How to Start Amazon Business | 2024

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Understanding the Amazon Business Model: Your Guide to Starting a Profitable Venture

Are you dreaming of starting your own business and achieving financial independence? Imagine waking up to find money flowing into your account while you sip your morning coffee. With an Amazon business, this dream can become a reality! Whether you’re a stay-at-home parent, a college student, or simply looking for a side hustle, selling on Amazon is a fantastic way to achieve your goals. Let’s dive into how you can get started on this exciting journey!

Amazon offers two main types of fulfillment services:

What is Amazon FBA

Fulfillment by Amazon (FBA) is a service offered by Amazon that allows you to store your products in Amazon’s fulfillment centers. With FBA, Amazon takes care of order processing and customer service, allowing you to focus on other aspects of your business, such as marketing your webshop.

Benefits of FBA:

  • Access to Prime customers: As mentioned earlier, this can lead to a significant increase in your sales figures.
  • Increased exposure: FBA products are also eligible for the Amazon Buy Box, which can further boost your conversion rates.
  • Hassle-free shipping: With FBA, Amazon handles all order processing and takes care of returns on your behalf. This simplifies the shipping process for you.
  • Customer service: FBA also provides customer service for online orders, handling customer inquiries or complaints on your behalf. This takes the burden of customer support off your shoulders.

Disadvantages of FBA:

  • Costs: FBA fees can be higher compared to other fulfillment methods. Amazon charges fees based on factors such as product size, weight, and storage. This can be a significant cost for some webshops. Additionally, you will incur additional costs for shipping your products to Amazon’s fulfillment centers. On the other hand, you do not have to invest in your warehouse operation.
  • Less control: With FBA, Amazon handles all aspects of the fulfillment process, including packaging, shipping, and returns. This means you have limited control over the logistics process.

What is Amazon FBM

Fulfillment by Merchant (FBM) is a fulfillment method that allows you to handle online orders yourself without utilizing Amazon’s fulfillment centers. With FBM, you are solely responsible for all aspects of the logistics process. This means you pack and ship the orders yourself and focus on customer service.

Benefits of FBM:

  • More control: With FBM, you have complete control over the entire fulfillment process, allowing you to customize it to specific needs. Want to include a handwritten note with each order? No problem, you can do that!
  • Flexibility: With greater control comes increased flexibility in the fulfillment process when you choose FBM. You can make changes to the fulfillment process as needed without being bound by Amazon’s fulfillment requirements. Additionally, you are not obligated to meet the strict delivery timelines of FBA or SFP.
  • Cost savings: FBM can be a cost-effective option for webshops with low order volumes or those with their own warehouses. If you have your own warehouse, you can save on storage fees. Check out this resource if you’re looking to optimize your warehouse processes!
  • No storage fees: With FBM, you don’t have to pay storage fees as you are responsible for storing and shipping your own products.

Disadvantages of FBM:

  • Limited exposure: FBM products are not eligible for Amazon Prime* or the Buy Box**, which can significantly limit the exposure and sales potential of your product.
  • Amazon Prime*: Being an Amazon Prime seller means that your items are guaranteed to be delivered to Prime customers within 2 days. This can significantly increase the visibility and sales of your products. The Prime customer base provides access to over 100 million customers worldwide.
  • Buy Box**: By being eligible for the Buy Box, customers are more likely to choose to buy from you rather than a competitor. This can be due to factors such as later cut-off times, the best reviews for a product, or having the best price-to-quality ratio. Being in the Buy Box means your products appear at the top of the product listing page, giving your visibility and sales a boost.
  • More work: FBM requires you to handle all aspects of the fulfillment process, which can be quite time-consuming. Compared to the other methods, FBM requires the most hands-on effort.
  • Longer delivery times: With a high volume of orders, it can be challenging to process and ship packages quickly, resulting in longer wait times for your customers. This can lead to customer dissatisfaction.
  • Self-managed customer service: With FBM, you are responsible for providing customer service, which can be challenging if you lack the resources or expertise to handle customer inquiries or complaints effectively.

The Amazon Business Model

Amazon’s business model is the way of selling products on Amazon’s online marketplace. That involves the kind of product you will sell, and the approach to sourcing and fulfilling the order to the customer to generate profit. 

What is “private label” on Amazon?

Private labeling is the process where a retailer rebrands or renames an already manufactured product to market it under their own brand or label. Examples of private label products include Walmart’s Great Value and Target’s Mainstays. Amazon also offers its own private label lines, such as Amazon Essentials and AmazonBasics.

What is Retail arbitrage on Amazon

Online arbitrage involves discovering low-cost or discounted products on one website or online marketplace to resell them on another platform. Similar to retail arbitrage, the profits earned by online arbitrage sellers on Amazon are determined by the difference between the selling price on Amazon (minus Amazon’s fees) and the initial cost of the product.

What is Wholesale on Amazon

Wholesaling is buying goods in bulk at lower prices to sell individually. With online platforms like Amazon, wholesalers can easily reach customers. Technology helps manage inventory and predict trends. There’s also a focus on sustainability and fair practices in the supply chain. These advancements make wholesaling more efficient and competitive.