I get a lot of emails from my customers with great questions about selling on FBA. Many of them cover the same topics so I thought I’d post answers from the email bag the past few weeks.
Q. I sent an item up to Amazon.com and then Amazon suddenly started selling it – and for a lot less than me. What do I do now?
This is a tough one. If you can undersell Amazon and squeak out a profit, then go ahead and do that and move on. If there is no way you can meet their insane prices, then you need to consider either 1) having the products sent back to you and you return them to where you originally bought them; or 2) waiting them out. I had a bunch of new game system accessories up at Amazon that were selling great until Amazon started selling them for about $30 less than me. It more than killed my margin so I decided to wait. Since this was a very popular item, I gambled that Amazon would run out from time to time and mine would have a chance to sell. It took nearly 10 months for me to sell the rest of my inventory but I made my margin. Even though I paid for 10 months or so of storage, it was well worth it. If the item had not been so popular, I might have decided to have Amazon return the products to me (for 50 cents each) and then try to sell them on Craig’s List or eBay. I couldn’t return them because they were close-outs, no return type items. I had a crockpot that I sold a lot of for about $80 that Amazon came in and started selling for about $25. I had my extras returned to me (50 cents each) and took them back to the Walmart where I bought them. It was a walk of shame but worth it since I had paid about $20 for each one.
Q. I found a local warehouse that sells merchandise pallets from Sears, Target and Walmart among others. Some were returned electronics, toys, clothing, video game accessories, auto parts and furniture. Others contained out of season and discontinued merchandise. Have you sourced products this way?
I have done some wholesaling and I’ve bought large quantities of books. One thing I would caution you before buying a pallet load of merchandise is to make sure it is good condition. Sometimes these guys are selling ugly and/or opened boxes, which is why the price is so cheap. Assuming the merchandise is truly new in crisp boxes, then you just need to make sure you’ve got plenty of margin. If you are buying 100 Barbie dolls, make sure you can really sell them for the margin you need (I like to at least double my money after expenses) because you will have a lot of them and they will be hard to clear out if there are a lot of low-ball sellers undercutting you.
Some categories on Amazon – like appliances – will let you sell “open-box” merchandise. Be sure you know which ones are which and you can probably get some great deals.
Be aware that you need permission from Amazon to sell in certain categories like auto parts, clothing and jewelry.
Check out this warehouse and try to get references. You do not want to be selling stolen goods and you also want to make sure the company stands behind its products. What is their policy if the entire pallet-load you get is full of defective merchandise? Remember, sometimes people return things because they are broken.
Q. How/when do I get business insurance? Does it matter that I sell a wide range of goods? What company do you use?
Amazon requires proof of insurance once your sales get to a certain level. Below that is up to you whether you want to go uninsured or not. My advice for business insurance is call the company that currently insures your house and vehicles. You will most likely get the best rates from them. If you don’t have a house, then start with the big names and start calling. Or you can find a local insurance broker who will call around for you. He’ll make a commission off of this. Amazon lists its requirements (what it needs to see from the insurance company including coverage levels) online. Search in Seller Central “Help” under “insurance.” Be sure your agent understands that you do NOT warehouse merchandise yourself and that you ship it to Amazon. This lowers the risk for them and the price for you. In reality, you are more likely to have a robbery claim than anything else. Also ask your agent about covering merchandise that is in transit for you. In other words, UPS will automatically cover you up to $100 for stuff that gets damaged in shipping, but what if your merchandise is worth $400? You will only get the $100.
If you plan to sell expensive jewelry or other high value items, you will need a rider which will cost more. Amazon is concerned about liability – what if one of your products hurts someone? The categories most at risk here are Baby and Toys – possibly food although you can’t sell fresh food online right now and that’s perhaps the most risky.
The “Insurance Threshold” according to our Pro Seller contract with Amazon.com is if your sales exceed the “threshold” of $10,000 a month for any three consecutive months. They will contact you and you have 30 days to comply. You need at least $1 million in coverage per incident. This is standard. I’ve had insurance like this on previous businesses of mine for less than $500 a year. Your actual costs will vary according to the perceived risk of your business by the underwriter.
Q. My goal for my Amazon business is to make about $3,000 a month after expenses. If I have 20-25 hours a week to commit to this effort, is this a realistic goal within a year? What amount of cash do I need to have on hand for inventory?
This is a realistic goal. There are people who are doing at least that much if not more per month in the time you mention. A lot depends on your ability to find high quality, low cost inventory that is selling quickly on Amazon. Easier said than done, I realize. Many successful sellers I know sell books since the margins are so good. You can easily clear (i.e. net after expenses) $3-$4 off a book for which you paid 25 cents. I know one seller who works about 20-25 hours a week who is making $5,000 a month on average from books. I’m not sure how long it took him to build up to that level, but I will share when I get there myself as it is one of my goals for this year.
Others buy used and new items in thrift stores, garage sales and estate sales. Some focus on only new items from retail stores. I can’t tell you what an ideal budget would be. I started off with $200. Obviously, my progress was much slower than my Dad or friend Lynn who both had credit and were willing to put in a few thousand dollars right from the beginning. My friend Lynn started with several thousand dollars with the express goal of being able to pay it back quickly. Her first check from Amazon was over $7,500. She paid back her initial investment and has had the business fund itself from sales ever since. She started right before Christmas with toys, which was part of the reason her results were so good. My Dad had a $13,000 credit card he wanted to pay off with his part-time business. He made enough in about 6-7 months to pay it off, which made him very happy. My suggestion is to start from where you are. If you have a few thousand dollars to invest – great! Think about low cost, high margin items that are selling fast (rank is an indicator of this). If you have a few hundred dollars, definitely start with books and garage sale items. As you sell stuff, you can invest it back into the business.
Q. Do I need to be an Amazon Pro Seller to sell FBA?
No. If you sell more than 40 items a month, however, it makes financial sense to be a Pro Seller as Amazon charges higher per-item fees to its non-pro sellers. It is a flat fee for Pro Sellers of $39.99 a month for unlimited items, whereas other sellers pay $1 per item sold in addition to commissions and other fees. In addition, programs like Scan Power only work with Pro accounts so if you plan to use the tools I use for my business, then you need to be Pro. The first month as a Pro Seller is free from Amazon so that gives you time to build up your sales to more than 40 units a month. In addition, customers of my eBook can get free month from Scan Power, too.
Amazon also offers terrific reports to its Pro Sellers that are not available to non-pro sellers.
Q. How can I add a picture of a book that I am sending to Amazon?
Most items on the catalog have a picture so you don’t need to add one unless it really, really doesn’t have one. I find sometimes that a book will appear in Scan Power without a picture, but when I click through there is a picture. This is a glitch in how Amazon pulls information. I find the same issue with some items where Amazon says there is no picture and then I click to the item and a picture is there. If your book truly doesn’t have a picture and you want to add one, there are several criteria.
1) You have to be a Pro Seller on Amazon
2) You have to have previously purchased something from Amazon through your pro seller account (I used my personal/Prime account for most purchases and so this was a problem for me the first time. Now I’ve ordered several things through that account).
3) You have to add your picture to the catalog through Amazon Seller Central. Go to “manage inventory” and click on “Add a product.” Put your ISBN# in the box. It will bring up the item in the catalog and then you can edit/update it with a picture.
4) Your picture needs to be professional quality with a white background. Click here for Amazon’s requirements (at the bottom of the page): https://sellercentral.amazon.com/gp/help/help-page.html/ref=ag_200364740_cont_scsearch?ie=UTF8&itemID=200364740
5) In the case of a book, I am often able to find a nice quality picture from the publisher or elsewhere online like eBay or Barnes & Noble so I don’t have to take my own picture.
It is not required to have a picture in the catalog and I rarely add one simply because of the time involved. If the book is expensive or I’m selling a lot of them, then it would definitely be worth my time to add a picture.
Q. How do you place an FBA label on books that are either collector’s items or in new condition that you don’t want to mess up the dust jacket with a sticker? How do you protect collectible books?
There are a couple of ways to do it. I have a friend who shrink-wraps all his books and places labels on the outside. This is too much time and effort for me with my limited resources. If I have a particularly valuable book, I will wrap it in a plastic bag and tape it up tightly. Not as slick as shrink-wrap, but secure and tough. If it is also a fragile book, I might first wrap it in small-bubble wrap, then a plastic bag.
Please note that you need to be pre-approved to sell collectible books, otherwise you have to list it as “used.” Some books are only available as “collectible” and you have to be approved. You can find the online form through Seller Central’s “Help” section.
Q. Have you used Amazon’s free “Scan & Ship” program? Is it like Scan Power?
I have looked into it. I use Scan Power not because there is no other way to list and label items but because it is the most efficient and robust.
The Scan and Ship is a tool Amazon offers for sellers to replenish their inventory. In other words, if you’ve already sold something on Amazon and are sending in more, you can use their program to generate labels with your LabelWriter and then to send to the Shipping Queue. It does not offer you the ability to add new items. You need to add those manually on Amazon first, which means you will be spending a lot more time than with Scan Power. Scan Power gives you the ability to easily customize your notes, you can see FBA offers and quantities, you can record your original purchase price and much more that you cannot do with Amazon’s listing capabilities.
If you are just starting out and have more time than money, then by all means you should use every free tool available to you including Scan & Ship. As you generate more sales, you will want to upgrade and you’ll be so pleased with how much time you save and how much more you are able to do with Scan Power.