Have you shopped and purchased something from Amazon before?
Most of us did. After all, Amazon is the world’s largest online store for almost anything you need. From the most basic items to elaborate electronics, furniture, you name it, they have it.
When I first started researching about ways to make money online, Amazon FBA (Fulfillment By Amazon) was a constant pop-up.
I was intrigued by the notion of making money by selling products under my own brand or private labeling as it is known.
The idea is all good and furthermore, a quick search online reveals no lack of successful entrepreneurs in this area. In fact, I was close to starting my Amazon business until I discovered Wealthy Affiliate, a platform that trains and bred many successful entrepreneurs in the field of affiliate marketing.
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Amazon FBA is a way to make money online and I want to share my thoughts on it and the things you may want to take note before plunging in. To set the record and ensure this is not a waste of time for you, Amazon FBA is 100% Legit and you can rest assured that it requires hard work and grit to succeed, just like any other legitimate online business.
Let’s Jump In, What Exactly Is Amazon FBA?
We all know starting a business selling physical products is exciting but never easy. Many have tried and failed. Let’s first examine what goes behind the scenes.
On a very basic level, you need a storefront where your customers can find you and it is most likely your store is also your warehouse. In other words, you need space and space costs money.
When e-commerce took off, online stores took away the pressure of rental cost.
You no longer need to have a physical retail store to peddle your goods, all you need is a website to showcase your products in their full glory, display their pricing, purchase options (sizing, color, quantity) and make sure you have the payment gateway (ex. PayPal, Credit) done up and VIOLA, your business is up and running!
Is that it? Well, the above is just the basics.
You still need to find a warehouse to store your inventory, logistics to ensure products are delivered to the doorstep of your customers. On top of that, your customers may run into situations where they require customer support.
Warehouse, Logistics, Customer Support – These form the 3 pillars of your business. There is also a 4th pillar and that is your supplier who is going to manufacture your products and sell you at a bulk pricing so that you can markup a little and earn the profit from the difference.
When you consider all the necessary ingredients for starting a business selling physical products, it is natural to be overwhelmed.
This is where Amazon FBA comes in. Prior to Amazon FBA, the process of starting an online business selling products is a NIGHTMARE.
Where can you get a reliable supplier?
Will the supplier be willing to ship to each customer locally or across states/countries?
If not, you have to be personally responsible for delivering the product to your customer. Can you do it within budget and can you do it fast and accurate enough?
What if the item is lost / damaged during delivery?
Your item is shipped and suddenly your customer wants a refund, what’s your policy for returned merchandise? Do you cover their return shipping costs?
Where can you get a warehouse or storage to keep your inventory? Remember, the supplier won’t be selling you at a favourable pricing for just a few pieces. You have to order in bulk to negotiate a lower cost price. We are talking about minimum of few hundreds or thousands of units.
Assuming you have all of the above figured out and is geared up, the whole process is challenging and you probably will end up investing money to outsource the above 3 pillars. Again, that translates to more costs being paid upfront, even before you see your FIRST DOLLAR.
That’s why it is hard and sometimes unimaginable for people to start their own online business in this manner and the failure rate is high even for those who did.
Amazon FBA changed that
With FBA (Fulfillment by Amazon), your warehousing, logistics and customer support are ALL taken care of by Amazon.
For that, Amazon charges every seller/merchant a monthly fee (USD 39.99) for their FBA service. In other words, as a seller, you are FREE to focus on product marketing, sourcing the right supplier and ensuring the products get shipped to Amazon warehouse.
Half the work is done by Amazon, improving your rate for Success!
Once your products reach Amazon warehouse, the rest of the legwork is handled wholly by Amazon.
Customer orders your product from Amazon and Amazon will ensure it is packed, shipped and delivered to the doorstep of the customer. In between, should there be a customer complaint or request for delivery dates adjustment, Amazon will manage it on your behalf BECAUSE it is all included in the FBA package.
Is USD 39.90 Per Month Worth It?
If you made up your mind to make money online by selling products on Amazon, then USD 39.90 is a fantastic deal!
Why do I say so?
If you just try to outsource to separate vendors for warehousing, logistics/delivery and customer support, you can easily chalk up a much heftier cost per month. Easily.
Not only that, you also have to ensure these vendors coordinate well with one another. In most cases, you may just end up being the coordinator.
For USD 39.90, the three vendors are now merged into one seamlessly integrated vendor known as Amazon. It saves you costs and you get peace of mind.
So yes, USD 39.90 is definitely worth it if you are going down this business track.
Are There Any Other Hidden Costs?
There are other costs but they are not ‘hidden’.
First, the cost of manufacturing your products in bulk and the cost of shipping them to Amazon warehouse have to be negotiated separately with your supplier. Again, this is a big topic and I won’t get into the details.
Aliexpress is one of the well known supplier networks hailing from China and they do communicate in English over email. You can send across your design, specifications and they can give you a quotation. In some cases, they can also ship you a sample if you pay them.
The sample would be your prototype and if you are satisfied, you can give them the go-ahead for MP (Mass Production)
Depending on the type of product you are focusing on, the costs of production can vary significantly.
The other cost is known as Amazon referral fees and these range from 6 to 20% of your product pricing. Referral fees are paid to Amazon each time your product is sold. This is on top of the USD 39.90 per month.
In other words, as you sell products on Amazon, you have to remain mindful that there is fixed seller account fee of USD 39.90 and every product, you will also have to deduct 6-20% of the revenue which is paid to Amazon.
Then, there is the product bulk manufacturing cost and shipping fee to Amazon warehouse.
A Lot Of Upfront Costs Involved, Can I Really Make Money?
The successful Amazon seller is making an average profit of 30% from his gross revenue.
In other words, if you are getting an annual revenue of USD 1 million from your sales, you should be making around USD 300,000 as profits (30%). The rest goes into all the costs mentioned above plus any advertising campaign you may run from time to time.
30% is the realistic goal, according to industry veterans who are successful at Amazon selling.
Is Amazon Selling For Me?
For a long while, I was researching and pondering over this prior to starting my affiliate marketing business.
I signed up courses and took training. They were all good but none can really guarantee success and with a high upfront cost due to the need to stock up on inventory, I eventually decided not to venture into Amazon selling at this stage.
Then recently, I have a new perspective on Amazon selling. Interestingly, it came about because I started to order some furniture and household items on Amazon.
The ordering process was straightforward. Add to Basket, Confirm Details and Checkout!
Then came the NIGHTMARE.
Almost every item came earlier than expected, at a time where I was not around to receive them. Thus, I had to contact Amazon and even contact the Seller to arrange for re-delivery.
Some sellers did not entertain my request and I had to go to collection centres to collect the products on my own. Extra work, extra costs!
There was one item slated for delivery at a very late date. It was like 3 weeks of waiting and when it arrived, I opened the package to find that the item is badly manufactured and has very flimsy parts. I requested for a refund and the seller promptly informed me they will ‘gladly’ refund me but I need to cover the return shipping costs which I found to outweigh the cost of the item!
My Point Is…
Amazon selling is not easy.
You need quality products, meaning you need to find a reliable supplier.
You need to stock up on inventory. Otherwise, it would take too long for your item to reach your customer. Chances are they may request a refund.
You can’t control delivery by Amazon. One of my deliveries came in the morning before 11:00 which was a bit disturbing because I received a text stating they will arrive between 12:57 and 14:57. Thankfully I was at home to receive it and when I asked the delivery personnel on the time discrepancy, he said he prefers to work only in the morning.
I was dumbfounded!!!
My point was not to rant against Amazon. I still enjoy every product (Ok…most products) I bought from them but the customer experience is a mixed bag.
I am standing and looking at this business from the side of the customer and all I can say is that if you are going in, you have to be prepared for all of these.
I hope this helps you to decide whether Amazon FBA is suitable. It really depends on your passion because that’s what will keep the fire burning during the journey.
My Alternative Proposal For Making Money Online
If after considering all these factors, and you decide Amazon FBA is not for you at this stage, I can understand.
It’s not an easy option and I tend to believe it would suit entrepreneurs who are a bit more cash-rich to make that initial lump sum investment for inventory.
My recommendation is affiliate marketing if you are serious about turning your knowledge and experience into a means of making money online. By sharing reviews (like what I’m doing now), you can help people by educating and inspiring them to take action (sign up a course, purchase a product for example) and through that, start earning commissions when they purchase through your affiliate links. Top affiliate marketers like Pat Flynn, Income School’s Jim and Ricky are making thousands of dollars per month per niche site from pure affiliate sales.
The best thing of all – you don’t have to fork out a lot of money to start. At the most basic, you just need to pay for web hosting so that your website can be searched online 24/7. That’s the cost of your business!
If you are new to online business but want to start something and build it into a profitable business over time, affiliate marketing is a very viable choice.
At the start of this post, I mentioned Wealthy Affiliate which is an online platform designed for affiliate marketers of all levels. I can safely vouch for it because after I started my training in Wealthy Affiliate and implementing what I learned, I started to see results and even made money from it from the 3rd month onwards from affiliate sales including that of Amazon.
Here are some relevant posts for Wealthy Affiliate and I think you will benefit from reading them at your own pace.
Click HERE to start your FREE Membership with Wealthy Affiliate and I will personally help you to get rolling quickly once you are registered.
- 5 Reasons Why You Should Consider Wealthy Affiliate (Especially If You Are Bootstrapping!)
- How Your Online Business Can Work For You When You Can’t
- How to Make Money with Wealthy Affiliate?
- Why I Stopped Comparing Wealthy Affiliate With Other Programs
- Wealthy Affiliate Review 2018 – My Thoughts After Six Months
- I Almost Gave Up on Wealthy Affiliate! A Real Story
- Wealthy Affiliate for the Working People
- Review of Web Hosting Services: Bluehost vs Wealthy Affiliate