Do you love to shop and take advantage of great deals? Are you considering starting a side business to bring in extra money?
Basically, you find the products you’d like to sell, and Amazon handles the storage, sales, shipping and customer support.
Ready to learn more? Here’s how to know whether FBA is a good option for you — and how to get started.
How Does Fulfillment by Amazon (FBA) Work?
Kyle Taylor, founder of The Penny Hoarder, spent a year using FBA by obtaining products through retail arbitrage — buying cheaply and selling at a profit.
Kyle spent a few hours each week scouring online ads to find deeply discounted prices. He mainly sold toys, something he was familiar with from past experience selling on eBay.
He recommends selling a product that people buy regularly, and one that you can acquire for quite a bit less than people will pay for it.
While Kyle said he usually made a 10% to 20% profit, some full-time sellers, like The Selling Family, prefer to have a profit of close to 100%. You’ll also need to check whether your preferred product is in one of Amazon’s categories requiring approval.
One good way to learn some best practices and solid selling strategies is to consider taking a quick online course through a site like Udemy. This one’s only $15 right now and goes through the basics of setting up your brand and selling products on Amazon.
Once you’ve acquired your products, you’ll upload them to Amazon, box them up and ship them to an Amazon distribution center.
Bear in mind that your inventory may not all go to one place; Amazon has lots of distribution centers, and this step can require little more time if your 100 Monopoly games must go to six different places.
However, the intuitive FBA platform allows you to pause shipments so that you can wait until you have several items ready to be shipped to the same location, saving you on overall shipping costs. Shipping is inexpensive when you take advantage of Amazon’s partnership with UPS.
Once the items arrive and are scanned in at the distribution center, they’re live on Amazon. Kyle said most of his products sold within a week, with some selling just hours after arrival.
If items don’t sell within set periods of time, you can either pay storage fees or have them returned to you at your expense.
Maximizing Profits by Stacking Deals and Rewards
While the process seems complicated at first, you’ll quickly have it down to a science. And that’s when you can add to your profits.
Here’s the strategy Kyle used to make the most of his FBA account — and earn more than a million airline miles in the process.
Kyle used his rewards credit card to buy discounted gift cards from sites like Gift Card Zen. Then he’d start his virtual shopping trip by logging into his Ebates account to get money back from his online purchase.
Next, he’d quickly check FatWallet and RetailMeNot for coupon codes for free shipping or an additional discount. He did a lot of his shopping at Kohl’s, which has a great rewards program of its own, so he’d use his Kohl’s charge card to earn Kohl’s Cash to use for future purchases.
Here’s a quick example: He’d buy a $100 gift card for roughly $95. Shopping through Ebates netted him another $3, and then he might save $30 with a coupon code and earn $10 in store rewards.
So for $100 worth of goods, he’d spend $65 and earn $13 in rewards, making his overall cost for the goods just $51 — and that’s not counting the miles or rewards from the credit card you used to buy the gift card, which still has a $35 balance!
Repeat this scenario a few dozen times, and those rewards start adding up to some serious cash.
How Much Can You Earn With Fulfillment by Amazon?
Depending on how much inventory you start out with, your numbers will vary. Madison DuPaix at My Dollar Plan earned a base profit of $10,000 in her first five months and $42,000 in her second year of selling toys through FBA.
Ryan Grant at Online Selling Experiment earned nearly $400 in profit during his first month selling on FBA in October 2013, $1784 in his second month, and more than $9,000 in September 2014. Another seller, Jessica Larrew from The Selling Family, built up her earnings to replace her husband’s income so he could quit his job.
How to Make the Most of Fulfillment by Amazon
Ready to set up a FBA account and then head out to Target or Kohl’s to score some deals? Here are a few tips to help you get started:
Put all your expenses on your rewards credit card
Besides your inventory, Madison at My Dollar Plan lists items you’ll need to buy, such as boxes and tape. All of these can go on your credit cards, netting you the best ROI as possible. (Note that her post is about selling on Amazon in general, not just through the FBA program.)
Choose a niche
Sticking to one niche will help you figure out which products do and don’t sell well. Asked if he had strict standards for choosing items, Kyle said that after a while he knew instinctively whether it was worth buying or not. My Dollar Plan reader Shuan, who made $10,000 profit plus another $2,000 in rewards, chose to sell electronics, which have lower selling fees.
This is another part where taking an online course can help set you up for success.
Price items to sell
Part of the reason Kyle was able to sell products in just a few days was that he was pricing them to sell. He found that most any item that was on the top 30,000 list would sell well, with items clocking in at 5,000 or higher selling much faster.
Plan for returned or damaged items
Once you ship your box off to Amazon, you’re no longer in control of what happens to your items, but you are responsible for them. Amazon’s 100% satisfaction guarantee extends to people who purchase your items as well. As you consider pricing, expect that 3-5% of items will come back and be unable to be resold.
Now that you know how to make money on Amazon, are you ready to try FBA?