Getting Started With Amazon FBA

Part 2

This is the second post in my Amazon FBA series. See the first post here.

Once you decide to resell on Amazon, you need to create an Amazon seller account. Before you do that, review this Amazon page, How to start selling on Amazon, that provides a high-level overview of the process. Then click on the Create your Amazon seller account link, which you will find about halfway down the page. 

You will be prompted to login to your Amazon account and this is where you need to make your first decision: should you use your existing Amazon account, or create a new one? I recommend creating a new account that is solely for your selling activities. You will need a separate email address. Use gmail or your favorite email provider.

Once you are signed in to your Amazon account, proceed through the seller-registration steps. You will be asked for your business details such as your product category (pick anything you like since you're not limited to it), your store name, business address (home address is fine), and so on. You will set up two-step verification with a mobile number or an authenticator app. 

Next, you provide your tax details, which will vary depending on your country. If you have a registered business such as a sole proprietorship or LLC, you can use your business's Employer Tax ID (EIN) in the United States. Otherwise, you will use your Social Security Number.

You do not need to create a business entity to sell on Amazon.  However, if you start doing significant amounts of revenue, you should probably switch to a business entity in the future since it provides you with a level of legal protection in case of issues or lawsuits¹. If you decide to do wholesale later, a business entity is required. Additionally, having a legitimate business entity might generate a few more sales since many people feel more comfortable buying from a business than from an individual seller. Personally, I have an LLC that I used for my tech contracting work, so I'm rolling my FBA activities under that entity.

Identity Verification

After you finish registering for your account, you will need to prove to Amazon that you are who you claim to be. This step is more of a pain than anything else, but it's straightforward if you are prepared ahead of time. During your account registration, you were asked to upload two documents:

• A government-issued ID such as a driver's license or passport
• A bank account or credit card statement

You can take a photo of your documents with your phone or scan them with a printer/scanner. Make sure the resulting image is clear, well-lit, and with no glare. 

You can schedule your identity verification immediately, during the account creation process, or at a later time. I had my documents ready to go, so I did it immediately. You video chat with an Amazon employee who will ask a series of questions and then they'll ask you to show them your ID. I used my passport, because my wallet was in my car, which my wife was out driving at the time. With a passport, I had to show a bunch of different pages, the front, the back, and so on. I had to show all the edges, and bend it to prove it was real. My guess is that a driver's license would have been a loot simpler.

After all that, he said my passport image wasn't good enough, and I had to resubmit them. Again, I did it while he waited, rather than starting and waiting all over again. The Amazon associate was very patient. 

The ID verification is supposed to take a maximum of 72 hours, but mine was done the next day, and just like that, I was an official Amazon seller.

Choosing a Strategy

Before you can start sourcing products, you have to choose your strategy. There are six basic strategies from which to choose:

1. Used books
2. Retail arbitrage (RA)
3. Online arbitrage (OA)
4. Wholesale
5. Private label (PL)
6. Manufacturer, or original products

Only three of these make sense for individuals: books, RA, and OA.

The other three either require a lot more capital, or a "real business." Wholesalers contract with manufacturers to buy and resell their product, usually in larger quantities. Private label sellers buy items (typically from China or other low-cost manufacturing countries), put their own brand name on them, and then sell them on Amazon. Finally, manufacturers often sell their products directly on Amazon, as one of their sales channels.

As beginning sellers, our three options are really just variations of the same model. What changes is the product (books or everything else) and how you source your products. With RA, you buy your products in retail stores that you physically go to. With OA, you buy products online, have them shipped to you, and then you turn around and sell them on Amazon.

Personally, I think I will start with a mix of RA and OA. Books are their own whole world and I feel like booksellers should probably focus solely on books, so that they get really good and efficient at it. 

As you can see, effectively sourcing profitable products is the key to your success. There are a number of costs involved:

• Product cost
• Product prep (boxes, labeling, bagging, and so on)
• Shipping into Amazon
• Amazon listing fees
• Amazon storage fees

This is not a complete list. The point is that you total costs plus your profit margin has to be equal to or less than whatever you can sell the product for on Amazon. 

Sourcing is both an art and a science. It is where we'll spend most of your time, both to learn it, but also how to become truly good at it. I'm just starting to learn, so I'll have more posts on this subject over the next few weeks.

What's Next?

I have decided on sourcing and analysis tools and will install, and start learning, those in the next day or two. I will also try to source at least one or two products this week so that I can send in a test shipment to Amazon. You want to be 100% perfect in your inbound shipping processes so that your product does not get delayed or rejected at the Fulfillment Center. 

¹ I am not a lawyer nor am I an accountant or tax advisor. Many years ago, a mentor told me, Never take legal advice from a non-lawyer. When in doubt, consult your attorney or CPA.