11 ms·

How To Start An Amazon FBA Business

237 points by landfall 10y ago

Abimelech 10y ago
Perfect guide indeed, exactly what I needed. Lovely that some people take the time to put things like these for free on the internet.
nibnib 10y ago
This looks fantastic. I am curious about reselling Chinese products - why do Alibaba sellers value FBA businesses? Why don't they just set them up themselves?
- arbingsam 10y ago
  Hello. I'm the guy who wrote the article. Just created an account as I saw I was getting some traffic from Hacker News. In answer to you question: They do sell on Amazon FBA themselves. More and more so in the last year. In fact, in the seller center there are two choices for language, English and Chinese. That is why I suggest focusing on creating your own products or improving on existing ones rather than just reselling stuff from Alibaba. Even then you need to do your own marketing. As a consumer in your own market place you should have an advantage over a Chinese seller who can only speak broken English. It's also worth pointing out that these factories aren't in the business of creating brands. They're in the business of mass producing other people's brands. As such the more people who work with them the better, regardless of where they plan on selling the final product.
  - petecooper 10y ago
    Constructive suggestion: make a note of which URLs are affiliate links, or have a referral/affiliate disclaimer on the article.
  - awesomerobot 10y ago
    I'm surprised that Chinese sellers aren't paying attention to language disparities and hiring translation services. Are they simply trying to streamline price so aggressively that it's just not worth it?
- cylinder 10y ago
  I have not found opportunity in doing this. Basically every product that is eligible for FBA on Alibaba is already on Amzn five times over. The opportunity is in creating your own products and brands and selling on Amazon. In that sense, you already have a valuable business model that would exist without Amazon, but FBA is just a great sales channel and platform for doing that selling directly rather than traditional means of selling to distributors, retail stores, etc.
  - vpayette 10y ago
    That's my experience as well and creating+marketing a brand new product is a ton of work.
IanCal 10y ago
Really interesting. I also followed on to this: http://www.arbing.co.uk/create-sell-physical-product/ http://www.arbing.co.uk/create-sell-physical-product/ which is worth a read. Nice to see all the steps laid out, it's impressive how smooth the process can be for manufacturing and selling something these days.
ivank 10y ago
How risky is it to ship straight from the factory to Amazon? It seems like a supplier could switch to shipping duds/rejects, Amazon would sell them for you, and you'd get a pile of 1-star reviews on your listing. Do FBA businesses do anything to deal with supplier risks?
- Vibrelli 10y ago
  For a quality supplier, it's not in their interest to sell you rubbish. If you make money and are successful, then so are they. Get to know them really well but make sure you get lots of samples. In saying that, some just don't sell quality products, it's up to to filter them. You can also hire people to do Quality Assurance testing at the factory on your orders.
  - jameskegel 10y ago
    I'm curious how this would play out in Chinese manufacturing operations.
  - arbingsam 10y ago
    As Vibrelli says, I use an extra step where the freight forwarder quality check every item before sending them to Amazon.
    - bambax 10y ago
      How does that work? Do they open 1 in 10, 1 in 100, etc.? Are products sealed at the factory? Or does the freight forwarder seal them for you?
      - arbingsam 10y ago
        They open and repack everything. Amazon requires a specific Amazon barcode, you can either pay them to do it for you for 20c an item or pay someone else to do it. I found I could get the item quality checked and barcoded for the same price as Amazon would do it.
Vibrelli 10y ago
From experience - really really research your suppliers as these will make of break your business. Many 'suppliers' on Alibaba, are not manufacturers just on-sellers. Also use other non-alibaba methods of sourcing suppliers, hire sourcing agents who speak the lingo and help vet the factories for you. Also focus on quality.. don't sell junk ;)
TeamMCS 10y ago
Quite enjoyed this. I've been toying with the idea of using Amazon distribution to increase scale. Very helpful to see the steps laid out. Thank you
thirdsun 10y ago
Very interesting, great guide. As a seller, it's actually very tempting. On the other hand however, this is everything that's wrong with Amazon. This feels messy and like wild west ecommerce. If I, as a customer, wanted to shop with little to no curation I'd do that at eBay. Since I'm rarely interested in buying that way I'd prefer Amazon to focus on quality products instead of setting up a free for all environment.
- brianwawok 10y ago
  Amazon has never had curation. Other places such as Jet have curation but much fewer products.
  - komali2 10y ago
    Wouldn't user reviews technically be a form of "curation?" It's not like when I search "SD card 16gb" I go past page 2 on the search results.
    - brianwawok 10y ago
      Sure, crowd sourced curation. The problem is, what happens when someone buys 100 reviews? If there was marketplace curation - wouldn't matter, still only 4 listings for SD card 16gb. But with 600 people competing and buying reviews for SD cards? Who knows what shows up as the highest reviews... FWIW Amazon has 1,826 results for that query, and Jet has 35. I am sure Amazon has more unique products, but not that many more.
wyager 10y ago
It's incredible how efficient the market is these days. Great article.
cm2012 10y ago
I've worked with quite a few old school manufacturers that have expanded their business by selling direct on Amazon. Amazon's easy to use marketplace is the only online medium that has ever worked out so well for companies that make products but are not savvy in e-commerce. The profits from Amazon are giving these businesses the opportunity to dip their toes in e-commerce. The real advantage to the world from all of this is just starting to appear: In every example that I know, the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon.
- mooreds 10y ago
  > the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon. Hmmm. Are they concerned about marketing? That seems to be where Amazon provides a ton of value--aggregating a tremendous number of customers that are shopping. A manufacturer's website won't have the same traffic, right?
  - cm2012 10y ago
    Precisely.
    - mooreds 10y ago
      Err, maybe I misunderstand. Is it possible that their confidence is misguided, or are they aware that Amazon provides a tremendous platform that, if they sell direct to consumer, they'll have to replicate in some way?
      - cm2012 10y ago
        Sorry, yeah, misread your question. It is really hard to expand beyond Amazon because marketing is so hard. But the few that do succeed can then control the customer relationship, so its worth the risk and investment.
rbustamante22 10y ago
I have been selling on Amazon for about a year now. If you have not sold on Amazon you do not understand the scale of their platform. If you are interested in getting started I would recommend going the retail arbitrage approach first. It is a great way to get your feet wet without much risk. Trust me you will be amazed.
- mooreds 10y ago
  Here's the same author discussing retail arbitrage: http://www.arbing.co.uk/retail-arbitrage/ http://www.arbing.co.uk/retail-arbitrage/
ilamont 10y ago
The article glosses over a critical element: Getting Amazon reviews and positive ratings. Unfortunately, many sellers of new products take the easiest way out, and go to Fiverr or a similar service to pump up their product with dozens of fake reviews. A few also use fake reviews to bring down competing products. It's a broken mess that misleads buyers and hurts legitimate vendors.
- slantyyz 10y ago
  While I'm sure there are a lot of shady sellers, a lot of legitimate sellers simply scrape the top reviewers lists and send cold-call emails offering samples/discounts in exchange for reviews. Amazon reviewers who get discount codes or free samples are required to disclose this information in their review. When I hit the top 1000 reviewers on Amazon Canada, I started to get offers for review samples, and as my ranking improved, I started getting even more offers, with most of them coming from Chinese vendors.
- arbingsam 10y ago
  I'd always recommend new sellers to not buy or fake reviews. Not just from a moral view point, but also from a business one - if Amazon catch you (which they're quite good at now) that's it, no more selling on Amazon for you. I totally agree with you that the Amazon review system needs a complete overhaul. I've had fake reviews from competitors damaging my sales, and have seen people get hundreds of reviews in a few hours. The issue is that it's too easy to leave a fake review (you don't even need to buy the product), and too few customers leave a real one. Less than 1%.
gregpilling 10y ago
I have a small factory in Arizona, and we sell products on Amazon as well as through multiple other distribution channels. A few thoughts came to mind while reading this: 1. China isn't the only place to get stuff made. Look locally. We manufacture our products, as well as products for two other companies who also sell partially on Amazon. You probably have local contract manufacturers like us who would appreciate a chance to compete with China. We use lots of automation, and we are cheaper than China on heavier metal goods (over 20 lbs). We are also cheaper in small runs, or MOQ is typically 1; in China it is often 1000. You probably have someone near you that can do the same. 2. Getting a hit product isn't easy. Mostly it seems to be luck. Manufacturing is like software development; sometimes you have to iterate for a while before it all clicks with the customer. Once it clicks, its off like a rocket. One basic path to a hit product is to create a product that is a combination of others. I have a friend who makes a kit out of a bunch of specialty tools for EMT. His is the only kit on the market and is a great seller for him. Another friend had great success with an automotive accessory this Christmas season on Amazon. He sold up to 50 units a day, that season he sold 3000+ units. He was #1 on the “top seller” list. Don’t forget that he had to have 3000 units in stock before this; that is a huge gamble if you are just starting out. 3. Having a hit product isn't easy to manage. Once you get a hit product it goes 0-1,000 real quick. I had to manage 50-100% growth per month in the first year of manufacturing. Per month. With a product made out of steel. If your hit product is coming from China, I hope it is lightweight because you will end up air freighting it constantly. I once air shipped a 1000 10 mm bolts with a special head from China and it cost me $1000 in fees, $1 in shipping per $0.13 bolt. If you ever run out of stock, you will fall of the "top seller" list and your volume will plummet. China can take 3-6 months for a restock order to get made, shipped, through customs and onto Amazon warehouse. How do you keep stock for 3-6 months on hand? My friend who sold 3000 units before Christmas, he had to ship those units to Amazon FBA well before then and pay storage the whole time. The storage is sold by the cubic foot, and he had thousands of cubic feet to pay for at elevated Christmas rates. 4. Single Point of Failure. If Amazon suddenly decides that they don’t like you, sales can go from 100-0 instantly - and now you have money tied up in product, fees in storage, and no cash flow. Even if you have multiple channels, Amazon will be a BIG customer. They are about 10% of our business, and if they disappeared tomorrow it would hurt. If they are over 30% of your business, getting shut off could mean bankruptcy for you. 5. Building a brand is hard, and a different skill set than manufacturing. The article is correct that there are thousands of manufacturers wanting to build stuff for you. How well could you build a brand in a foreign country? Especially if you are a manufacturer (focused on efficiency) and not a marketer (focused on A/b, Social, advertising)? This is why the Chinese manufacturers are happy to let a marketer take on the risk of developing a brand, seeking out a customer base. As a USA based manufacturer I am happy to make whatever you want too! We take Visa, Mastercard, Paypal, Bitcoin ….. The article is fairly complete though, I believe the author has actually done this stuff.
bambax 10y ago
Great article. I'm in the process of making a physical product: a new quick-release plate for DSLRs; I did find a manufacturer in China for CNC machining and had a couple of prototypes sent to me (in France), which were of very good quality. The problem is however, the final product will be made of several parts from different manufacturers: the plate, a rubber pad, screws, washers, a box for "clean" packaging, etc. Are there factories that specialize in assembling/boxing a product, and what would the proper keywords be in order to look for them?
- louprado 10y ago
  Have you asked your current suppliers if they could perform the assembly or find someone who can ? That's what my company does and it has worked well.
  - bambax 10y ago
    No, not yet, but I will.
kristianp 10y ago
I don't buy stuff on Amazon because I'm in Australia (the shipping from US or UK is too expensive), but I use Ebay and there are a number of local resellers for any small electronics items I want to buy. Does anyone know of a similar site about 3rd party fulfilment centres that can do Ebay shipping?

237 points by landfall 10y ago

Perfect guide indeed, exactly what I needed. Lovely that some people take the time to put things like these for free on the internet.

nibnib 10y ago

This looks fantastic. I am curious about reselling Chinese products - why do Alibaba sellers value FBA businesses? Why don't they just set them up themselves?

arbingsam 10y ago
Hello. I'm the guy who wrote the article. Just created an account as I saw I was getting some traffic from Hacker News. In answer to you question: They do sell on Amazon FBA themselves. More and more so in the last year. In fact, in the seller center there are two choices for language, English and Chinese. That is why I suggest focusing on creating your own products or improving on existing ones rather than just reselling stuff from Alibaba. Even then you need to do your own marketing. As a consumer in your own market place you should have an advantage over a Chinese seller who can only speak broken English. It's also worth pointing out that these factories aren't in the business of creating brands. They're in the business of mass producing other people's brands. As such the more people who work with them the better, regardless of where they plan on selling the final product.
- petecooper 10y ago
  Constructive suggestion: make a note of which URLs are affiliate links, or have a referral/affiliate disclaimer on the article.
- awesomerobot 10y ago
  I'm surprised that Chinese sellers aren't paying attention to language disparities and hiring translation services. Are they simply trying to streamline price so aggressively that it's just not worth it?
cylinder 10y ago
I have not found opportunity in doing this. Basically every product that is eligible for FBA on Alibaba is already on Amzn five times over. The opportunity is in creating your own products and brands and selling on Amazon. In that sense, you already have a valuable business model that would exist without Amazon, but FBA is just a great sales channel and platform for doing that selling directly rather than traditional means of selling to distributors, retail stores, etc.
- vpayette 10y ago
  That's my experience as well and creating+marketing a brand new product is a ton of work.

IanCal 10y ago

Really interesting. I also followed on to this: http://www.arbing.co.uk/create-sell-physical-product/ http://www.arbing.co.uk/create-sell-physical-product/ which is worth a read. Nice to see all the steps laid out, it's impressive how smooth the process can be for manufacturing and selling something these days.

ivank 10y ago

How risky is it to ship straight from the factory to Amazon? It seems like a supplier could switch to shipping duds/rejects, Amazon would sell them for you, and you'd get a pile of 1-star reviews on your listing. Do FBA businesses do anything to deal with supplier risks?

Vibrelli 10y ago
For a quality supplier, it's not in their interest to sell you rubbish. If you make money and are successful, then so are they. Get to know them really well but make sure you get lots of samples. In saying that, some just don't sell quality products, it's up to to filter them. You can also hire people to do Quality Assurance testing at the factory on your orders.
- jameskegel 10y ago
  I'm curious how this would play out in Chinese manufacturing operations.
- arbingsam 10y ago
  As Vibrelli says, I use an extra step where the freight forwarder quality check every item before sending them to Amazon.
  - bambax 10y ago
    How does that work? Do they open 1 in 10, 1 in 100, etc.? Are products sealed at the factory? Or does the freight forwarder seal them for you?
    - arbingsam 10y ago
      They open and repack everything. Amazon requires a specific Amazon barcode, you can either pay them to do it for you for 20c an item or pay someone else to do it. I found I could get the item quality checked and barcoded for the same price as Amazon would do it.

Vibrelli 10y ago

From experience - really really research your suppliers as these will make of break your business. Many 'suppliers' on Alibaba, are not manufacturers just on-sellers. Also use other non-alibaba methods of sourcing suppliers, hire sourcing agents who speak the lingo and help vet the factories for you. Also focus on quality.. don't sell junk ;)

TeamMCS 10y ago

Quite enjoyed this. I've been toying with the idea of using Amazon distribution to increase scale. Very helpful to see the steps laid out. Thank you

thirdsun 10y ago

Very interesting, great guide. As a seller, it's actually very tempting. On the other hand however, this is everything that's wrong with Amazon. This feels messy and like wild west ecommerce. If I, as a customer, wanted to shop with little to no curation I'd do that at eBay. Since I'm rarely interested in buying that way I'd prefer Amazon to focus on quality products instead of setting up a free for all environment.

brianwawok 10y ago
Amazon has never had curation. Other places such as Jet have curation but much fewer products.
- komali2 10y ago
  Wouldn't user reviews technically be a form of "curation?" It's not like when I search "SD card 16gb" I go past page 2 on the search results.
  - brianwawok 10y ago
    Sure, crowd sourced curation. The problem is, what happens when someone buys 100 reviews? If there was marketplace curation - wouldn't matter, still only 4 listings for SD card 16gb. But with 600 people competing and buying reviews for SD cards? Who knows what shows up as the highest reviews... FWIW Amazon has 1,826 results for that query, and Jet has 35. I am sure Amazon has more unique products, but not that many more.

wyager 10y ago

It's incredible how efficient the market is these days. Great article.

cm2012 10y ago

I've worked with quite a few old school manufacturers that have expanded their business by selling direct on Amazon. Amazon's easy to use marketplace is the only online medium that has ever worked out so well for companies that make products but are not savvy in e-commerce. The profits from Amazon are giving these businesses the opportunity to dip their toes in e-commerce. The real advantage to the world from all of this is just starting to appear: In every example that I know, the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon.

mooreds 10y ago
> the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon. Hmmm. Are they concerned about marketing? That seems to be where Amazon provides a ton of value--aggregating a tremendous number of customers that are shopping. A manufacturer's website won't have the same traffic, right?
- cm2012 10y ago
  Precisely.
  - mooreds 10y ago
    Err, maybe I misunderstand. Is it possible that their confidence is misguided, or are they aware that Amazon provides a tremendous platform that, if they sell direct to consumer, they'll have to replicate in some way?
    - cm2012 10y ago
      Sorry, yeah, misread your question. It is really hard to expand beyond Amazon because marketing is so hard. But the few that do succeed can then control the customer relationship, so its worth the risk and investment.

rbustamante22 10y ago

I have been selling on Amazon for about a year now. If you have not sold on Amazon you do not understand the scale of their platform. If you are interested in getting started I would recommend going the retail arbitrage approach first. It is a great way to get your feet wet without much risk. Trust me you will be amazed.

mooreds 10y ago
Here's the same author discussing retail arbitrage: http://www.arbing.co.uk/retail-arbitrage/ http://www.arbing.co.uk/retail-arbitrage/

ilamont 10y ago

The article glosses over a critical element: Getting Amazon reviews and positive ratings. Unfortunately, many sellers of new products take the easiest way out, and go to Fiverr or a similar service to pump up their product with dozens of fake reviews. A few also use fake reviews to bring down competing products. It's a broken mess that misleads buyers and hurts legitimate vendors.

slantyyz 10y ago
While I'm sure there are a lot of shady sellers, a lot of legitimate sellers simply scrape the top reviewers lists and send cold-call emails offering samples/discounts in exchange for reviews. Amazon reviewers who get discount codes or free samples are required to disclose this information in their review. When I hit the top 1000 reviewers on Amazon Canada, I started to get offers for review samples, and as my ranking improved, I started getting even more offers, with most of them coming from Chinese vendors.
arbingsam 10y ago
I'd always recommend new sellers to not buy or fake reviews. Not just from a moral view point, but also from a business one - if Amazon catch you (which they're quite good at now) that's it, no more selling on Amazon for you. I totally agree with you that the Amazon review system needs a complete overhaul. I've had fake reviews from competitors damaging my sales, and have seen people get hundreds of reviews in a few hours. The issue is that it's too easy to leave a fake review (you don't even need to buy the product), and too few customers leave a real one. Less than 1%.

gregpilling 10y ago

I have a small factory in Arizona, and we sell products on Amazon as well as through multiple other distribution channels. A few thoughts came to mind while reading this: 1. China isn't the only place to get stuff made. Look locally. We manufacture our products, as well as products for two other companies who also sell partially on Amazon. You probably have local contract manufacturers like us who would appreciate a chance to compete with China. We use lots of automation, and we are cheaper than China on heavier metal goods (over 20 lbs). We are also cheaper in small runs, or MOQ is typically 1; in China it is often 1000. You probably have someone near you that can do the same. 2. Getting a hit product isn't easy. Mostly it seems to be luck. Manufacturing is like software development; sometimes you have to iterate for a while before it all clicks with the customer. Once it clicks, its off like a rocket. One basic path to a hit product is to create a product that is a combination of others. I have a friend who makes a kit out of a bunch of specialty tools for EMT. His is the only kit on the market and is a great seller for him. Another friend had great success with an automotive accessory this Christmas season on Amazon. He sold up to 50 units a day, that season he sold 3000+ units. He was #1 on the “top seller” list. Don’t forget that he had to have 3000 units in stock before this; that is a huge gamble if you are just starting out. 3. Having a hit product isn't easy to manage. Once you get a hit product it goes 0-1,000 real quick. I had to manage 50-100% growth per month in the first year of manufacturing. Per month. With a product made out of steel. If your hit product is coming from China, I hope it is lightweight because you will end up air freighting it constantly. I once air shipped a 1000 10 mm bolts with a special head from China and it cost me $1000 in fees, $1 in shipping per $0.13 bolt. If you ever run out of stock, you will fall of the "top seller" list and your volume will plummet. China can take 3-6 months for a restock order to get made, shipped, through customs and onto Amazon warehouse. How do you keep stock for 3-6 months on hand? My friend who sold 3000 units before Christmas, he had to ship those units to Amazon FBA well before then and pay storage the whole time. The storage is sold by the cubic foot, and he had thousands of cubic feet to pay for at elevated Christmas rates. 4. Single Point of Failure. If Amazon suddenly decides that they don’t like you, sales can go from 100-0 instantly - and now you have money tied up in product, fees in storage, and no cash flow. Even if you have multiple channels, Amazon will be a BIG customer. They are about 10% of our business, and if they disappeared tomorrow it would hurt. If they are over 30% of your business, getting shut off could mean bankruptcy for you. 5. Building a brand is hard, and a different skill set than manufacturing. The article is correct that there are thousands of manufacturers wanting to build stuff for you. How well could you build a brand in a foreign country? Especially if you are a manufacturer (focused on efficiency) and not a marketer (focused on A/b, Social, advertising)? This is why the Chinese manufacturers are happy to let a marketer take on the risk of developing a brand, seeking out a customer base. As a USA based manufacturer I am happy to make whatever you want too! We take Visa, Mastercard, Paypal, Bitcoin ….. The article is fairly complete though, I believe the author has actually done this stuff.

bambax 10y ago

Great article. I'm in the process of making a physical product: a new quick-release plate for DSLRs; I did find a manufacturer in China for CNC machining and had a couple of prototypes sent to me (in France), which were of very good quality. The problem is however, the final product will be made of several parts from different manufacturers: the plate, a rubber pad, screws, washers, a box for "clean" packaging, etc. Are there factories that specialize in assembling/boxing a product, and what would the proper keywords be in order to look for them?

louprado 10y ago
Have you asked your current suppliers if they could perform the assembly or find someone who can ? That's what my company does and it has worked well.
- bambax 10y ago
  No, not yet, but I will.

kristianp 10y ago

I don't buy stuff on Amazon because I'm in Australia (the shipping from US or UK is too expensive), but I use Ebay and there are a number of local resellers for any small electronics items I want to buy. Does anyone know of a similar site about 3rd party fulfilment centres that can do Ebay shipping?