business model to get into and you could get started for a thousand dollars or less depending on the minimum order quantities from the suppliers you find.
For online and retail arbitrage you can reasonably get started for a hundred dollars or less. Keep in mind though the more money you invest into the business the quicker you can grow. Check out my video about using credit cards to grow on Amazon for a really good breakdown of how to properly leverage your money to optimize your growth. The second consideration is the other thing you’ll have to invest a decent amount of in order to start and grow on Amazon and that is your time. This is the downside of this type of business because you naturally have to be more hands-on with physical products than you would be with digital products.
When I was running my business full-time in 2019 I was actually working way more hours than I was at the previous job that I had been let go from. I had to constantly send in a new shipment every week or I would see my sales drop off.
The funny part about this is that my Amazon business is actually doing even better this year even though I’m only working a quarter of the time I was last year. There’s a number of reasons for this but I would say the main one is that I’ve been switching my Amazon business over to a wholesale-focused business model. Private label is probably the most hands-off business model once you do the upfront work of finding and sending in products that I was mentioning earlier.
On the other hand, wholesale still requires you to send inconsistent shipments in order to keep your sales consistent but it is much easier to send your products directly to Amazon and have them prep them for you than having to prep them yourself.
With retail and online arbitrage you have to prep and pack all the items you’re sending into Amazon and I would estimate I was spending on average 3 minutes per item. With retail arbitrage, you also have to spend time physically going to all the stores in order to source products to resell. Similar to investing your money is you have the option to invest as much time as you like into this business. The more time you put in the faster you can grow.
Also if you’re doing arbitrage since it is a hands-on business you have to keep in mind that if you plan on taking a vacation or if you get sick and can’t send in a shipment on a regular schedule then your sales may suffer temporarily until your next shipment gets in.
Before I Move On Expatiating On What Is An Amazon Fba
Before I move on expatiating on what is an Amazon FBA, I would like to point out that over 80% of people who watch my videos aren’t subscribed and I’m on the road to a thousand so if you want to be part of the before 1k club then make sure you go down there and subscribe. Now you combine the amount of time and the amount of money you need to invest to grow a large-scale Amazon business, the third thing you want to consider is scalability. This is how large you can grow your business and what it takes to do that. When it comes to scaling up an Amazon business that focuses on arbitrage the biggest bottleneck is gonna be your time.
As you grow your business you’ll have plenty of money to reinvest into the business and keep growing.
However, there are only so many hours in the day that you can source, prep, and ship your items. There are definitely a few ways to maximize your time and increase your dollars per hour earnings. One is to slowly increase your minimum profit and ROI threshold so you are buying more profitable products. This means if you keep selling the same amount of products and each sale is making you more money you’re gonna be earning more per hour of work.
The other is to simply focus more on online arbitrage vs. retail arbitrage. With online arbitrage, you can use software like Tactical Arbitrage in order to automate sourcing. I’ll leave a link down the description to a playlist I made all about the software. This comes with the added benefit of you being able to ship products directly to you instead of you having to go from store to store in order to source.
Then if you really want to scale up you can outsource your prep work to a prep center and have them take the physical labor off your plate. Running an Amazon FBA business that is completely focused on online arbitrage you can easily make a full-time living while working fewer hours than a normal job. The majority of the time you do spend on your business will be sourcing for more products to sell. If you’re using a prep center you just send your products to them and then most of the work is handled for you either by them or Amazon themselves.
You are then left with mostly admin work to keep your account running.
I mentioned earlier in this video and in some other videos that this year I am actually switching my business over to a wholesale-focused business. The main reason for this is that I could work fewer hours and earn the same amount of money I was earning last year. Then I have the ability to focus on scaling up my business which is what I’m currently working on. Similar to what I was talking about with online arbitrage and sending your products directly to a prep center you can actually do with wholesale. However, with wholesale, you could skip out on the prep center and have Amazon do that work for you.
Conclusions
So if you’re asking what is an Amazon FBA or you’re looking to start an Amazon FBA business these are the three things you want to consider. If you don’t have a ton of time or money and you want to start this as a side hustle then I think retail and online arbitrage is actually perfect.
You can grow slowly over time by reinvesting your profits. You’ll also get the ability to learn about Amazon and what sells on their platform. Then when you want to scale up your business or go full-time you can focus on online arbitrage and use a prep center or you can move over to a wholesale-based business and really grow your business that way.
If you want to jump straight into doing a wholesale business model then you could check out this video about finding your first supplier and you can see how easy it is to send a shipment directly to Amazon in this video down here.
If this video was helpful to you at all please drop alike. Don’t forget to subscribe and turn on the notifications for more content like this. as always thanks for watching this episode on what is an Amazon FBA!
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