The 15 Things You Need To Know Before Selling On Amazon FBA
Over my years of selling on Amazon FBA I’ve gained a significant amount of knowledge and learned what it takes to make a product successful. It is very important that new Amazon FBA private label sellers know these things before diving in!
1. The Money is in the Research
This is too true, and if you jump straight into importing a product without doing the research—you will have a high chance of failure. Check out this post!
2. Reviews are KING
Before Amazon changed their Terms of Service to not allow incentivized reviews, many people would give away product for cheap in exchange for an honest review. Those people who collected hundreds of reviews are not guaranteed a top spot for a long time because of how Amazon’s algorithm works. Also reviews give an additional sense of safety when buying a product.
Think about the time you bought a product on Amazon. I’m sure you looked at how many reviews it had and the star ranking, but you probably didn’t read the review content. When I watch my mom purchase products on Amazon, all she cares about is the rating.
Just remember, reviews are king, and regardless about how you feel about them they are incredibly important for your business. I recommend using a software program to increase rating conversions.
3. Managing Inventory Can Be Hard
This one hit me hard because one of my best selling products on Amazon ran out of inventory while I was on vacation. I was not monitoring the inventory properly, and all of a sudden it gained a significant amount of momentum and was selling 10+ products a day after being on Amazon for only a couple of weeks. My initial purchase was only 100 and I quickly sold out. When I saw my inventory was dwindling I immediately contacted my supplier—but it was too late—my product was out of stock for two months. It took a lot of time to get back that momentum.
A lot of product is also sold during Christmas and you have to prepare for that, especially when the sales usually drop right after. Look at historical data of similar products in your category and try to extrapolate trends and curves on Excel. It may take a lot of time to do this analytical work but you’ll thank me you did.
4. Everyone Will Try to Copy Your Product
One of my first products on Amazon was competing against a top item that was shipped and sold by Amazon. I still knew I could compete, and since the majority of people were scared away by Amazon’s product, it was a perfect opportunity for me to jump into the niche. Within the first month I was on the first page, and the next month I was the top seller.
Months have passed by and I’m still doing amazing sales with no work on my part. Anyway, I decided to check out the competition. Five pages of a similar product, four sellers who copied my item AND my pictures—even my supplier on Alibaba copied my high-quality pictures. Obviously the hard work paid off, but there are other sellers competing for my spot. There is a lot of competition out there looking to get rich quick.
5. Organic Reviews are Incredibly Difficult to Get
As I touched on before, reviews are king, but how do you get those reviews? It’s hard. I usually only get 1 review for every 150 products sold—note that these are positive reviews.
Amazon had a little mishap with my inventory and all of the packages lost 1 out of the 2 products within it (never skimp on your packaging, people). Amazon did not accept blame, but it was detrimental to me. People would receive the product, return it, leave a bad review, and the process would repeat because they would return it and Amazon would reship it out. I had to have all of my inventory sent back to me which left me out of stock for a little while and lots of customers complaining. I was getting 1 NEGATIVE review for every 10 products shipped. Just remember, make sure you have a high quality product, otherwise let the negative reviews pour in. People love to complain.
I use feedback programs that email customers a couple of days after they receive their product to see if they like their item and if they need to contact us directly. I also give a link to directly leave me a product review.
6. People Don’t Know Where to Leave Product Reviews
Reviews are so important, I can’t stop talking about it! Anyway, people get confused where to leave feedback because Amazon isn’t always very intuitive. I get a lot of people leaving seller review feedback for products (similar to how eBay works). I actually get more seller feedback than product reviews sometimes!
This goes back to why having a feedback program is so important. It gives your customer a direct link to where they can leave a review for your product, rather than your seller profile.
7. You Need Capital to Scale
Nobody is really talking about this. I teach students that they can start an Amazon business for a couple hundred dollars. That is definitely true, I am no liar. That being said you’re going to need capital to SCALEyour business. Like we talked about inventory earlier, you’re going to need to buy more and more inventory when your products start selling faster. Sure, you may be able to reinvest your profits, but if you want to be sustainable your usually going to need extra capital. Luckily, Amazon pays out every 2 weeks, but sometimes you are selling even quicker than that!
8. Amazon FBA Fees are High
$40 per month for a professional seller account!? That is a lot of money when you’re just starting out, and you won’t be able to list in restricted categories without being a professional seller, each item you sell will incur an additional $1 fee if you aren’t a professional seller, and so many other limitations.
I always recommend having a professional seller account, but this will be a big expense in the beginning until you are selling at least $1000+ worth of product every month (ideally with 30-40% of that being profit).
9. Never Compete on Price
This is the rat race to the bottom. When you are competing against other sellers on price, you are both losing. The winner here is Amazon. First of all, fees are a better deal when you have a higher priced product (in general—I recommend $15-$75 price range). Second, you are just driving each other’s margin down. Rather than competing on price, compete on quality.
Apple makes amazing products, but they cost a fortune, and Apple is still doing incredibly well. See where I’m going? While Dell, HP, and all of these other computer companies are competing on price, Apple is over there pulling in higher profits and more loyal customers. Their products also tend to last a lot longer and hold higher resale values. Take this example from Apple and apply it to your business. You don’t need a cheap product, focus on quality.
10. Niche is Good
This is such a hard concept to grasp for most people that are just starting their business. They think: more broad means more keywords, which means more customers! Wrong. If you are trying to target everyone, you won’t end up having any customers. When you have a niche product, which targets a certain set of people, they are going to feel special, like this product is specifically designed for them. This results in a happy and loyal customer.
Niche also means that you can dominate the specific category and keyword because there are so many less people competing for that product—because there is a smaller market share to be taken up.
Entrepreneurship programs do a poor job of this. They tell you, the market is 1 million people and we will take 1% of that market share! Wrong. When people want a product or service, they want THE BEST of that market. Why would you take some random ride-sharing service when you could take an Uber or a Lyft? Exactly my point.
Niche and sub-niche, you won’t regret it.
11. Make Sure There is Enough Search Volume
There is a happy medium with this. You have to make sure there is enough volume, but if there is too much volume you’re going to deal with a lot of competition—hence my last comment on niches.
I can’t really give you any hard numbers, because this depends on what country you’re in and what product category you’re focusing on. All I can tell you is that you’re going to want to make sure there is enough keywords and keyword volume. I recommend using Google Keyword tool.
12. Bundles and Multipacks are a Great Way to Make Money
There are a couple of reasons for this:
- Single items have a lot of competition
- Profit on single-item sales get eaten by Amazon fees
- You can offer a “discount” to your buyers
Remember I mentioned how one of my items had two in a bundle? Well, I noticed a lot of my competition had only one in their bundle. You could see this in a lot of comments and in the Q&A, so I decided to bundle mine up in a package of two.
13. Amazon Loses Stuff
Amazon isn’t perfect. Even with the massive infrastructure they have in place, not everything is perfect. Humans are usually the issue, but that is life!
Before I talked about how Amazon lost half of my items. They also seem to lose items every once and a while with their shipping company. I even get refunded when this happens because they acknowledge that they lost or damaged my items.
When refunding me for the damaged item, they give me a percentage of what it’s listed at (and usually well under the cost of sourcing it)—but hey, at least I get some money back!
I even recently was told one of my items was damaged, and asked to have it shipped back (at my expense) and it was somebody else’s item! Amazon relies on FNSKU barcodes to track the items, and it is never perfect 100% of the time.
14. Stay Away from Stiff Competition
I talk about this a lot, but you need to stay away from extremely competitive realms. iPhone cases are a great example of a place with stiff competition. When the iPhone 7 was a few months from coming out, I decided to import some cases, despite having all of my processes in place and going against my better judgement. It was a beautiful case and marketed well but I still didn’t do well. It was only marginally successful. Trust my failures on this, competition is tough.
15. Advertising is Actually Important!
It is sad, but true. Advertising still works very well. When you sponsor your products, and if you give them a high enough CPC (cost-per-click), they will be featured on the first page as a sponsored product. And people still click on them, my parents click on them, they work.
I did a test on my parents, I went on Google and Amazon to search for some things—they didn’t even notice the little “Sponsored” text below the search. These things are engineered to work, and it should be a part of your strategy, especially when starting out.
So there you have it, my 15 most crucial tips for people that are new to selling on Amazon FBA. I know there are a lot more, but these are the questions I tend to be asked a lot, time after time.