Understand FBA Vs. FBM
- FBA – Fulfilled By Amazon
- FBM – Fulfilled By Merchant
With FBA, Amazon holds your inventory and ships it to the customer when an order is placed. With FBM, you’re notified of an order and must ship it out.
There are pros and cons to each.
Fulfilled By Amazon
- De-clutter – FBA is great if you have a lot of inventory. Instead of trying to safely store everything in your home or garage, you just send it all to Amazon.
- Prime – FBA items are marked as Prime which means Prime members get free 2-day shipping. A lot of people won’t buy something that isn’t prime (unless there is no other option).
- Convenient – Having to ship packages can be a real pain in the butt. Letting Amazon handle all the work for you will be a big time saver.
- Fees – There are fees associated with using FBA like storage fees.
- Fees – I’m listing this one twice because there are fees associated with pretty much every action when you opt for FBA. For example, let’s say you decide you want some of your inventory back… you have to pay a fee for that (per item) plus shipping. In addition to storage fees, there are long-term storage fees if your items sit on shelves too long.
- Shipping to Amazon – Actually sending your stuff to Amazon can be a bit of a challenge (especially the first time). They have a lot of “guidelines” you need to follow and if you get it wrong guess what… yep, more fees!
Pro tip: Review Amazon’s FBA shipping guidelines here.
Fulfilled By Merchant
Basically, just flip the pros and cons from above. With FBM, you avoid some of the fees but can’t take advantage of the “Prime” label. In addition, you’ll need to make trips to your local shipping store frequently which can be a real hassle.
So, by now you probably have a pretty good grasp of how to sell on Amazon… but what is it going to cost you? Good news: Not a lot.
If you’ve decided to dive right into retail arbitrage you will need some upfront money for inventory. This initial investment can vary based on your finances.
In addition to building up your inventory, you’ll probably need some office supplies. Keep in mind that your office supply needs will vary based on whether you’re doing FBA or FBM. Here’s some supplies you may want to have on hand:
- Internet connection
- Printer paper
- Labels for your products
- Shipping labels
- Clear plastic bags with suffocation warnings (or purchase the warnings as separate stickers)
- Packing tape
If you are going to be treating selling on Amazon as a business you’ll also need the $39.95 to sign up for the professional seller account.
Overall, that’s a pretty low investment for starting a business that could replace your full time job.
Know the Risks
As with any business, there are some risks associated with selling on Amazon. However, you can mitigate your risks by having a solid understanding of how to sell on Amazon and always running the numbers before purchasing a product to sell.
Risks you’ll want to be aware of include:
Getting stuck with inventory.
This becomes even more probable if you’re buying in bulk. If doing FBM, you’re garage may become impossibly cluttered. If you’re doing FBA, you may incur long term storage fees.
Having money tied up.
If sales are down, you may find yourself with more money than you’d like tied up in inventory.
Competition could increase.
Even if you check a product out before purchasing it, you could wake up one day and find that competition from third-party sellers or even Amazon has picked up.