There are many ways to make money on Amazon. It is a huge platform with lots of potential for entrepreneurs that will fit any type of strategy. There are some that involve a lot of upfront investment and some with just a little to get started. One of the most profitable ways to make money on Amazon is to become an Amazon seller and use their Fulfilled by Amazon program (FBA).
This is a program that allows you to essentially set up an e-commerce store, but you will use Amazon’s logistics for fulfilment and their site as your storefront. Since Amazon is a juggernaut, they have the capabilities of selling your product and getting it to the customer much better than you could yourself. If you want to learn the basics of how to make money, then we created this article just for you.
Table of Contents
Here are the 4 steps to creating a business as an Amazon seller:
1. Make a better product
The first step is to do some research on the product that you’re thinking of creating. You could even choose a product based on what you’re seeing on Amazon currently without having a preconceived idea of what to sell.
A lot of Amazon sellers are doing a bad job of selling products on Amazon, which may offer you an opportunity to make money on Amazon. For instance, there are products for sale that are not solving their customers’ needs and even have a lot of flaws. You can take note of the problems and come up with some fixes. Then have that product manufactured and sell your version on Amazon.
There are others that have terrible product pages with bad pictures and terrible descriptions. You can then take your improved product and avoid their mistakes on their product page. Take some good pictures of the product and use an image converter to edit the picture. Visit this site for a free tool to do this.
Then, write out a description that actually describes how the product will solve the problems of the user.
2. Find a manufacturer
Once you have your specs defined for a product, you will need to have it manufactured. It is important to make sure that you get this phase of the product creation done correctly and on budget. Look for manufacturers in China or some other country where you can have it produced cheaply but at the same time with quality in mind.
You will need to shop around to find the right manufacturer. In fact, you may even start out with several to see who makes your prototype the best and for the lowest cost per unit.
There will be many advertised that specialize in the type of product you want to make, and they will usually include what the minimum order is. You will likely want to start out with a small order for the first time to make sure you aren’t stuck with inventory that isn’t selling.
Select several manufacturers that offer the minimum order that suits your needs and also have a good turnaround time. It may take months for some of these factories to have your order completed so time is important.
3. Calculate the cost of goods sold
Once you pick the manufacturer that will do the best product at the best price, you need to start doing some napkin math and figure out how much each unit will cost. Then, ask around for some shipping quotes. Come up with the cost to ship each unit. Add in the cost of advertising and even giving away some products. Next, you will have some Amazon fees to contend with since they make money off of your success.
All these costs need to be bundled into the cost of producing a product from the manufacturing to the time it sells. Once you have each figure, add them up, and now you know what your minimum is to be able to break even. Add enough to the price you plan to charge that is high enough to be happy with the profit and low enough to encourage people to buy.
4. Understand the fees
One of the downsides of selling on Amazon using FBA is how high the fees can be. This is part of using them to sell your products and needs to be accounted for. There is a fee that is collected when you make a sale. There are also storage fees that depend on the size of the product plus how long it is on the shelves.