How Does Amazon FBA Work?

How Does Amazon FBA Work? A Beginner’s Guide To Making Money Online

Here’s the question I get asked very often. How does Amazon FBA work? If you’ve asked that question before, it’s likely because you’ve seen people crushing it online. Maybe you have a friend selling products on Amazon FBA. Maybe you’ve simply heard about the ridiculous amounts of money you can make in the e-commerce realm. Whatever it is, you’re here because you’re looking to expand your knowledge and discover how Amazon FBA works and whether it’s right for you.

But you probably have lots of questions. You’re likely asking whether it’s right for you or wondering if it’s even possible to sell on Amazon if you’re not from the United States. You might have other questions after seeing people talk about how you can build what’s called a private label business on Amazon and just how much money it takes to get started. Look, all of these are great questions.

But if something’s holding you back from living the life that you know you truly deserve, then let me help fill in the so-called knowledge gaps for you. Also, this probably isn’t your first rodeo, so to speak. You’ve likely tried to start other businesses online. Maybe you struggled. Maybe you failed. But that has no impact or bearing on your ability to not only figure out how Amazon FBA works, but to actually crush it making money online selling simple everyday products on the world’s largest ecommerce storefront.

Understanding How Amazon FBA Works

What most people don’t realize is that the majority of products sold on Amazon are actually sold by third-party sellers. They’re very much like you and me. Nothing different about them. Except for the fact that they took a risk and decided to leave their dreary corporate 9-to-5 jobs. They ventured out there into the world and actually took a chance. And for a large part of those third-party sellers, that risk paid off handsomely. Because, think about it.

Maybe you’ve tried to understand how selling on Amazon works. Maybe you’ve even tried something like this in the past and struggled or even failed. And that’s okay. It’s not your fault. There’s so much information out there that sometimes it just feels overwhelming. But don’t worry. I’ve got your back. Understanding this is clear and straight forward. But you likely have some questions. Questions like, will Amazon FBA work for me if I don’t live in the US or how much money do I need to start selling on Amazon?

The truth is this. It’s not free and you do need some sort of budget to sell on Amazon FBA. But it also doesn’t take rocket science. And here’s the thing. We only have a small amount of time in this world. Most of us are used to exchanging our time for money once. Meaning, we do the work and get paid one time. That’s it. The beauty of setting up an Amazon FBA is that we can do the work once and get paid repeatedly. In other words, it’s a passive income business. And one that you can automate and infinitely scale.

Setting Up Your Amazon Seller Central Account

In order to sell on Amazon, you need to setup an Amazon Seller Central account. This account is your gateway into Amazon’s ecosystem and it gives you the ability to sell your products online through Amazon’s platform. In order to set one up, all you have to do is head to the following link. Then, just click the “start selling” button and you can begin the process of signing up for your Amazon Seller Central account.

Of course, this isn’t free. In order to sell on ‘Amazon you need to pay a monthly fee for the professional account, which is $39.99 per month. Afterwards, there are fulfillment costs for your products. Plus, there are warehousing fees if you don’t have a high sales velocity (turnover) rate. So, if your products aren’t really selling but collecting dust in an Amazon fulfillment center, there will be warehousing and storage fees associated with your account.

In order to setup an Amazon Seller Account, you’ll also need to go through a rather hefty verification process. You’ll need to verify your identity to prove that you are who you say that you are. This process involves a lot of back and forth paperwork. It includes things like your driver’s license pictures, front and back, bank account statements, address verification, credit info, and more.

Finding Profitable Products To Sell On Amazon FBA

Another part of the process here is to discover profitable products that you can sell on Amazon’s platform. You have to search for products that have high demand and low competition. Meaning, you want to find the simple, everyday, even the weird, products that are flying off the shelves due to super-high demand, yet there are not that many people competing for those customers. This is one of the most critical parts of the process.

So how do you go about doing this? There are numerous tools available. The most popular of which is called Jungle Scout. But there’s also another tool called Sellics. Both of these tools help you to not only identify profitable products to sell, but also help you to coordinate ranking for keywords once you’re up and running. The goal here is to find keywords with high search volumes at the outset.

You might think that it’s hard to do that right now and you can’t think of something to search for on Amazon. When, in fact, it’s quite simple and straightforward to do this. All you have to do is write down things you think about over time. Because, if you shop on Amazon, you know that you’re searching for everyday products on a periodic basis. Next time you think of something just jot it down.

Keep Track Of Household Items You Need

Grab a popular app on your phone and create a list that you can then track all the products that you can think of. For example, let’s say you needed hangers for your closet, add that to your list. Let’s say you wanted an iPad stand, add that to your list. Just start adding items to the list, and each time you add it, jump into a tool like keyword scout and check out the demand for that search.

Some searches won’t be worthwhile because the demand simply won’t be there. But you never know until you actually start digging in and doing some research. Once you’ve done a bit of research on Jungle Scout or Sellics, then it’s time to x-ray the results on Amazon as well. It’s pretty simple. All you need to do is pay close attention to the search results. Keep in mind that there are two kinds of results on Amazon:

  • Sponsored results – These appear at the top of the search results and are paid advertisements. In the following image, there are a few sponsored ads for the search term “hangers” and you’ll notice them on the top row and also mixed in with the products beneath it as well. You’ll see the word “sponsored” in grey just about the listing title.
  • Organic results – These organic results are Amazon’s best-selling items because they appear first. They often have what’s called a high sales velocity. That simply means that they are selling a lot of those products. You’ll also see badges such as “Amazon’s Choice” and “Best Seller”, which are important as well, because most consumers default to these listings.

Analyzing Top Listings

Keep in mind that in order to really get your Amazon business off the ground, you’re likely going to have to compete with other listings that have lots and lots of reviews. Reviews are important because most Amazon shoppers care about the reviews deeply. That’s why it’s important to find good products that don’t have competitors with thousands of reviews. Now, that doesn’t mean you can’t compete in those niches. You can. But you’ll need to spend more on marketing in the beginning.

In order to market products on Amazon you need to utilize something called PPC, which is pay-per-click advertising. You’re paying Amazon to display your listing as a sponsored search result at the very top of a search. This gives you an unfair advantage even over the listings that have thousands of reviews. Why? Because most consumers don’t know the difference between the sponsored and organic listings. They simply see the product appear first.

Still, even then, you need to ensure you have reviews. Lots of reviews. Selling on Amazon is incredibly difficult without solid reviews. So your goal is to get as many authentic reviews as possible. That is the biggest challenge that most Amazon sellers face today. There are plenty of strategies for getting reviews, which I won’t go deep into here because it could take tens of thousands of words to outline and my fingers would start hurting a bit 🙂 But you can check out the free training at the bottom of this page if you want to learn more.

Finding & Negotiating With Manufacturers In China

Once you find a good product to sell, you then have to negotiate with suppliers in China. At the basis of this is finding a product for say $1 and selling it on Amazon for $20. A time-times return is not uncommon. In fact, some sellers see even higher returns than that. But don’t expect that to happen overnight. It will take time to build up your listing and to get things off the ground.

But if you’re a hard worker and you’re not afraid to put in the time now, then this is the right solution for you. There’s also the potential to earn an enormous amount of passive income. This gives you both time freedom and money freedom. So to get there, you first have to negotiate with manufacturers and find a top-quality company who can produce your product for you at a cost-effective price.

To do this, you should use a website called Alibaba.com, which helps you source suppliers from China to manufacture the products you intend to sell on Amazon FBA. When you search on Alibaba, be sure to search for suppliers (not for products or wholesalers). Suppliers are the ones who are directly manufacturing the product so that’s who you want to speak to. And, make sure you look for verified suppliers who’ve been in business for a long time.

Contacting Manufacturers

In order to get a quote on the product, you should contact at least 3 manufacturers. Bear in mind that you have to come across as professional. Most suppliers don’t want to deal with people who are just starting out or don’t really know what they’re doing. If you want a serious response and a serious quote, use the following script:

Hello (Supplier’s Name Here),

My name is (Your Name Here) and I am contacting you on behalf of (Your Company). We are an international (Company Type) based out of (Your Location). I’ve been instructed by our CEO to secure a sole manufacturing partner for the production of (Product Name), similar to the following Amazon item:

https://www.amazon.com/EasyPAG-Mounted-Organizer-Literature-Compartments/dp/B01L12KL72

We are interested in partnering with your firm in a long-term relationship that will be mutually beneficial to both of our companies.

Here are the specifications that we’re looking for:

Item Weight 3.3 pounds
Product Dimensions 13.5 x 4.4 x 16.5 inches
Color Black
Material Type Mesh Metal

With that said, we have a number of questions for you based on the potential partnership that I’m offering. If you could please answer these questions directly under each question, and highlight the answer, we would greatly appreciate it.

Please find our questions below

If you could please answer these questions directly under each questions, and highlight the answer, we would greatly appreciate it.

  • We’d like to get a sample of this product shipped express mail to our offices in (Your City, State) in the (Country). We’d also like to know whether you would agree to refund this amount after we conduct our first transaction with you. We could certainly handle this shipping fee via PayPal to make it easier.
  • Do you have the capability to package this product inside a custom white box that includes our logo on it along with a UPC barcode printed as well?

Cost & Quality Control

  •  How much is the cost per unit of this product? We are looking for two specific quotes. The first is for 1,000 units. The second is for 10,000 units. We would like to compare these prices for both quantities.
  • What is the manufacturing time required for you to produce 1,000 units and 10,000 units of this product? How much lead time is required?
  • What type of internal inspection controls or QC testing do you have baked into your manufacturing process?
  • How do you ensure that the product is not damaged during the shipping process? What type of packaging do you utilize to avoid breaks and other damage?

Please get back to us as soon as possible

I would kindle request that you get back to me as soon as possible with the answers to these questions as we are looking to make an immediate decision on this. Also, please inform me of any other policies (shipping or otherwise) that your firm has that could potentially impact this transaction.

If you could be as detail-oriented in the answers of these questions, we would greatly appreciate it. Again, we’re looking for a serious partner, and your answers to these questions will help us determine whether you are the long-term partner that we are seeking.

Please feel free to add me on Skype as soon as possible. My Skype contact details are (Skype ID). Please note, we will not respond via Alibaba. Only Skype. This is an important part of the process for us. You can simply copy and paste my questions along with your response directly beneath them into a Skype chat.

We are looking forward to a mutually beneficial relationship.

All the best,

Your Name, (Your Company Name Here)

(Your Skype ID)

Join Me For A Free Amazon FBA Training Masterclass

Interested in learning more about starting your Amazon FBA business today? I’m doing a free online training for anyone interested in getting started with Amazon FBA today. Whether you’re a beginner and know nothing about selling online, or you have some experience under your belt, it can show you the way. Be sure to join now while it’s still free.

Click here to join the free training right now >>
(the class is closed now but this link will be active soon)