Amazon FBA - Setting Up an Account and Pricing Guide
Updated: Dec 7, 2020
The next venture that I looked into setting up was a Store on Amazon using their FBA model. (Fulfilment by Amazon)
The basic idea behind this is that you source the products that you want to sell, set-up your store on the Amazon site, simply get your products to one of their units and Amazon do the rest for a small fee. Sounds like a breeze!
So the first step was to register with Amazon. This was quick and easy and there are step-by-step guides on the website that walk you through the whole process. The link to their page is below.
You need to set up either a basic sellers account or an Amazon Pro Seller account. I will go into detail of the costs but simply the basic account is free but with a fee per item sold and the Pro account has a monthly subscription fee but removes the fee on each item. If you are planning on selling 35 or more items per month then I would advise the Pro account is the way forward.
Amazon Basic Seller Account
The fees of Basic selling are made up of three components:
Per-item fees
Referral fees
Variable closing fees
The per-item fee is £0.75 per item sold and it is deducted from your profits. You will also have to pay a referral fee for each item sold, depending on the item category. For most categories, the fee is between 7% and 15%. This fee is calculated based on the total sum paid for the item by the buyer, including all applicable taxes and customs fees. There is also a per-item minimum referral fee of £0.40. In addition, there is also a fixed closing fee that is charged at 50p for all Media products.
I would say that this plan is great if you are just an occasional seller, otherwise you are better off with the Pro Plan.
Amazon Pro Seller Account
The fees of Pro selling are also made up of three components:
Monthly subscription free
Referral fees
Variable closing fees
There are no per-item fees in the Pro selling plan. Instead, there is a monthly subscription fee of £25 (excl. VAT) per month this is applicable whether you are selling or not.
The referral and closing fees are just about the same as with the basic account, however, the Pro Account also comes with additional useful tools and advantages like 1-click purchases, order reports, automation tools and you also get access to the full set of categories.
Other costs to be aware of for using both the above services are:
Fulfilment Fees
Storage Fees
Details of these can be found here:
Once you are signed up and have got your head around the fees the next thing you need to do is to source the ideal product!
This is the most important thing to get right in the whole process. You can create a great looking store and market it well, however, if you do not have a product that people need this is where your adventure will end.
To understand what products sell well you need to research, research, research and where better to look that on the platform you are looking to sell.. Amazon. You need to look at the best-sellers and see what is currently on trend.
I came across a website that offers a great tool to maximise your research called Jungle Scout. This website provided a fantastic tool that attached to your browser as an add-on that gives you data on everything that is selling on Amazon. It gives information on, what is selling, what the competition is like, pricing guides and potential profitability. The link to this website is below:
Jungle Scout offers 3 packages:
Basic - $29 / month
Suite - $49 / month
Professional - $84/ month
I personally went with the suite package and I can honestly say that I was so impressed with what it can do, giving so much information on products and made my market research extremely simple. See screenshot below showing the type of information that is available.
Once you have decided on a product you then need to source your product. There are obviously several ways of doing this depending on what your item is. You could be building or manufacturing your own products and if that is the case then ignore the following section, however, i was looking to source an existing item so I found myself researching into where I could do so for the best value possible.
A website that I came across was Alibaba. https://www.alibaba.com/ This website is a marketplace of suppliers and manufacturer from China where you can find some great products or provide a brief and ask various manufacturers to provide you will a quote to create your items.
I am going to write a further article on the Alibaba Marketplace as there is a lot to it, however, if you take your time to research and find a legitimate supplier it is possible to source a great product. There are some dodgy suppliers on there so please tread carefully and the rules I found myself following were:
Do not pay to much attention to the rating (as you can pay for this) Instead look at how long they have been in business. If they have been around for 5+ years you can be fairly confident that they are legitimate.
Request a sample. Although you will pay a premium for a sample as the delivery for 1 item is obviously a higher cost, this is definitely recommended to make sure you are getting what you are asking for. (I paid around £50 for my first sample product that was worth around £5, however, this was discounted off my 1st larger order so if you go with the product you can get these for free)
Ask lots of questions. Ask about their factory, ask for photographs and videos of the products and keep in constant conversation to ensure your order requests are being carried out.
If you follow the guidance you should be fine and you'll see that it is pretty easy to navigate around and you will build up your own techniques over time.
I decided to go with a small fitness product (to keep delivery and storage costs to a minimum) and after I was happy with the sample, I put an order in for 500 units. The product cost around £2.50 per item to be manufactured. So £1250 spent.
I was nervy about organising my own transport via a freight forwarder so for this 1st order I asked the manufacturer to organise delivery. I knew this would be at a slightly higher cost but as it was DDP Delivery (inclusive of all fees and taxes) and organised at source I was confident that my product would arrive. The total cost of this was £800 so I had paid £2050 for 500 units meaning £4.10 per unit.
Now I needed to consider that the Amazon fees were to be added onto this, as well as getting it to the Amazon Warehouse from my location so when calculating my total costs. I budgeted that the total item cost would be around £7 per unit and with all this included I was not far off. The competition were marketing the item at around £20 - £25 so if I could sell at market rate I would be able to make a decent return. From my early calculations I would have a total cost of £3,500 and a return of £10,000 so a profit of £6,500 from my first delivery of inventory.
The delivery took around 21 days to get to me and I was more than happy when the product arrived. I checked my products and sorted the packaging that is required for Amazon to accept the inventory. This is simple and is barcode based, however, if you are getting your items delivered direct to Amazon or do not want the hassle of sorting this, it can be done by Amazon at the warehouse (obviously for a small fee!) I then organised transport to my nearest warehouse through the Amazon Sellers Website as you can get discounted rates through this and I was ready to sell my items!
Updating the Amazon store was very simple and there are tools to help you manage your inventory. To start to build traffic to your item it is important to advertise your product. This is available through the Sellers Central page and again is very simple and you can get very good value at a low cost. It is important to get this part right and there is a lot of different methods that can be utilised but the Tutorials and training page in the Sellers University take you through all of this. I would say that it is critical that plenty of time is spent in the Sellers University found on the homepage of your sellers account. The training is delivered by short video clips and it makes understanding everything you are doing extremely easy.
I hope you found the above informative and useful. The store that I set up is selling my product at a constant rate and I'm on my third order now. the next step for me is to add to by inventory with further products so I'll update you again as I progress. Good luck and Happy Selling!
