What are Amazon FBA stores?
Amazon FBA stores are online stores on Amazon that use the FBA service. FBA stands for “Fulfillment by Amazon”. This means that Amazon takes over the entire order processing. Instead of taking care of shipping yourself, you send your goods directly from the manufacturer to an Amazon warehouse. When an order is then received via the store, Amazon takes care of the packaging and shipping. Amazon also handles the returns. So you pass on the entire logistics to Amazon.
You can therefore run an FBA store on Amazon completely from home without needing large warehouse space yourself.
Advantages and disadvantages
Amazon is one of the largest online marketplaces in the world and is known worldwide. In Germany alone, Amazon is accessed about 500 million times a month. So there are plenty of potential customers. You can use this reach to generate more sales. Unlike normal merchants on Amazon, FBA merchants also have the advantage that they can sell their products via Amazon Prime. The fast and free shipping usually increases the conversion rate many times over.
Another advantage is that you don’t need your own warehouse. Instead, you ship the goods from the manufacturer directly to an Amazon warehouse. This saves you the effort and cost of your own warehouse. As a pure online business, everyone has the opportunity to operate a store on Amazon. Since you also no longer have to worry about order processing, you have more time that you can put into marketing instead. The Amazon Seller Tools, which provide an overview of the market and competitive environment, also help here. With this, one can improve one’s visibility and thus increase sales in the long run.
The disadvantage of the FBA program is that it makes you dependent on Amazon.
How does an Amazon FBA store work?
In order to earn money with the FBA store, one must first take care of the classic bureaucratic things. These include registering a business and applying for an EORI number, which is required for importing goods.
Then you have to register with Amazon as an FBA merchant and choose a product that you want to market. For this product, one then looks for a manufacturer from whom one can obtain the product as cheaply as possible. A marketplace to find such manufacturers is for example Alibaba. Once you have decided on a manufacturer, you have the goods shipped directly to an Amazon warehouse.
The last step is to take care of marketing to increase the number of sales. This mainly includes creating good product photos, product titles, bullet points and descriptions. In addition, you can also actively advertise to bring potential customers to the product page.
How do you make money with it?
As with any other business, running an FBA store is all about generating as much revenue as possible with as little cost as possible. Overall, costs can be divided into three groups:
– Amazon FBA service costs
– One-time and ongoing product costs
– General business costs
Decisive for success on the cost side are mainly the product costs, since you have the greatest influence on these. This mainly concerns the costs of purchasing and importing the products. One should keep these as low as possible through extensive research and skillful negotiation.
On the other hand, it is important to optimize marketing in order to increase the number of sales. The first step is to make the product page search engine optimized and customer friendly. This improves the visibility and the conversion rate, which leads to more sales. Especially at the beginning, it can also be useful to actively advertise to boost business. The better you design the marketing, the more money you can earn.