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How To Start An Amazon FBA Business (arbing.co.uk)
237 points by landfall on July 5, 2016 | hide | past | web | favorite | 47 comments



I've worked with quite a few old school manufacturers that have expanded their business by selling direct on Amazon.

Amazon's easy to use marketplace is the only online medium that has ever worked out so well for companies that make products but are not savvy in e-commerce. The profits from Amazon are giving these businesses the opportunity to dip their toes in e-commerce.

The real advantage to the world from all of this is just starting to appear: In every example that I know, the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon.


> the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon.

Hmmm. Are they concerned about marketing? That seems to be where Amazon provides a ton of value--aggregating a tremendous number of customers that are shopping. A manufacturer's website won't have the same traffic, right?


I made a bit of money flipping things during the Black Friday sales - a bit of retail arbitrage. I didn't make much, but I got a lot of airmiles out of it.

My experience with FBA was very positive and actually made me consider finding something to sell. For me the main advantages were a) if you sell on Amazon using FBA, you get to use Prime services and people will preferentially choose that over 3rd party sellers on their own b) Amazon will (for a small cut) deal with all the shipping, packing, returns and so on. Shipping was pretty cheap and the UPS van picked up the stuff directly from my house.

It's so heavily automated that aside from the initial shipment to the warehouse - I don't believe you're allowed to dropship direct to them from China - you can sit back and forward parcels to them and they'll do absolutely everything else. The small overhead in warehouse and handling fees is well worth the peace of mind I think.


Precisely.


Err, maybe I misunderstand. Is it possible that their confidence is misguided, or are they aware that Amazon provides a tremendous platform that, if they sell direct to consumer, they'll have to replicate in some way?


Sorry, yeah, misread your question. It is really hard to expand beyond Amazon because marketing is so hard. But the few that do succeed can then control the customer relationship, so its worth the risk and investment.


Ah, yes, that makes sense. Thanks for clearing it up for me.

To me, it's a bit like the relationship between an author and a platform like FB or twitter. Whoever owns the customer relationship is in the driver's seat.


Very interesting, great guide. As a seller, it's actually very tempting.

On the other hand however, this is everything that's wrong with Amazon. This feels messy and like wild west ecommerce. If I, as a customer, wanted to shop with little to no curation I'd do that at eBay. Since I'm rarely interested in buying that way I'd prefer Amazon to focus on quality products instead of setting up a free for all environment.


Amazon has never had curation. Other places such as Jet have curation but much fewer products.


Wouldn't user reviews technically be a form of "curation?" It's not like when I search "SD card 16gb" I go past page 2 on the search results.


Sure, crowd sourced curation.

The problem is, what happens when someone buys 100 reviews? If there was marketplace curation - wouldn't matter, still only 4 listings for SD card 16gb. But with 600 people competing and buying reviews for SD cards? Who knows what shows up as the highest reviews...

FWIW Amazon has 1,826 results for that query, and Jet has 35. I am sure Amazon has more unique products, but not that many more.


Really interesting. I also followed on to this: http://www.arbing.co.uk/create-sell-physical-product/ which is worth a read.

Nice to see all the steps laid out, it's impressive how smooth the process can be for manufacturing and selling something these days.


How risky is it to ship straight from the factory to Amazon? It seems like a supplier could switch to shipping duds/rejects, Amazon would sell them for you, and you'd get a pile of 1-star reviews on your listing. Do FBA businesses do anything to deal with supplier risks?


What's to stop the factory to cut you out and just sell on Amazon?

That's why many folks use freight forwarders who break out, wrap, label, and send the items to Amazon.


For a quality supplier, it's not in their interest to sell you rubbish. If you make money and are successful, then so are they. Get to know them really well but make sure you get lots of samples. In saying that, some just don't sell quality products, it's up to to filter them. You can also hire people to do Quality Assurance testing at the factory on your orders.


As Vibrelli says, I use an extra step where the freight forwarder quality check every item before sending them to Amazon.


How does that work? Do they open 1 in 10, 1 in 100, etc.? Are products sealed at the factory? Or does the freight forwarder seal them for you?


They open and repack everything. Amazon requires a specific Amazon barcode, you can either pay them to do it for you for 20c an item or pay someone else to do it. I found I could get the item quality checked and barcoded for the same price as Amazon would do it.


Great answer, thanks! So quality check is 100%? And what is the defect rate? What happens when a defective product is found?


I'm curious how this would play out in Chinese manufacturing operations.


From experience - really really research your suppliers as these will make of break your business. Many 'suppliers' on Alibaba, are not manufacturers just on-sellers. Also use other non-alibaba methods of sourcing suppliers, hire sourcing agents who speak the lingo and help vet the factories for you. Also focus on quality.. don't sell junk ;)


This looks fantastic. I am curious about reselling Chinese products - why do Alibaba sellers value FBA businesses? Why don't they just set them up themselves?


Hello. I'm the guy who wrote the article. Just created an account as I saw I was getting some traffic from Hacker News.

In answer to you question: They do sell on Amazon FBA themselves. More and more so in the last year. In fact, in the seller center there are two choices for language, English and Chinese. That is why I suggest focusing on creating your own products or improving on existing ones rather than just reselling stuff from Alibaba.

Even then you need to do your own marketing. As a consumer in your own market place you should have an advantage over a Chinese seller who can only speak broken English.

It's also worth pointing out that these factories aren't in the business of creating brands. They're in the business of mass producing other people's brands. As such the more people who work with them the better, regardless of where they plan on selling the final product.


Constructive suggestion: make a note of which URLs are affiliate links, or have a referral/affiliate disclaimer on the article.


I'm surprised that Chinese sellers aren't paying attention to language disparities and hiring translation services. Are they simply trying to streamline price so aggressively that it's just not worth it?


I have not found opportunity in doing this. Basically every product that is eligible for FBA on Alibaba is already on Amzn five times over.

The opportunity is in creating your own products and brands and selling on Amazon. In that sense, you already have a valuable business model that would exist without Amazon, but FBA is just a great sales channel and platform for doing that selling directly rather than traditional means of selling to distributors, retail stores, etc.


That's my experience as well and creating+marketing a brand new product is a ton of work.


I have been selling on Amazon for about a year now.

If you have not sold on Amazon you do not understand the scale of their platform.

If you are interested in getting started I would recommend going the retail arbitrage approach first. It is a great way to get your feet wet without much risk. Trust me you will be amazed.


Here's the same author discussing retail arbitrage: http://www.arbing.co.uk/retail-arbitrage/


The article glosses over a critical element: Getting Amazon reviews and positive ratings.

Unfortunately, many sellers of new products take the easiest way out, and go to Fiverr or a similar service to pump up their product with dozens of fake reviews. A few also use fake reviews to bring down competing products. It's a broken mess that misleads buyers and hurts legitimate vendors.


I'd always recommend new sellers to not buy or fake reviews. Not just from a moral view point, but also from a business one - if Amazon catch you (which they're quite good at now) that's it, no more selling on Amazon for you.

I totally agree with you that the Amazon review system needs a complete overhaul. I've had fake reviews from competitors damaging my sales, and have seen people get hundreds of reviews in a few hours. The issue is that it's too easy to leave a fake review (you don't even need to buy the product), and too few customers leave a real one. Less than 1%.


While I'm sure there are a lot of shady sellers, a lot of legitimate sellers simply scrape the top reviewers lists and send cold-call emails offering samples/discounts in exchange for reviews.

Amazon reviewers who get discount codes or free samples are required to disclose this information in their review.

When I hit the top 1000 reviewers on Amazon Canada, I started to get offers for review samples, and as my ranking improved, I started getting even more offers, with most of them coming from Chinese vendors.


I have a small factory in Arizona, and we sell products on Amazon as well as through multiple other distribution channels. A few thoughts came to mind while reading this:

1. China isn't the only place to get stuff made. Look locally. We manufacture our products, as well as products for two other companies who also sell partially on Amazon. You probably have local contract manufacturers like us who would appreciate a chance to compete with China. We use lots of automation, and we are cheaper than China on heavier metal goods (over 20 lbs). We are also cheaper in small runs, or MOQ is typically 1; in China it is often 1000. You probably have someone near you that can do the same.

2. Getting a hit product isn't easy. Mostly it seems to be luck. Manufacturing is like software development; sometimes you have to iterate for a while before it all clicks with the customer. Once it clicks, its off like a rocket. One basic path to a hit product is to create a product that is a combination of others. I have a friend who makes a kit out of a bunch of specialty tools for EMT. His is the only kit on the market and is a great seller for him. Another friend had great success with an automotive accessory this Christmas season on Amazon. He sold up to 50 units a day, that season he sold 3000+ units. He was #1 on the “top seller” list. Don’t forget that he had to have 3000 units in stock before this; that is a huge gamble if you are just starting out.

3. Having a hit product isn't easy to manage. Once you get a hit product it goes 0-1,000 real quick. I had to manage 50-100% growth per month in the first year of manufacturing. Per month. With a product made out of steel. If your hit product is coming from China, I hope it is lightweight because you will end up air freighting it constantly. I once air shipped a 1000 10 mm bolts with a special head from China and it cost me $1000 in fees, $1 in shipping per $0.13 bolt. If you ever run out of stock, you will fall of the "top seller" list and your volume will plummet. China can take 3-6 months for a restock order to get made, shipped, through customs and onto Amazon warehouse. How do you keep stock for 3-6 months on hand? My friend who sold 3000 units before Christmas, he had to ship those units to Amazon FBA well before then and pay storage the whole time. The storage is sold by the cubic foot, and he had thousands of cubic feet to pay for at elevated Christmas rates.

4. Single Point of Failure. If Amazon suddenly decides that they don’t like you, sales can go from 100-0 instantly - and now you have money tied up in product, fees in storage, and no cash flow. Even if you have multiple channels, Amazon will be a BIG customer. They are about 10% of our business, and if they disappeared tomorrow it would hurt. If they are over 30% of your business, getting shut off could mean bankruptcy for you.

5. Building a brand is hard, and a different skill set than manufacturing. The article is correct that there are thousands of manufacturers wanting to build stuff for you. How well could you build a brand in a foreign country? Especially if you are a manufacturer (focused on efficiency) and not a marketer (focused on A/b, Social, advertising)? This is why the Chinese manufacturers are happy to let a marketer take on the risk of developing a brand, seeking out a customer base. As a USA based manufacturer I am happy to make whatever you want too! We take Visa, Mastercard, Paypal, Bitcoin …..

The article is fairly complete though, I believe the author has actually done this stuff.


> 2. Getting a hit product isn't easy. Mostly it seems to be luck.

One weekend I had a surge traffic to my website. Then the orders started coming in. Finally I emailed one of the new subscribers to my email list to ask why scores of people had suddenly started searching for that term. She said a radio show host had told his listeners to go to google and search for that term.

Agree with your points about working locally. Arizona Archery's main business is injection molding; they take care of most of the my machining. Maybe I'll come see you some time.


Even when you get lucky, sometimes nothing happens!

My friend had his product featured twice on the John Oliver show on HBO. Total sales from that? 1 item!

NSFW: http://www.flatearthtrading.com/one-meter-hand-carved-wood-p...

NSFW John Oliver clip https://youtu.be/Vwkqh3lCgvw?t=2m22s


Serious question about point #1: I've thought about contacting local manufacturers, but I don't know where to find people such as yourself.

Do you also get discovered through Alibaba or is there some U.S. equivalent version of the site?

I'd love to try someone local for some prototypes I'm building.


Picking up a phone book is one option for finding local manufacturing firms; one benefit of dealing with someone local is that you can pick up a phone and speak to them in your own language. Another is that it significantly reduces the iteration time during the prototyping stage, since you can drive over to inspect things yourself.

Another is by web search: "contract manufacturing <city name>", "injection molding <city name>", or "machine shop <city name>".


While it's true that you can find them using a phone book or any search engine, it is not a similar experience to using Alibaba.


Some US manufacturers are on Alibaba, and I am planning to list us also one day soon. Just select the countries you want, and they will filter the results for you.

If you know what kinds of stuff you want to make, look for someone who builds similar stuff and ask if they take outside work. Some will, some won't.

The manufacturing communities can be fairly well knit also, so if the first company you call can't help you, they might know someone who can.


Also, there's the risk of getting big enough that Amazon decides to do their own "store brand" version of your product. cough monoprice cough


Absolutely! and it doesn't even have to be a major item either. I am friends of a friend who was selling Australian Noise sticks, and had huge volume on Amazon. Then they went and launched their own line and his volume went to nothing. From 4 employees packing orders to zero, just the one guy doing it all now.


Great article.

I'm in the process of making a physical product: a new quick-release plate for DSLRs; I did find a manufacturer in China for CNC machining and had a couple of prototypes sent to me (in France), which were of very good quality.

The problem is however, the final product will be made of several parts from different manufacturers: the plate, a rubber pad, screws, washers, a box for "clean" packaging, etc.

Are there factories that specialize in assembling/boxing a product, and what would the proper keywords be in order to look for them?


Have you asked your current suppliers if they could perform the assembly or find someone who can ? That's what my company does and it has worked well.


No, not yet, but I will.


Quite enjoyed this. I've been toying with the idea of using Amazon distribution to increase scale.

Very helpful to see the steps laid out. Thank you


I don't buy stuff on Amazon because I'm in Australia (the shipping from US or UK is too expensive), but I use Ebay and there are a number of local resellers for any small electronics items I want to buy. Does anyone know of a similar site about 3rd party fulfilment centres that can do Ebay shipping?


It's incredible how efficient the market is these days. Great article.




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