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Amazon FBA Experiment
- k__ 8y agoI bought a huge course about this topic once. I found the whole thing really interesting. The troubles with Amazon accounts. Designing your own products based on white label products. etc. I really wanted to do this, but I then learned that I had to send the products to my home first, so I can check if it's okay and then send them to Amazon for fulfillment. It sounded like a virtual business, I'd think about markets, design products, find factories in China who create stuff for me and then let them deliver to Amazon so they would sell it for me. But suddenly I would have to sit with hundreds of products at home, checking them, putting new barcodes on them and driving them to the post office.
- CodeWriter23 8y agoYou can ship straight from factory to Amazon Fulfillment. But you better be sure your production is golden or you’ll get killed by refunds, return handling fees and poor reviews.
- r00fus 8y agoSo is the value proposition simply to buy items on Alibaba and resell on Amazon? Very interesting. I await the conclusion. How long do you think it'll take to sell the lot?
- sleavey 8y agoSeems so. Honest question: what's to stop the manufacturer (or anyone who knows the manufacturer) from making copies and selling them themselves? Do business owners who sell this sort of thing on Amazon just have to stay ahead of the curve or are there protections in place for this sort of thing?
- TAForObvReasons 8y agoManufacturer gets paid even if the reseller can't sell them. No need to take risk on the US market if someone else is willing to bear it.
- Phlarp 8y agoI don't think the alibaba shops have much interest in doing the legwork to list their own items on Amazon. They rely on other people (like the author) to do the research and marketing legwork, and hold the bag for unsold goods. They are focused on moving volume and keeping the factory at capacity. The bigger threat is Amazon itself, if your product is successful enough there will soon be an Amazon Basics branded version undercutting you and showing up higher in search results.
- NicoJuicy 8y agoYes, they have. I only saw numbers, but 50% of new sellers on Amazon Europe is Chinese. I expect the same for the US. I also read an interview once where they got analysed on the US store, with frequent typos, but better images then in the past.
- vezycash 8y agoAmazon can also create a competing product. Trademarking MIGHT protect against people using your logo and brand name.
- jamisteven 8y agoThey typically do not, how this works is Amazon buys out your store and puts in under their own white label ie: amazon basics brand. Lot of FBA businesses have this exit strategy planned out from inception and are building stores simply to sell them in the end, rinse and repeat.
- hobofan 8y agoThere is nothing stopping Amazon from getting in contact with the original manufacturers and selling it themselves if they see good sales number for a product. This usually happens after 1-3 months of good sales. Source: I previously worked in the Amazon price optimization field, and basically all our customers experienced this.
- csytan 8y agoThe value prop is in getting the item much quicker via Prime. It's also a form of arbitrage.
- siruncledrew 8y agoHe's spent over $2500 and his main batch of products from China haven't even arrived in the US yet. They still need to clear customs as well, which could further delay the items if any problems come up. That puts a lot of holiday selling in jeopardy. This seems pretty risky. --Plus he still needs to store the items, sell them, ship them, and deal with the customer service aspect.-- (Clarification: He doesn't actually have to do these things, but pay the FBA fees for Amazon to do them: https://services.amazon.com/fulfillment-by-amazon/pricing.html https://services.amazon.com/fulfillment-by-amazon/pricing.ht...) If his items happen to catch on and his supplier in China notices, there's also no real barrier to stop the suppliers (or friends of suppliers) from just cutting him out and creating duplicate product pages with slightly lower prices (which overseas suppliers have already succeeded at). This is an experiment afterall, so it would still be interesting to see the results of a random person reselling items that aren't particularly unique and in a market with plenty of alternatives (handbags/accessories) with over sellers probably doing about the same thing.
- anoncoward111 8y agoWinners in this scenario: Amazon, Chinese factory owners, consumers. Losers in this scenario: Chinese laborers, American "wantrepreneurs", and the environment.
- nostromo 8y agoSpeaking as the frequent victim of flipped AliExpress knock off items purchased on Amazon (at 100% markup over the AliExpress price) -- I think you should put consumers in the losers column.
- anoncoward111 8y agoThe quality is unacceptable/not as advertised? Then you most definitely are in the losers column, I agree. It's rare that consumers win but most of my chinese made shit is way better than american, especially for the price.
- NicoJuicy 8y agoIt's called retail arbitrage
- k__ 8y agoWell, they often have white-label stuff. Depending on the factory you buy at, they will let you customize more than just the logo and box. Using different materials, adding tools etc. Sometimes you get an edge over others because your product is just made of different plastic and comes with a nice bag.
- cblum 8y ago> Master Yoga ಠ_ಠ
- sfilargi 8y agoGreat deal for Amazon. 50% of the sales goes to them with 0 risk. I wonder if after the monthly seller fee, the returns and any unsold merchandise, if they will make any profit at all.
- tomerico 8y agoTo be fair, 15% is what they take as fees, and the rest is the shipping cost, which are likely realistic to expedite shipping a bag in the US.
- ernsheong 8y agoSorry, what does FBA stand for?
- rangibaby 8y agoFulfilled by Amazon, Amazon keeps your stuff at their warehouse and handles shipping etc
- pacificmint 8y agoFullfilled by Amazon. It is the program where third party sellers can send their products to Amazons warehouses, and Amazon then handles the shipping to the customer. The big advantage is that this makes the products eligible for Amazon Prime, as opposed to products that get shipped by the third party themselves.
- gaius 8y agoIt’s more insidious than that: Amazon commingling means that the merchants inventory which may be all counterfeit is indistinguishable from genuine articles prior to the buyer actually receiving it. If you want to be safe avoid any product that has both Amazon and FBA.
- bootlooped 8y agoThey have a program now for sellers to qualify for merchant-fulfilled Prime. I'm assuming they have to be able to guarantee they can do 2-day shipping, and there is some sort of oversight to ensure they're meeting that. I'm not sure how widespread the program is. I did purchase something within the last year that was listed as Prime, got to me in 2 days, but did not ship from an Amazon fulfillment center.
- richrichardsson 8y agoIt's literally in the 3rd sentence of the article! I highly doubt it was edited in the last 3 minutes. Even if it were, there is this fantastic website you can type queries into and it gives you results pertaining to those queries, literally the 1st result after the obligatory advert when searching just "FBA"!
- occamschainsaw 8y agoThe site seems to be down.
- coolness 8y agoYeah, getting ERR_SSL_VERSION_OR_CIPHER_MISMATCH
- bredren 8y agoI have done some of this and it is as speculative, competitive and risky as product market fit in startup land. You can make some money but you will probably make a lot more writing software. It is still a lot of fun to go through the process and I learned a lot doing it.
- NicoJuicy 8y agoI have done this also, but not on Amazon. Amazon is pretty expensive + competitive + I simply don't trust them.
- danellis 8y agoYou'd think someone involved in e-commerce would at least know that the dollar sign goes before the number and the percentage sign after.
- mavhc 8y agoI assumed from the mistakes in English that they're not native speakers. Wonder if they actually live in USA
- klohto 8y agoAuthor is not from USA. It’s common everywhere except for ‘murica to put currency sign after the amount...
- the-dude 8y agoNot true at all.
- vsl 8y agoNope. And it’s not common to put % in front at all either. This quirk identifies the author as having as their first language Arabic, perhaps Persian (where both styles are mixed), or Turkish (that one surprised me - RTL origin didn’t): https://en.m.wikipedia.org/wiki/Percent_sign https://en.m.wikipedia.org/wiki/Percent_sign
- danellis 8y agoI can't think of anywhere it's common to put the dollar sign after. They put the Euro sign after in some European countries. Nowhere puts the percentage sign first. The author is in the US, though.
- deleted 8y ago[deleted]
- fouc 8y agospeedybarcodes says "At this time, you have no choice but to obtain barcodes from GS1 if you want to list your products on Amazon." on the additional information page. I wonder what the fallout will be like when the boxes arrive at amazon and the UPC codes are considered to be invalid.
- jlangenauer 8y agoI think "business" is far too grand a word for what's being described here. This is old school trading - buying something, and selling it for more than you bought it. But it's being done in a highly competitive environment, where everything is commodified. Alibaba has commodified manufacturing, shipping was always a commodity, and Amazon has commodified the marketing and fulfilment end. The problem with commodities is that it's very difficult to create a competitive advantage - if you do happen to find one, it'll be transient and fleeting as others cotton on to it. I hope the author is also keeping track of the time he spends on this. At $7.64 profit per item, assuming he does sell all 200 handbags, that's $1528 in profit. If he's spent 152 hours on this, that's just $10/hour for his effort. If he ends up spending 211 hours, he's earning less than the US minimum wage.
- grecy 8y agoA friend of mine is making many thousands of dollars profit per month from FBA. It's real.
- xhruso00 8y agoThrough his own trademark or just like link above?
- grecy 8y agoLike the link. Started with one product and was willing to loose a few grand, now has about 5 products doing really well. He just went over to China to meet people to expand into new products.
- beginningguava 8y agoIs he aware that Trump ended the program that subsidizes shipping cheap products from China? I imagine this will pretty much kill all FBA when it goes into effect https://www.theatlantic.com/technology/archive/2018/10/trump-changes-terminal-dues-and-epacket-rates/573337/ https://www.theatlantic.com/technology/archive/2018/10/trump...
- DrNuke 8y agoWhat strikes me the most here and there in this interesting blog is how the OP found immediate solutions to some of his problems just looking outside his door, instead of the internet. Why do not go with the full local route then, next time? Less adventorous than moving threads globally but hopefully more rewarding economically (time vs hassle vs ROI)?
- bufferoverflow 8y agoBecause most of the cheap production is in China / Indonesia / Vietnam. I doubt you can find many local products that you can sell with high margins, justifying all the Amazon fees and your time.
- flavor8 8y agoI've done this and continue to run a couple products on Amazon. I funnel all of my profits back into bizdev, including trademarks & patents, trying different advertising platforms, new product development, qa tools for my products, etc. I've done strictly private label so far, but there are some wholesaler price lists that I have which are intriguing. If nothing else it's been a good way to teach myself marketing, imports, and more about IP law...I hope to do a hardware startup in future, which would likely involve Shenzhen manufacturing, so learning to find and interact with Chinese factories has also been valuable.
- bambax 8y ago> Buying UPC codes from GS1. This requires filling out a registration form on GS1 and it costs 250$! > Buying UPC codes from eBay or other websites. This is the easiest way and it costs only 2$ for a UPC code! I did little bit research and found out that many people are buying from eBay-like sites. So i decided to go with the second option. DO NOT DO THIS. You will get banned from Amazon and the codes you bought will be worthless -- not just the money but the codes printed on the products that will have to be redone. Registering with GS1 is the way to go if you're serious; the cost is usually much less than $250, depending on where you are and the size of your business; and then with the registration you can generate as many codes as you want. Or you can register a brand with FBA, and then apply to have no codes; if you only sell on Amazon it's a good option. Your products will only need an FNSKU number than Amazon generates for you. See for example (many articles on the subject exist, just Google it) https://amzadvisers.com/amazon-gs1-barcode-requirements-are-now-being-enforced/ https://amzadvisers.com/amazon-gs1-barcode-requirements-are-...
- steventhedev 8y agoAccording to this[0] it costs 250 USD for 1-10 codes in the US. Where can you get them for cheaper? [0]: https://www.gs1us.org/upcs-barcodes-prefixes/get-started-guide/get-your-upc-barcodes-from-gs1-us https://www.gs1us.org/upcs-barcodes-prefixes/get-started-gui...
- bambax 8y agoIn France for a company with a turnover of up to EUR 500,000 it only costs EUR 85/year, for what I think is up to 1 million codes (you get a root number and can generate the codes yourself). https://www.gs1.fr/Obtenir-un-code-a-barres/Consultez-nos-tarifs-et-CGA https://www.gs1.fr/Obtenir-un-code-a-barres/Consultez-nos-ta...
- steventhedev 8y agoWould Amazon accept those for FBA in the US? If not, then it may be tedious to register a legal entity abroad just to get cheaper UPCs that you can't even use. If they do, then it would be worthwhile building a list of countries with cheap/easy UPCs and cheap/easy legal entity registration.
- iofiiiiiiiii 8y agoIn many ways this is an interesting business model - the author is largely acting as the financial backer and publisher, whereas everything from product design to manufacturing happens in China. I wish the author tracked their time spent on this. The labor cost might be a killer overhead. Being very lean on process is probably a major factor in making it pay off.
- LancerSykera 8y agoSelling existing products would be the smarter way to go at the beginning. Less risk that your unique product doesn't catch on, and just focus on procurement and sale pricing (as well as learning the process and policy expectations). I did just a bit over $1 million in sales over two years of my Amazon business and it was 99% existing major brand lines. Some I bought direct from manufacturer, some from other suppliers.
- vthallam 8y agoDo you pick a niche or just look for any products which has good margin? Also, do you use any tools to identify products or categories which are top selling? Appreciate any information
- LancerSykera 8y agoI did have a very specific niche in the industrial categories. It was a business that I used to work for a supplier for, so I was familiar with products and manufacturers and distributors. For me, it wasn't so much identifying top selling products, but rather ones that I could compete on price. I did use a good many tools for all aspects of the business, but couldn't really share them now as I've basically shut all that out of memory.
- eeeeeeeeeeeee 8y agoWhat kind of profits?
- LancerSykera 8y agoOn individual sales including all fees, 20-25%. I currently owe the IRS roughly 20k or so from 2015, and I just started a new job at $16/hr. Guess how well that's working out for me.
- continuations 8y agoThat didn't seem to be a bad business if you made 25% after all fees. Why didn't it work out?
- dpeterson 8y agoThis reads like a guide released by amazon themselves. They’ve burned so many bridges with existing sellers they may be trying to lure in all new unsuspecting would be entrepreneurs that haven’t been given multiple black eyes by them already. “Hey look, amazon was really a gentleman, maybe I should go out on a date too”
- CodeWriter23 8y agoMaybe. My money is on a post about the same time next year where he’s whining about FBA’s Long Term Storage fees catching up with him.
- _red 8y agoIts a racket for sure, once your inventory gets stuck in Amazon you either have to continually pay the LT service fee increases, or you must pay for them to "destroy" your inventory. Hilariously, they "destroy" your inventory by selling it and keeping 100% of the money.
- bootlooped 8y agoYou can also have them return the product to you. Of course this costs money. I don't think that storage fees specifically are a racket. What do you want Amazon to do, store a bunch of non-selling products indefinitely for free? The lesson is that you shouldn't send a ton of products to FBA unless you have good reason to believe they'll move.
- _red 8y agoRacket may be too strong of a word, and no I don't expect Amazon to hold inventory for free. However, charging people to "dispose" of inventory (ie. sell for their own profit) is a bit shady.
- CodeWriter23 8y agoYou can. For the full rate a non-Prime customer would pay for shipping. If they happen to have several units in the same place, they'll send them in the same box. My mom asked for about 2 dozen items to be returned, she received about 10 boxes, at about $5 a pop (small merchandise, retailing for $10-$20 each).
- arcticfox 8y agoAs an FBA seller with mid 7-figure yearly revenue on the platform, I'd recommend it to no one as of about 6 months ago. I'm likely quitting soon. Amazon's support for sellers is obscene, it pendulums between non-existent and a knife in the back.
- CodeWriter23 8y agoHow many units do you have in their FC’s, that you need to draw down?
- arcticfox 8y agoAbout 10000 at this point; the biggest problem is that our "home base" comfortably handles about 1000 units at a time and is already at ~500% of capacity (i.e. basically unworkable) due to problems Amazon has been handing us. So drawing down is going to be a nightmare.
- CodeWriter23 8y agoBest of luck to you. Maybe this will help you feel better. My mom had 50K items. It’s been a years long project of selling things at a loss (her stuff is in the $10-20 range) to have it cost less than the disposal fee, running promotions, taking advantage of the periodic disposal promos Amazon offers. They haven’t made it completely unworkable for her yet, but it’s bad. Much of her line is unique, and we get these counterfeit cockroaches that sell on her listings (which is against this particular category’s guidelines) and ship some piece of crap and gets negative reviews attached to the listing. Every time she opens a case to deal with the counterfeiter or bad review, she has to walk it through various obstacles thrown out by the agent, like it’s day one on the job for each of them. It’s a total nightmare. She is working to pivot to a different type of category and sell to brick and mortar department stores. The type of hell they offer is looking pretty good compared to Amazon these days.
- nyolfen 8y agoyou should write up your experience
- CamelCaseName 8y agoHere are my two cents as an Amazon seller. >Niche is wallets/purses Purses and wallets are quite competitive. The material cost isn't too high and they typically sell for quite a bit, but marketing is a huge challenge and being able to feel the product is important to buyers. Another issue is that the factories manufacturing your product are competing directly against you on Amazon, which is sometimes true for any given product, but definitely true for something as fairly undifferentiated as women's purses. I know many people who have failed here. It seems the only way to succeed in this niche is to either be the manufacturer, middleman, have some unique differentiator either in brand (tough to market such a difference as purses/wallets are infrequent purchases) or in the purse's utility itself, which will require a custom (and expensive) run. >20% margins These margins are way too tight for Amazon. You simply cannot stand out from the other 10,000 generic women's purses with such a budget. Listing products on Amazon is the easy part, getting eyeballs is hard. Advertising is very expensive, and doubly so without a trademark. >Buying codes off eBay This is pretty risky. What would work better is if you apply for GTIN exemption. It's very easy to get and you don't even need UPC codes. >Now i need to come up with a 5 bulleted list and description for my product This is one of the most important parts of the page. You know your product and the target audience best so it's critical you write this yourself. >Shipping direct to FBA with no intermediary QA Yikes, there's no guarantee that what's inside those boxes is going to be anywhere near the same quality as your sample. >[After shipping] I will use this 1 month period to do some research about marketing. This likely going to be one of your biggest expenses. Using the advertising tools, you can get a rough idea of your costs before ordering product. Edit: Removed all caps, substantially toned down/removed needlessly aggressive phrases.
- jakobegger 8y agoSo, yes, this person is a total noob, and his/her experiment is obviously going to fail. But the author expects that option. It's an experiment. The blog post talks about spending 3k to 5k on the experiment, which I presume is not a lifechanging sum for the author. The experiment will fail, but apart from a bit of lost money there's not a lot of risk. The problem is when people do the same thing, but don't consider the fact that they are inexperienced. They think they have it all figured out and spend their life savings on it. They sell their home, take another mortage, and end up with mountains of debt, and a product nobody wants. It doesn't sound like that's what the blog author is doing.
- mherdeg 8y agoIt's very cool to see someone trying this out. Any predictions on the outcomes? (1) I sold a bunch of product and made money (2) I sold a bunch of product and lost money (3) No one wanted my product and I lost money (4) I sold a bunch of product then Amazon started selling it for less and I lost money ? Separately, I have been following the Keyboard.io backer updates for years now ( https://shop.keyboard.io/ https://shop.keyboard.io/ ) which provide fairly thorough slice-of-life pictures of every step involved in creating a consumer electronic product from scratch in collaboration with manufacturers in China. It's not an exhaustive guide to the process but every step of the logistics we do get to read is fascinating. Lately I've been feeling like they could make more money teaching hardware startups to navigate this landscape than they could by selling the keyboards. Also separately, I used to log 100k+ miles per year butt in seat flying for work and recreation, flying with carryons only but with a 3x 70lb baggage allotment and a modest duty-free allowance I never used, and I always wished I understood how to buy off-the-shelf consumer products that are cheap in one country then resell them in another. It seemed like it would be low risk because consumers can usually return unused merchandise. I figured there must be some way to buy iPads and sell them on Gumtree, meet up in Covent Garden and trade them for cash, then return any iPads I couldn't sell at a profit. I never found good docs of anyone doing this and always wondered whether it was logistically very hard (i.e. issues with customs or reliable resale) or whether it was just an area where people were quietly individually making a killing and didn't want competition. Ended up pretty much only using the free 3x 70 lbs to help move house when we moved overseas & came back.
- sct202 8y agoI'm going to go with 3. He only has a $7 margin not including ads/promos and his pricing is already on the higher end of FBA bags on Amazon. Like he's going to need to get early reviews and that is not free.
- jklinger410 8y agoSolid 3. The absolute arrogance of walking into a market as a complete amateur with low margins, admitting that he will "learn about marketing" while the product gets set up in the store is honestly laughable. There are hundreds of thousands of people thinking about what the next niche to attack in online sales is. The work is on that end, not this silly, already done, repeatable, novel process of drop shipping.
- ilamont 8y agoAfter the shipment arrives at the FBA warehouse, it may be in a "reserved" status (processing, validation, transshipped, etc.) for at least a few days in a normal part of the year. This is not a normal time of year, so it may take weeks to clear into "available" status. If you send too much stuff to Amazon and it doesn't sell, you will be liable for long-term storage fees and they can be expensive (https://sellercentral.amazon.com/gp/help/external/200684750?language=en-US&ref=mpbc_201101150_cont_200684750 https://sellercentral.amazon.com/gp/help/external/200684750?...) The FBA universe is filled with stories of people having a manufacturer overseas make some low-cost product and encountering problems including low demand, poor quality, too many similar products available, and commingling with pirated or "third shift" inventory. Protections against piracy and commingling include trademarks and the Amazon Transparency program (https://brandservices.amazon.com/transparency https://brandservices.amazon.com/transparency). Requirements for Transparency described here: http://leanmedia.org/amazon-transparency-what-is-it-and-how-can-amazon-sellers-and-brands-use-it-to-fight-counterfeits/ http://leanmedia.org/amazon-transparency-what-is-it-and-how-...
- sigi45 8y agoI stumbled about that on YouTube, searched around and than accepted that it is probably something like Bitcoin. Super risky and not worth it. I keep working normally in my normal job. Ah yeah BTW. This topic feels like a 'everyone is doing it because a few people use this topic to upsell there videos and referrals etc.'
- someguy101010 8y agoYeah everything that I've ever seen related to this stinks of a scam and that it's too good to be true. Also, a lot of survivorship bias as well.
- ikeboy 8y agoPrivate label like OP is doing is the high risk high reward version. Wholesale is much less risk, but there tends to be lower margin. A lot of people recommend starting with wholesale or even retail arbitrage to get the hang of it. Per Amazon figures, there are 20,000 sellers who sell over a million dollars a year. I know a lot of people in that range, but it does take capital to get there.
- CodeWriter23 8y agoHave you experienced Amazon selling your “destroyed” items? I’ve always suspected that was the case but haven’t confirmed it.
- bootlooped 8y agoI'm pretty sure they do this. I also don't have a concrete case I can point to.
- demarq 8y ago> However i figured out how to solve crash problem without upgrading my plan. I just simply created a cron job which restart my server automatically every 2 hours. My favourite part!
- auslander 8y ago> to solve crash problem without upgrading my plan. I just simply created a cron job which restart my server automatically every 2 hours Love it, immensely :)
- throwaway2786 8y agoI'm an FBA seller doing mid 7 figures, it's certainly possible to be successful here and I have a lot of peers that are also pulling in multi 7 figures. The problem I see most beginners entering the business is that they're reading too many forums and watching too many Youtube videos thinking that there's a get rich quick scheme here. Let me tell you that there isn't. Here's the secret, treat FBA like you would any other business - that means focusing on competitive advantages, barriers to entry, customer acquisition strategy, and other general business model type stuff. For example, one of our best selling products took 2 years to develop, over $150k in R&D expenses, multiple patents and thousands in marketing to build the brand. It's currently making millions, but the road to get there certainly wasn't easy and it certainly wasn't "Off the shelf". No one talks about that stuff though because it's not sexy, it's just like any other business, you really have to put in the effort and think about what you're doing to get anywhere - or else like multiple comments have already said, the Chinese sellers will just totally crowd you out. And why shouldn't they? You have nothing special going on.
- binarysolo 8y agoAmazon seller here, around a decade of experience, doing low eight digits on mostly exclusive products (trademark+IP on products). Out of curiosity, but to the layperson, does the Amazon third-party marketplace seem like an exciting place to be? I feel like in 2016-2017 all the pickaxe sellers were popping up, and by 2018 all I see are a ton of burnout in my circle of vendor friends as they deal with the constant influx of 3p vendors with blackhat tactics.