Almost $1 out of every $2 spent online in the US is with Amazon and in 5-10 years experts predict retail will be dead and E-commerce will account for 80% of all purchases including groceries. Selling on Amazon FBA (Fulfilment by Amazon) right now is more than easy. The barrier to entry is very low and the hard work, sales fulfillment, and customer service are done by Amazon staff, so all your time is spent on marketing and product research.
Before we get started with the Step-by-Step Guide on How To Start An Amazon FBA Private Label Business, it’s important to note that Rome wasn’t built in a day, and there is no foolproof method for turning your products into an overnight success. I am sure you’re asking yourself these questions, and I’m trying to help you with answers.
- Is Amazon FBA becoming less profitable? No, and nor will it be unless you’re planning to jump on some popular listing and compete with 239 other sellers on the same listing like on the photo below. If you do your due diligence and find the right product, create your own private label product listing, you’ll be the only seller of that particular product.
- Is Amazon too saturated? No, and nor will it be unless you’re planning to import cheap generic garlic presses and list them on Amazon FBA. It is saturated, but not completely. More competition means the industry is growing. It doesn’t mean you make less money, it just means you need to work differently, better, harder and smarter to make it. It is true that everyone and his dog sells on Amazon but on the other hand, everyone, his mother, and their dog are buying on Amazon.
You probably know that there are thousands of million-dollar ideas, but ideas are worth nothing really. Execution is worth everything and without some form of execution, the idea is just an idea. So, stop looking for courses, register for an individual account on Amazon, identify some good quality products, and gain experience listing them on Amazon. When you go through this journey, you will have a million questions that come up which you can get answered through forums and by research. There is no teacher or guru that will teach you everything you need to be a successful Amazon seller because it all boils down to the product, its demand, competing offers in the marketplace, your advertising budget, and your marketing skills.
Once again, do not waste your money on a course. Spend that money on product and start on a smaller scale. Trust me, you’ll learn more from doing it than you will from any course out there.
Overall, the process is not that difficult for most people, but there is still a lot to learn about getting your product from selection to Amazon’s warehouses and getting it to sell well. There is another option. The smaller investment you put out up front will only limit how long it takes you to see the same growth in the future. But, either do it or unsubscribe from the podcasts and start doing something else that will make you money that you feel less skittish about. It doesn’t matter if it just makes you a couple hundred bucks in profit a month. Launching your first product will give you good experience in what you should and shouldn’t do for your next product.
If you’re ready, I hope this article will save you money and a headache.
So, without further ado, here is the Step-by-Step Guide on How To Start An Amazon FBA Private Label Business. These steps you can use as a checklist.
Amazon FBA Private Label Business- Step-by-Step Guide
- Find a niche
- Product research
- Find a supplier
- Create a logo
- Finalize negotiations with supplier
- Setup Amazon account
- UPC or brand registry
- Photo shooting
- Keyword research
- Set product pricing
- Create listing
- Product launch
- PPC campaign (marketing)
- Conversion rate optimization
- Email marketing
HOW TO FIND A NICHE FOR AMAZON FBA
Choose a category that you’re interested in or gravitated to already. Choose an area of products where you don’t need a name brand to sell. Things like appliances, kitchenware, home decor, pet accessories, phone accessories, etc. You don’t have to find the “perfect” product. If you go by all the rules the podcasts come up with that requires a product to have x sales, less than x sellers, less than x reviews, light, small, etc. it will be hard to find a “perfect” product since most of those products are already flooded with sellers. Don’t just focus on finding the perfect product. Since you’re building a brand, you’ll be selling a couple of different products in your niche anyway.
Why is this important? When you complete your application to the brand registry do not select more than one category.
Amazon only allows one unique identifier, yet for some reason, it still has the option on the application to choose more than one. If you do this, your application ends up in limbo, and the only way to get it fixed is to have them cancel the application and reapply. Please note that we no longer approve applications with multiple key attributes as we have found that this results in listing errors. Therefore, I request you to please write back to us with a single key attribute that you would like to use.
Well, it will be easier because you can expand to related similar niche products. When you’re building a private label brand, it might take a while to start scaling but once you do, you’ll want to spread into related products so you’ll have more revenue streams. Also, these streams will be able to draw customers to your brand from different avenues which will help build more sales.
You can do this manually, or you can save hours of time and speed up things with Jungle Scout, one of my favorite product research tools.
HOW TO FIND THE RIGHT PRODUCT TO SELL ON AMAZON FBA
Probably the longest part of the process is usually when new Amazon sellers get stuck on product research. It should be like that because this is one of the most crucial steps and because everything else can be done perfectly, if we don’t choose a good product, we could possibly fail and lose our investment. That’s why the planning at the product selection phase should be researched carefully and not be rushed.
Almost every product has a large enough audience to do well on Amazon. The issue is, are you going to be competitive or not? That’s what you should be looking at, more than whether the product has enough sales. Volume is not always all in all if you can create something with a good margin positive ROI. At the end of a day, you want to make some money.
Don’t try to reinvent the wheel such as having a product nobody has heard of before. As in, nothing that is sold on Amazon already. No one would be searching for it. For that, you have to do some serious brand building. The first and most important thing you’ll be doing is finding a product to private label. This is the hardest step, but with enough research and preparation, you’ll be able to create a product that generates income for you on autopilot.
Here are the basic criteria of what you should look for:
First and most important, the product has to have a good positive Return on investment (ROI)
Most common mistake that a new seller makes is that they calculate profit margin without ROI calculation. Let’s say, for example, you’re comparing two products—a knife and a spoon. The knife had a profit margin of 30% while the spoon had a profit margin of 20%. But then you look at the ROI for each and ROI for knives is 53% compared with an ROI of 120% for spoons.
With just looking at the profit margin, clearly you would have made a mistake if you had gone for knives, but the ROI calculation reveals how much better it is to invest in spoons.
Sample calculation to help you understand:
Let’s say you have $1,000 to invest and have to choose between bottle and can opener.
- Bottle opener retail price: $15
- Sourcing, shipping, sent into Amazon costs: $5
- You can buy 200 units
- Amazon Fees: $5
- Total cost/unit: $10
- Profit margin: 33% ($15-$10)/$15*100
- ROI ($5/$5): 100% (profit margin/cost of goods) (at the end you have $2,000 in your pocket)
Now let’s calculate can opener.
- Can opener retail price: $15
- Sourcing, shipping, sent into Amazon costs: $7
- You can buy 143 units
- Amazon Fees: $3
- Total cost/unit: $10
- Profit margin: 33% ($15-$10)/$15*100
- ROI ($5/$7): 71,5% (at the end you have $1,715 in your pocket)
Despite the same profit margin, a bottle opener is obviously the better investment if both products move the same in a given period of time and you will earn $285 more with the same amount invested. The return on your investment is higher, so you will be able to reinvest that money sooner and have more inventory on hand earlier.
Product can be sourced on Alibaba for less than $10
It’s hard to show and convince customers the difference in quality, and despite the fact that the product is noticeably more expensive and higher quality than competitor’s variations, you won’t be able to sell it at the significantly higher price. Even if you have the $$ to move forward on the high-demand higher priced product, my advice to you would be to start with the lower priced / in-demand item and get your feet wet first. Last, but not least, a unique high-end product is really difficult to sell. People aren’t shopping on Amazon for high-end clothing unless it’s a very well- known and established brand. If customers don’t know the brand, they will buy exclusively based on price.
Product that isn’t too heavy or isn’t too big
Otherwise, transport costs and Amazon FBA fees will eat all your profit. One dangerous oversight new sellers make while doing Amazon product research is underestimating the impact of Amazon’s fees. You can quickly use Seller Central’s fee calculator to get an accurate estimate based on a similar product or ASIN. Use FBA Revenue Calculator to estimate FBA fees
Similar product has 5000 or smaller Best Seller Rank in Main Category but less 100 reviews
Best seller rank (BSR). BSR shows you how well a product is selling in its category. This is an indicator of whether there is demand for a product in the market or not. I recommend going after products in BSR range from 1000 to 5000 because they have good demand. When looking on BSR, pay attention to main categories and subcategories. Products selling in the main category with a BSR of less than 5000 should be in the main category. The subcategory BSR isn’t a good indicator of how well a product will do because sub categories are focused on very specific product niches rather than a wide scope of how many products are selling.
No national brands on the market
The reason is obvious, they’ll have built enough trust and authority to draw most customers to them and it’ll be impossible to compete unless your selling price is much lower but then there is no profit for you.
2-3 Products with Less Than 100 Reviews on First Page
100 reviews might seem like a lot, especially for a new seller
Non-seasonal Products. Items whose usage does not vary by the time of year.
Can your product sell all year long? As a new seller, you can’t really afford to sell only three months out of 12 and you don’t want to strategize on how to effectively buy and manage seasonal inventory. That’s why you’ll have a bigger opportunity with the non-seasonal product.
Once again you can use Jungle Scout to automate things and find a product that matches all criteria with ease.
You can read How to find profitable products on Amazon
HOW TO FIND AND NEGOTIATE WITH ALIBABA SUPPLIER
Do remember, you make 50% of your margins not by selling high but by buying low because selling price is determined by your competition and you can’t lower Amazon fees. Your ability to govern the buying price with your supplier could help your margins significantly.
A thing to keep in mind: EVERYTHING is negotiable with Chinese sellers and you hold the money and power.
Searching for products on Alibaba
- Search for products In Alibaba.com
- Contact minimum 10 suppliers with short, clear, specific, concise questions (Write short, clear, emails. The language barrier is very real.)
- Compare prices with 1688.com (Chinese version of Alibaba)
- Order a sample (it will costs you around $50)
Introduction email template
Hi, My name is XY
I am interested in your product for my Amazon store
I have a few questions.
- Do you offer DDP or DDU parity? / Note: every serious supplier has this option and that means they know what they are doing
- Minimum trial quantity?
- Can I brand with my logo?
- What is the lead time (manufacturing once I place order)?
Estimated annual quantity is 5,000 – 10,000 units.
Here you can read an Absolute Beginner’s Guide to Buying off Alibaba and selling on Amazon
Create a Logo
You can hire a designer from Fiverr or Upwork but I suggest using manufacturer designer (almost every factory has one and they will do it free of charge). Send them free hand drawing or just your brand name in Word document so they know what to print it on a product.
Buy them cheap from third party resellers on Ebay, but you should know this is against Amazon TOS.
Ordering from Alibaba
I would suggest buying 200 units or less initially. If you want to invest that much, 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.
For the start and small quantity you can use Air cargo and let your supplier do the hard work you, or you can contact UPS and organize delivery. Just be sure that the order is less than $2,300 so you can avoid custom procedure and additional taxes.
GETTING INTO AMAZON
Set Up An Amazon Account
Here you should register to sell your products to millions of Amazon.com customers. As an international seller you can sell on Amazon.com, here is the list of supported countries. If your country isn’t on the list then you need Payoneer account. Registration your account and Payoneer will allow you to withdraw your payments directly to your local bank account.
The most important part of your listing is your photos and your title. A huge number of customers won’t even get past your main photo and almost no one will read further than bullet points.
If you are a bad writer I suggest you hire someone for descriptions, bullets, title, and keywords. Use multiple keywords in title to draw more traffic to your listing. For keyword research, I suggest Keyword Inspector, a tool that allows you to see your competitors keywords.
At the beginning of your Amazon FBA journey, you don’t have reviews, you have zero sales and your product is without Amazon seller ranking.
When a product goes live, try to find it on Amazon. It is hard, whatever search term you use, right? If it is hard for you, it will be even harder for the customer to find it and eventually when and if they find it, more likely they won’t buy it because there is no reason to trust your product without any reviews.
Reviews are KING – I’ve noticed that the guys who gave away hundreds and thousands of cheap products in exchange for a review were able to build up a lot of real reviews using that momentum and it Is VERY difficult to get organic reviews.
What to do then?
Your job is to get as many sales and reviews as possible in a short period of time after launch. After you do it, Amazon will rank your product and start showing it organically to the customers.
- Ask your friends, neighbors, family to find your product manually on Amazon and buy it at full price
- Hire someone (fiverr.com, Upwork.com, 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 terms.
Let them buy at full price, so you won’t have any problems with Amazon and incentivized reviews. Additionally, along with a review, other potential customers will see it’s a verified purchase and you’ll have social proof.
NOTE: You can support your sales through your own website. Setup a Shopify store or WordPress store and include contact information and your product. Use Login with Amazon to connect Amazon and your website. Login with Amazon app allows people to log in with their Amazon account, choose their delivery address, payment method and boom they’re checked out. Easy and nice but wait that’s not all, here’s the beauty part. Sign up for Amazon Affiliates and on each of your product pages, include an affiliate link to your product listing on Amazon, so that you make 1-10% (depending on category) of each order.
Yes, you can be an affiliate for your own products and yes Amazon will pay you a commission for selling your own products – isn’t that nice 🙂
Keep in mind Amazon charges higher fees for MCF (Multi Channel Fulfilment) and that the Shopify site has to have equal or higher pricing. Amazon will ban you if you have a lower price on your Shopify store.
Here you can read How to Rank Your products on Amazon and How to Launch and Promote New Products on Amazon in 2017.
PPC Campaign (Pay Per Click)
After you receive at least two reviews turn your PPC on.
Sponsored ads require patience and organization, especially in the beginning, to establish a long-term profitable presence. If you are running sponsored product ads for the first time this is how I recommend doing it:
- Research keywords. Keyword inspector is a great tool you can use to see your competitors keywords.
- Put 50-70 keywords in a broad match campaign and let that run for ten days
- Pull a report and identify keywords that are profitable
- Put those into a Phrase match campaign
- Add the keywords from your Phrase match campaign as negative keywords in your Broad match campaign
- After a while, identify phrase match converting keywords and add the keyword phrase to an Exact match campaign (don’t forget to repeat negative keyword step)
- Optimize and adjust bids in your Exact campaigns ( I recommend setting this number as high as $5 dollars per click. Amazon’s never going to charge you that much but unfortunately for us, they often charge more than necessary but this high bid is the only way to ensure you rank at the top of page 1 for this keyword. Later you will lower your bid once you see the cost of clicks.)
Views usually increase by time, but you don’t wanna sit and wait.
- Having engaging, eye-catching, high-quality product photos will increase click-through rate. I really do think that hiring a professional for photos is one of the best investments for a successful product line
Now, customers are on your listing and you want to convert them
- Reviews and price are drivers. Only they will convert and increase conversion rate which is very important because increased conversion rates improve SERP positioning
Spend hours creating and perfecting your TITLE, BULLETS. and DESCRIPTION. Hire a professional photographer. Getting the most and best keywords in the right spots can more than double the number of times you appear on customer searches. Hire someone on Fiverr, Upwork or pay someone doing marketing in your local college to look at your listing and make sure it is a fit for your target audience.
Use follow-up emails for every purchase and try to get organic reviews. You can do it manually that is the way I used to do all my follow-up emails. It is time intensive and hard work so you can automate with FeedbackGenius. This app sends auto-feedback pop-ups to thousands of orders on a daily basis.
If I list on Amazon sales will come later. Later never comes, so ideas like these don’t get a minute of my time. The only things I work on are things where I can make money starting on DAY ONE!
Don’t launch with a bad design or without a marketing plan!!!
I’m not a lawyer or CPA but make sure you do your due diligence before starting.
For any further input from anybody else, please comment in the comment section below so we can further add some value to the beginners just starting up on Amazon FBA.
I really do hope this has helped at least one person who reads this.