Amazon FBA 101 – Why It Will Work For You

In my last article I urged eCommerce entrepreneurs to ask themselves if selling on Amazon using the FBA system was for them. I went over a couple of things to think about before you commit to this new venture in your business. Truly, I wanted to get that out of the way so I can tell you how I really feel.

Amazon FBA is the best thing since sliced bread!  Well, maybe not, but it is certainly the best thing to happen to commerce since the Internet. Okay, maybe that is over-reaching too. Let’s just say… I’m excited about Amazon FBA!

The advent of Amazon’s FBA program is an incredible opportunity for the vast audience of solo-preneurs I have been working with for the last few years as a teacher, coach, and podcaster.  This is a real game changer for us, a chance to become a “Big Boy” in eCommerce: to finally achieve the levels we have dreamed of for years.

First, a few facts about Amazon Prime and the FBA program:

  • FBA is just starting its fourth year
  • FBA now represents a growing 38% of Amazon’s revenues
  • Amazon Prime started in 2005
  • In 2009 Prime had 2 million members; by 2011 there were over 5 million
  • Prime represents only 4% of Amazon’s total customers so far
  • Prime is growing at over 20% Year Over Year
  • Prime customers spend 130% more than regular Amazon Customers
  • 40 % – 50 % of Amazon customers have never purchased from an third party merchant

Why did I tie the Amazon Prime program in with Amazon FBA? To understand how well FBA works, you have to understand one of the largest benefits.

Amazon Prime is a program where an Amazon customer pays $79 per year (there are many ways to get a free Prime account also, and free trials abound) for totally free shipping for ANYTHING they order from Amazon. Not just free S – L – O – W shipping, either: free TWO Day shipping. Upgrading to Overnight?  That’s only $3.99 for ANYTHING. Yes, that includes the generator you needed yesterday when the power went out.

How does Prime tie in with FBA? All items you as a seller send in to the FBA program become automatically eligible for Prime free 2-day shipping! This is a huge advantage you have over so called ‘Merchant Fulfilled’ sellers who ship items to their customers from their homes.

Selling merchandise on the Amazon platform can be very lucrative and another stream of income, but using the FBA system to sell on Amazon brings you to a whole new level.

The opportunity of FBA is huge. It can take a one man shop and turn you into a flourishing million dollar a year business. Yes, it really can. How? Scalability! Just think if you could take all the time you now spend in photography, writing up listings, dealing with customer service issues, buying and organizing packaging and shipping supplies, organizing and finding inventory when it sells, sending out newsletters, posting your listings on advertising and social media sites, etc, and use ALL that time to source product. What amazing opportunities could you discover? What deals could you make? What volume could your business do?

There are two main things that limit small sellers; time and space.  Sellers have only so much space to store product and only so much time to process orders. Even if you could GET 200 orders every day, could you handle that volume? With FBA the space constraint goes away because you are paying (extremely low rates, by the way) to store your items in one of Amazon’s warehouses. Amazon has recently added 17 new fulfillment centers and their total on-line right now is 69. And the time constraint goes away as you have hired (at pennies per order) a staff to handle your order processing, shipping and customer service.

The FBA seller has only to source product, then spend a couple of hours processing those items and shipping them to Amazon (using the incredibly LOW rates Amazon has negotiated with UPS).  Then watch the sales flow, or as we refer to it on my FBA Radio Facebook Group, enjoy the rain.

Another great blog article on FBA selling by my mentor, Chris Green of FBAPower can be read on The Anthead Syndrome Blog.

Still not sure you ‘Get It’?  You can purchase this small book for $4.99 on Amazon (free shipping if you are a Prime member!) and understand it better than anyone except its creators at Amazon. Understanding Amazon’s FBA Program by my mentor, Chris Green.

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About Kat Simpson

Respected as a trusted eCommerce speaker, educator, and entrepreneur, Kat Simpson has been a successful eCommerce merchant for over 10 years. She is an eBay Education Specialist and Silver Level PowerSeller, who also maintains stores on Addoway, Bonanza, Buy.com, and iOffer. Currently Kat is the producer of popular weekly Amazon FBA Podcast FBA Radio along with Chris Green of FBAPower.