I am hoping that I am able to create a free resource for people looking to start selling on Amazon. Do not waste your money on a course when you could spend that on the product.
Personally, I think it is better to watch some YouTube videos, read a couple of blogs and just getting started on a smaller scale. You’ll learn more from doing than you will from any course out there.
This isn’t rocket science, you can start selling on Amazon with less than $500 and in about a month without Harvard MBA, million dollars on your bank account, reinventing the wheel, all you need is common sense, some work hours and as I said $500 of the initial investment.
This is how to it, step by step, with exact, sample product.
Here’s a quick breakdown of costs for my first batch of 100 units ordered:
- Manufacturing costs: About $280
- Shipping/Freight costs: $150
- Photo editing: $20
- UPS: $8 from eBay
- Amazon monthly subscription fee: $40
With some quick math, you can see my total costs are about $498
1) Product research
A product that meets the following basic criteria:
- An obscure, boring item that sells well
- Existing demand on Amazon (we do not want to try to create demand, just leverage existing demand)
- Product without too much competition. Where there aren’t a lot of items with hundreds of good reviews competing for the top spot (1 product with 1,000+ reviews? Bad. Only one product sells. 5 products with less than 100 reviews? Good. 5 listing with 1,000 reviews? Bad, competition is too high. 6 guys with 10 reviews? Bad, no demand).
- A national brand name does not rule the market. (Don’t sell basketball shoes against Nike and UnderArmour)
- Lightweight and small products are preferred The ideal FBA product takes no storage space and sells within a month. The further you get from that ideal the less likely you are to make a profit.
2) Alibaba: order a product
You can go to AliExpress and order several units to test the market with minimum financial risk but I suggest, go directly to Alibaba and order 100 units due to better rates. The delivery time is 3-4 weeks.
Now look around your house and try to get an idea. Browse Amazon for each item you see no matter how obscure the item is. Let’s say, I saw stretch lid and decided to compete with it. (Tip: do not compete in things like phone chargers (too many fake products, you can face numerous refunds and get your account banned) and phone cases (too much competition, gross margin, and ROI are a disaster).
How do I do it:
- Search “stretch lids” on Amazon. (https://www.amazon.com/s/ref=nb_sb_ss_c_1_9?url=search-alias%3Daps&field-keywords=stretch+lids&sprefix=stretch+l%2Caps%2C339&crid=2MOA0OEV3SUIQ)
- Check out the first-page listing, how many reviews they have, photos and price of course. Seems like the 6 pack set is about $13-15. The sales price is determined by our competitors, so we will set our price at $13-15.
- Search “stretch lids” on Alibaba (http://www.alibaba.com/trade/search?fsb=y&IndexArea=product_en&CatId=&SearchText=stretch+lids)
After several messages I received an offer for a nice looking, FDA and LFBG approved, made from food-grade silicone, BPA free, dishwasher and freezer safe, flexible 6-set silicone stretch lid. $2,8 per set for, minimum order quantity – 100 sets.
This price difference looks great but there are some other costs to consider. Shipping and Amazon fees.
A supplier can organize air cargo+UPS delivery for $150 ($1.5/set costs to ship from China). So that’s $4.30 per set. Amazon then takes their cut and for this particular product, their cut is $4.53. You Amazon fees you’re gonna use Fulfillment by Amazon Revenue Calculator.
As you can see a product that costs $2.8 will actually cost almost $9. That’s three times more than you saw on Alibaba. In this example, we’re making a $3-5 profit/item. Not bad at all but eventually you’ll see that better selling product have even lower profit margins.
I know, when you sell all 100 units it’s only $300 of profit but you can’t expect to earn more with such a low initial investment.
A general milestone that Amazon sellers seem to strive for, is reaching $1000 a day. You may think that you do this by launching a hugely successful product and yes you can do it that way but it’s actually the hard way. You would need a product that makes $30,000 a month. The problem with most $30,000 a month products that have any kind of profit margin is that they will be highly competitive. The second problem is the inventory. The simpler way is to aim for a product that sells 10 – 20 units a day and sells for between $15 and $25. Once you have this product up and selling on Amazon you can start to expand into other items in this category which will lead to a reduction in your shipping costs in the long run. To get to the magic number of $1,000 a day you would just need to duplicate what you did with this product with 2 other products. Or 4 or 5 other products that sell between 5 – and 10 units a day.
- Waiting for the product to arrive – what to do?
The most important parts of your listing are your photos and your title. Many people won’t even get past your main photo. Instead of hiring a product writer on Fiverr I suggest you write your own descriptions, bullets, title, and keywords button the other hand taking your own pictures is a bad idea if you don’t have a professional camera, lightbox, and Photoshop skills. Photos could increase conversions by quite a lot, so hiring a professional for photos is one of the best investments for a successful product line. Additionally, you should research PPC, track your competitors (analyze their sales, keywords, and targets) and lastly, look at your pictures once again and ask yourself, could they be better. If they can, retake pictures.
- Product launch – strategy
The product has arrived at the Amazon warehouses. Our listing is officially active and live, now what? Get reviews on the product any way you can and as soon as possible. This should be your main focus because reviews are KING but it is very difficult to get organic reviews. Last year Amazon banned incentivized reviews so you have to think out of the box here. Ask your friends, neighbors, family to find your product manually on Amazon and buy it at full price, hire someone (Fiverr, Upwork, a bartender from a local bar, your dentist…just find someone) to search for it and buy at full price. Are you noticing a pattern? Don’t send a link to your product – let them find it manually. Amazon will rank higher your product for that particular search term. Let them buy at full price, so you won’t have any problems with Amazon and incentivized reviews. Additionally, along with the review, other potential customers will see it’s a verified purchase and you’ll have social proof. This is against Amazon TOS but trust me, without those initial sales and reviews your product will just sit and collect dust in Amazon warehouse.
That’s all folks, now you have started your own brand.
If they sell, don’t take money out of the table, re-invest into more inventory, decrease shipping costs, move on to a new product and start the whole process again. Except for this time, it should go much smoother and easier and eventually you’ll have your own company, your own small business.
If you want to invest more, I would buy 4 or 5 different products rather than a lot of inventory of one product. You’ll maximize your chances of success by having multiple possibilities for success.
DISCLAIMER: This was in 2014. Today, $500 is more like a marketing budget number.
Peter is a serial entrepreneur and founder of DollarSanity blog who created and run a variety of businesses. You can learn more about him at the DollarSanity About me page.
15 thoughts on “How I started an Amazon FBA business for about $500”
JS is the main tool I’m using but I use others as well (Unicorn smasher, google trends, kw inspector…) but mainly for validation of product idea based on instinct. Those tools you must have and use to validate your product but don’t use them for product research – issue with that kind of tools is the more users it has, the bigger chance there is that another sellers are seeing the same products as you (there were a zilion of watermelon slicers launched at the same time and this was a Jungle Scout lead originally).
What apps would you suggest for a first time Amazon seller? I’m still trying to figure out what to private label. Great article, I really enjoyed it.
Jungle Scout and Unicorn smasher.
JS extension or web app?
Both but if you can’t afford it then combine Unicorn with web app.
Ok,thank you again. I already do custom apparel printing and wanted to possibly sell other private labels on Amazon. Not sure if it’s the best niche to get into.
Well, you should be aware that the returns for apparel are CRAZY high. I’ve been hearing from other sellers that around 10 to 12% is average for clothing. Another thing is that people on Amazon don’t buy high end clothing unless it is not well known brand. Good luck.
Wow…thanks for the bit of info. Guess I won’t go that route haha. Using Unicorn Smasher as we speak. Looking into different categories. It’s definitely information overload. I’m not looking to making millions, I just wan to be able to support myself and small family. We shall see what I dig up.
Start here and save some time services.amazon.com/services/soa-approval-category.html it is list of open categories that don’t require approval to sell.
Can you still use those UPS barcodes from eBay in 2018? Because I keep reading that you need GS1 barcodes registered to you for $500.
Amazon taking GS1 UPC codes more seriously. If you are private labeling, you can apply for a GTIN exemption. It’ll cost you nothing if Amazon approves you, otherwise you will need legit UPC from the GS1 website. I bought them recently. It was $750 for up to 100 barcodes and a $150 annual renewal fee.
Ok so I’m a little confused about the photos part. How do you get someone to take photos of your product? Do you send them one once it arrives at Amazon? Also didn’t you have to pay for a logo and custom packaging? I have about $600, but I’m wondering if that’s enough to at least get started.
You can ask your supplier for the images. It is enough to get started but not enough to succeed. Unfortunately, this isn’t 2014 anymore.
I have two questions
1. Do I send the products straight to an amazon warehouse?
2. Do I need a business or resellers permit?
1. You can do that to avoid additional shipping costs
2. No, you don’t
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