What You Need to Know Before Jumping Into Amazon FBA: Part I

As a part of my goal to focus on Amazon FBA in the month of April, I wanted to write a post about what it takes to get started with Amazon FBA.

Amazon FBA is a great way to make money online, but it also takes money, time, and a whole lot more to be efficient and successful. I wrote this post with the “reseller” in mind, however, it still rings true even if you are small business owner looking to expand your presence online by utilizing Amazon to promote your products.

Here are a few things that you should be aware of before you get started:

#1: Amazon FBA will require more money, more supplies, more EVERYTHING!

Prepare to be amazed at the sheer amount of packing tape, poly bags, labels, toner, and other supplies that you will need at some point during your venture into Amazon FBA. You can certainly get by without purchasing all of these things, but there will come a time when you need them — and LOTS of them.

I ventured in Amazon FBA having already been a reseller on eBay. That means that I already owned a digital postage scale, a thermal printer, a laser printer, and various packing supplies.

The supplies I added after becoming heavily invested into Amazon FBA included:

  • a barcode scanner
  • Labels (either pre-printed or self-printed) for suffocation warnings and expiration dates
  • Blank label rolls (2×1″) for my Zebra printer to cover existing barcodes
  • Packing tape galore (in bulk) –> because I go through about 1-2 rolls each time I send in shipments
  • Polybags
  • 8.5 x 11 labels for laser printers because this is the best way (in my opinion) to print UPS labels provided by Amazon (or you could cut and tape each one, but time is of the essence in my opinion — and I’m tired of using so much packing tape!)
  • a heat gun (to remove hundreds of clearance stickers)
  • Scouting app (one-time fee)
  • Labeling service subscription

Other things that I didn’t include on that list are items like a never ending supply of boxes (which I get for free since I source for these materials at retail stores that just want to get rid of them) and handy items like Goo Gone and other cleaning solutions for prepping your inventory.

You can certainly get by without a lot of these items, but not everything. For example, you don’t need to purchase a barcode scanner early on, but once you start processing hundreds of items, you will grow tired of keying in barcodes. Likewise, you don’t need a thermal printer, but if you ever have a shipment where you don’t use all of the labels on a 30-up sheet, you will grow tired of wasting supplies and this is where a thermal printer shines since you can print single labels as you go.

In short, there is just no way around you having to spend more money.

#2: This isn’t eBay. Your money will come later…much later!

I must preface things by saying that I have an older selling account. That means that I can request payouts every 24 hours. These types of accounts are no longer available. If you are just getting into Amazon FBA, please be aware that things are not like eBay where you can have your money instantly (as soon as a buyer pays). Instead, new sellers have a 2 week waiting period between disbursements.

I believe this is important for newcomers to understand because it means many things. The biggest drawback that I can see to this is the fact that the amount of money that you have tied into inventory may not pay you back for a while.

To be quite honest, if I had a newer selling account, I would not focus on retail arbitrage at all unless I purchased things at a deep discount or I saved up enough money to keep reinvesting into inventory. Furthermore, it would have to be money that I could afford to do without.

I am a cheap frugal person by nature. I don’t think I would make a good businesswoman because I don’t like the idea of risk — especially when it comes to money. (Been there, done that during my high yield investment days). With that said, if you have to wait weeks for your shipment to arrive at Amazon’s warehouse, potentially weeks for the item to sell, a few days for the item to actually ship (...and hopefully before the cutoff for disbursement) and finally a week or two for a payout, you need to be sure that you are not spending your last on inventory in the hopes that it will sell fast. Maybe it will, but you will not get your payout immediately.

If you don’t have a lot of money to spend, the best way to start Amazon FBA is to start small and continually reinvest your profits.

#3: Brace yourself for the FEES!

The convenience of Amazon FBA comes with a price. That price is higher than anything I have ever encountered on eBay. For the luxury of someone else storing your merchandise, selling it to millions of people around the world, and providing great customer service and an even greater return policy, you will pay for it — big time!

I have read many times that people like to assume that Amazon will take 1/3 in fees after selling an item. My experience has been otherwise. For the past three months, I have calculated my fees and Amazon has taken a 40-50%, not a 33% cut. According to the calculations from my first public income report for March 2014, Amazon took at 45% cut in fees alone. (Please note: These numbers are based on my total sales minus all fees. This does NOT reflect the percentage Amazon takes on a per item/sale basis.)

Before you get started, make sure you understand Amazon’s fee structure for FBA. You can find everything you need to know here. I also advise you to play around with Amazon FBA’s free “Revenue Calculator.” You can use this tool to calculate the fulfillment costs of items that you are interested in selling.

Final Thoughts…

The goal of this post is not to in any way bash Amazon FBA or make it appear as a though it is more trouble than it is worth. My goal is to shed light on the things that many people fail to discuss when referencing Amazon FBA. I have read many comments from people just getting started who were led to believe that FBA is some “get rich quick” scheme. It definitely is NOT.

If you intend to be successful, please do your research and it should start with reading everything you can about FBA from Amazon themselves. You don’t need to spend money or pricey courses on eBooks for information that is right at your fingertips — for free.

If you need money fast, this is not the venture for you — at least not yet. It would be best for you to get your financial house in order (i.e. establish a budget and stick to it) and revisit FBA at some other time. FBA has a learning curve and blindly throwing money at products in the hopes that they will sell is a recipe for disaster.

I intend to record a few videos that are a little more explanatory because some things are more easily explained visually, but in the meantime, I do hope that this has provided some food for thought for those readers that are thinking about getting into Amazon FBA.

Although this is part one of this series, please do let me know in the comments section below if I missed anything or what your experience has been. Do you agree or disagree with what I posted above? Let’s chat below…