Part 5
Finding Something to Sell
This is the fifth part in my ongoing Amazon FBA Seller series. If you missed them, here are the first four articles:
By far the most difficult part of being an Amazon FBA seller is finding profitable products to sell. Recall from Part 2 that we talked about the different options you have as a seller:
- Used books
- Retail Arbitrage (RA)
- Online Arbitrage (OA)
- Wholesale
- Private Label (PL)
- Manufacturer of original products
In this article I will talk primarily about my experience so far with RA and OA, with a brief mention of books.
Used Books
Used books could be classified under RA, where the retailers are used book stores, libraries, thrift stores, and so on. However, because bookselling has its own nuances, as well as specialized tools just for book selling, I consider it separately.
Used books are a great way to start out with Amazon selling. It does not take very much capital, as you can often find books for $1-$2 each and then turn around and sell them on Amazon, sometimes for a lot more.
Let's say you're in your local library and they have a stack of books on a table for one dollar each. How do you know which of those are worth buying? After all, maybe no one wants them because they're all awful. Maybe they go for $.85 on Amazon and there is no way you can make a profit.
This is where the specialized book tools come into play. By far, the best book flipping tool is ScoutIQ1. With ScoutIQ, you can define triggers based on your own criteria. Scan each book that you find and it immediately tells you if the book is one you should buy because it's profitable, or one to put back on the shelf or table.
I will do a more in-depth article on book selling in the future. Let me know in the comments if this is something you're interested in.
Retail Arbitrage
With RA you go out in the real world and visit stores where you think you can find deals. Clearance aisles at big box stores like Walmart or Target, hardware stores, beauty shops like Ulna or Sephora, and so on are good places to start. RA is time consuming and you might encounter limits on the quantity of a given item that they'll let you buy. In that case, you might have to spend even more time to go visit a chain's other locations to get the same product. Even then, they might track you through your credit card or membership number, and if you over-do it you might get banned from the store.
I did some retail arbitrage this week to see how feasible my local stores are. I actually found three products that Seller Amp and Keepa indicated would be profitable. Since I am learning the process, I made small purchases of each. Here's the Seller Amp chart for one of them:
My SAS settings are a BSR of < 2%, profit > $3, and ROI > 30%. All three are green which means my criteria are met. I'm eligible to sell the product which means it's not gated for me.
Here is the Keepa chart for the same product:
The Buy Box price has stayed up around $26 for the last month, but there is a risk that it drops back down and if it does, the product will be unprofitable for me. With 650 sales/month, I am hoping that my inventory sells through fairly quickly. Per Keepa (Data > Buy Box Statistics), here are 16 FBA sellers but three of them have won the BB about 60% of the time. That leaves about 260 units to be shared by the other 12 FBA sellers which is over 21 units/month for each seller.
I sent in nine units, so I'm expecting to sell through in a month or two. The retailer I sourced this product from has a liberal return policy so in the worst case, I can get them back and return them, although I haven't checked how expensive the shipping for that would be and that might not be reasonable.
After all this effort, I will only make about $31 in profit across the nine units. I am okay with that because:
- Amazon FBA selling is a grind. I accept that and I am prepared to put in the work.
- I am purposefully starting slowly, with just a few test items. I am going to make mistakes and I want those mistakes to not cost me very much.
- I need to learn the process, both sourcing, and sending products to Amazon, and then managing my inventory. These first units are more for me to learn than to make a lot of money.
Here is a quick breakdown of my three products that are in transit to a Fulfillment Center:
Product | My Cost | No. Units | Unit Profit | Total Profit |
|---|---|---|---|---|
Health & Household | 11.49 | 9 | 3.47 | 31.23 |
Grocery | 8.89 | 4 | 3.20 | 12.80 |
Holiday Lighting | 23.99 | 6 | 4.37 | 26.22 |
Total: | 70.25 |
$70 does not seem like much, but it's a start and it also highlights a very important fact:
Amazon arbitrage is a numbers game. The only way to make a lot of money at it is to consistently source new products, and send them in as quickly as possible.
Also, don't expect perfection. My grocery item is canned pumpkin and it has already dropped in price by over $3, wiping out my potential profit. I won't join the race to the bottom, as in time the other sellers will run out and I believe the price will recover.
But it might not. Losses and obstacles are par for the course. It's a numbers game, so won't get overly stressed about individual setbacks. Your goal is to have more winners than losers so at the end of the day (or month or year), you'll be profitable.
Online Arbitrage
OA is my mid-term goal. Eventually I think I want to move to wholesale or maybe even private label. RA does not scale very well, as you only have so many hours/day, and you will often be limited in the quantities you can purchase. That's also an issue with OA, but it's easier to get around it with multiple accounts and payment cards. And with OA, you can hire overseas virtual assistants (VAs) to do some of your legwork, but that's not cost effective with RA.
So while OA is probably going to be more efficient in the long run, there are some obstacles to be aware of, including the following:
- Everyone else has access to the same websites that you do.
- It's really hard to find products for sale significantly cheaper than Amazon's price, especially after you add in the inbound shipping, FBA, and storage fees.
- Some sites might limit your quantities or even ban you for reselling.
So far, I have found only a single product through OA that I am confident enough to order. Here are the Seller Amp and Keepa charts:
The BB price has been fairly stable aside from a couple of short-term price drops. There are three other FBA sellers on the listing. It only sells about 30/month which is low but the BB distribution is fairly evenly distributed among the three current sellers. Assuming I get a fair 25% share, I will likely get about seven sales a month, so I ordered six units as a test.
If it works out, this is a potential replen item, that I can stock (replenish) monthly. Seven sales a month at $4.10 each would be a $28/month profit. Multiply that by 200 products and you have over $5000/month in gross profit.
Of course, finding these products is the biggest challenge. I will have a future article dedicated to some of the techniques for doing OA, including how to reduce costs through sales tax exemptions, and by using coupon and cash-back sites. For now, make sure you have Seller Amp and Keepa and start practicing!
Your First Inbound Shipment
Once you have items to sell, you have to figure out how to send them in to an Amazon Fulfillment Center (FC). Fortunately, that part is relatively straightforward.
Make sure you have your packing supplies before your products arrive (See Part 4 in this series for information about packing materials.) You don't want to have inventory sitting in your living room tying up your capital. Ideally, turn it around the same or next day and get it in transit to an FC as quickly as possible.
If you are using a dedicated label printer, connect and test your printer before you start creating an inbound shipment so that you don't get sidetracked and make a mistake during the shipment-creation process.
The general steps to create an inbound shipment are as follows:
- Go to Seller Central in a browser.
- Add your product's ASIN to your inventory.
- Put FNSKU labels on your units.
- Enter your shipment information such as box sizes and weights.
- Print and apply box shipping labels (there are two per box).
- Drop off your package at the carrier. I have sent in two shipments so far and both times it used UPS.
Make sure you wait until your boxes are scanned in by the carrier and you have a printed receipt. Once you're sending tens or hundreds of boxes a month, you want to have solid record-keeping and documented processes to avoid losses or missing packages.
And then you wait. It can take a week or more for your package to arrive at the FC, and even longer for Amazon to check your items in. Sometimes, your items will be transferred to another FC which introduces a further delay before your listing goes active and is available for purchase.
Be patient. It's a numbers game.
Check the status daily, but don't obsess over it. Spend your time sourcing. You want to build a pipeline of products: Source → List → Ship → Sell. Rinse and repeat. A lot.
Record Keeping
Keeping track of everything can be a burden, but I recommend that you set up good record keeping habits from the onset. You will appreciate it when it comes time to do your taxes, and also when you turn over some of these sourcing or shipping processes to an assistant or employee when you start to scale up. At the very least, create a Google Sheets or Microsoft Excel document and keep track of your Cost of Goods Sold (COGS), including:
- Name and ASIN
- Quantity
- Product cost (purchase price)
- Tax (you might be able to get a refund)
- Shipping to you, if you paid any
- Store or website
- Payment used (which card? PayPal? Cash?)
- Cash-back or coupons used
- Account used (email) if you're using more than one for online stores
For fixed costs, keep track of everything you spend money on, including:
- Software like Seller Amp and Keepa
- Packing supplies like boxes, tape, void material
- Internet service
- Email services if you pay for them
- Amazon seller fees (that is, the $39.99/month Amazon charges for the Pro account)
- Equipment (like your Rollo printer and scale, packing tape dispensers, and so on)
- Home office expenses
Your business-related costs are deductible2 (in the United States and probably in other jurisdictions). If you have good documentation habits now, while you are small, then you're less likely to miss things when you're larger and busier.
Finally, make sure you keep and organize all of your invoices and receipts, both for inventory and for anything else you buy. You'll need them when you get an intellectual property (IP) complaint through Amazon and you'll need then at tax time to prove you spent the money that you're trying to deduct as a business expense.
Final Thoughts and Next Up
I hope you found this article useful. Keep in mind that this is not a step-by-step tutorial. Use Seller University to see how to navigate Seller Central, and check YouTube for experienced seller videos. Just be wary of the hype and look for folks who are genuinely trying to help you learn.
Next week: I will let you know how the FC check-in process goes, assuming my initial products arrive and become active. Also note that I am going to move the article drop day to Monday or Tuesday, so that I can work on articles over the weekend and source/list/ship on weekdays.
Stay tuned, and follow me on Twitter (@garlick) to never miss an article drop.
1 The affiliate links in this article support my writing and I thank you in advance for using them.
2 Consult your tax advisor or CPA, since I am absolutely not either of those.