2021 Amazon FBA Business Guide: How to Sell, Fees and More
Written by: Ryan Flannagan

Solidify Your Company’s Future on Amazon with Nuanced Media Expertise

Amazon is a tool that allows manufacturers, distributors, and other sellers to reach their customers. It’s designed to be an efficient way of meeting the ongoing demand created by the eCommerce boom, something Amazon, in its 25 years of existence, has helped foster. In 2018, Amazon’s eCommerce market share encompassed 33.7 percent of all sales online.

According to Rakuten Intelligence, the company has 390 warehouses, along with a full logistics network that encompasses a global infrastructure capable of delivering packages to consumers as fast as one day after they’ve ordered it. During its two-day Prime Day event in July of 2019, Amazon sold over 100,000 laptops, 200,000 televisions, 350,000 luxury beauty products and more than a million toys according to CNBC. By investing in Nuanced Media’s Amazon marketing services, you’re solidifying your company’s future as a market leader on Amazon. With our expertise, as well as data-backed strategies, we can develop a comprehensive strategy that — when launched — will deliver success over and over again.

How Can Businesses Benefit from Amazon?

Small and large companies alike can build a 7-figure business selling on Amazon. The best way to sell on Amazon is through Amazon’s service called Fulfillment By Amazon or FBA. How does Amazon FBA work for you? This service makes it possible for companies selling products of virtually all types to reach their most likely global customers in an impressive, streamlined manner.

With Amazon FBA, the company does all of the hard work – the expensive work – including the warehousing of products, the fulfillment of the orders that come in, and even the customer service. Your job is simply to create a presence on the site, maintain the rules that Amazon puts in place, and to create the products consumers want.

If you are a business looking to sell products on a global scale, but to do so cost-effectively, Amazon FBA tools make that possible. Here, we’ll look at how to build a successful account on the site to reach those customers.

1. What Is FBA?

As noted, Fulfillment By Amazon is a service the company offers. To be clear, this is a service that benefits Amazon directly. It helps the company to provide quality service to customers and allows the e-commerce giant to maintain more control over the entire process of buying online.
For small business owners, it is also a very powerful tool.

1.1 How Amazon FBA works?

Let’s take a closer look at how Amazon FBA works based on each component of the service provided.

Positive Reviews

#1: You Send Your Products Directly to Amazon.

As the business owner, it’s your job to ensure your products get to the company. These products go to the company’s numerous warehouses. These are located throughout the U.S. and most other countries. By positioning your product close to your customers, it can reduce ship time.
Positive Reviews

#2: Amazon Works to Store Your Products

It inventories them. It keeps them sorted and ready to go out the door. Amazon’s warehouses are also some of the most efficient and controlled environments. If your products are here, they are in good hands. That’s because Amazon has worked hard to become a well-respected distributor and a consumer brand. Its logo is on every box – it wants to make sure what’s in the box is just was promised.
Positive Reviews

#3: Amazon Processes the Order

When your customer finds your ad on Amazon or navigates to your product listing, they can place an order. This is done fully on the Amazon platform. That means you do not have to worry about taking credit cards or worrying about any type of cyber risks associated with personal information. The entire purchasing process is automated, which again speeds things up and minimizes risks.
Positive Reviews

#4: Amazon Ships the Order

Now that the order is in hand, the Amazon staff or robots pick it from the warehouse shelves, pack it up, and then send it off to your customer. You do not have to worry about boxes, shipping protection, or any costs associated with the logistics process. It’s completely done for you.
Positive Reviews

#5: Your Customer Receives the Product

Order delivers within the designated time frame. If there is a problem with it, Amazon will handle the customer service aspects of the process. They can even handle returns for you. Although, no organization is perfect, and occasionally Amazon will make mistakes. It is important to keep monitoring services in place to pick up on discrepancies, but generally their services are very accurate.
As you can see, your work is very simplified in terms of getting a product to the consumer.

1.2 What’s your role, then?

When you establish your Amazon FBA business, you will have several requirements to fulfill yourself. You’ll need to learn the process and truly understand the requirements of Amazon. You also have to choose the right products to sell on the site and keep those items in stock at the company’s warehouses. That can prove to be challenging simply because of how large your customer base becomes.

You also have to market. This is where many business owners wonder if they can do well on Amazon. The answer is – you most certainly can.

You don’t have to do this alone. And, that’s where Amazon FBA consulting can work for you. We’ll come back to that later. For now, let’s consider what it means to build your Amazon FBA business.

It’s up to you to make your product an attractive option on the site for consumers. Because there are millions of products out there and plenty of direct competition for your customers, it’s up to you to find a way to be an attractive purchase. You want people to be able to find your product, see its benefits for you, and then buy it!

1.3 Who should invest in Amazon FBA?

Positive Reviews

Startup Company

Startup looking for access to one of the largest consumer groups in the world
Positive Reviews

Mid-sized Company

Mid-sized company looking to improve business and to grow your customer base
Positive Reviews

Larger Company

Larger company tired of increasing logistics costs and want to let Amazon do the hard work for you.

1.4 Why should your business use Amazon FBA

  • It provides you with full management of your business in a simple tool.
  • You gain access to Amazon’s treasured Prime subscribers. These are people who pay a fee to use Amazon’s fast delivery and routinely come to this site alone to make purchases.
  • Because of the company’s proven business model, you also are assured of good customer service. That brings them back to you.
  • It’s cost-effective, especially as you work to scale your business.
  • It minimizes the number of areas you need to excel in to grow your company. You can focus on your product and let Amazon do the work of selling and shipping your product.

1.5 What are some drawbacks of using Amazon FBA?

  • You want lower costs and believe you can achieve it on your own.
  • Amazon takes time to prep and setup, which can delay initial shipments and product launches
  • There’s no customer list available to you. That means you’ll need to work to build your brand offsite if you desire to sell directly to customers.
  • You have limited options for retargeting those consumers.
Would you go to Amazon to buy the product you are selling? If so, your company should be on the site selling!

2. How to Set Up Your Amazon FBA Business

Once you learn how to sell Amazon FBA successfully, it becomes easy to do and rather effortless. However, to get to that point, it’s important to provide you with some key best practices. This insight will help you to establish your business and grow it at any level.

Amazon Fulfillment FBA Delivery

The first area of focus is establishing your account.  You can follow this step by step Amazon FBA guide or you can elect to work with Amazon FBA consultants who will do the work for you. In either case, there are a few rules to remember and consider best practices for your FBA account establishment. Here’s where to get started.

2.1 How to Set Up Your Amazon Seller Account

If you think about it, Amazon doesn’t want to allow just anyone to set up a page on the site to sell. Amazon is far more interested in providing excellent service and meeting customer demands. In other words, this isn’t eBay where you have fewer rules to follow. That’s a good thing, though, because it allows you to tap into a consumer base that isn’t interested in purchasing from individual sellers.

Your first thing to do, then, is to get your Amazon seller account established. You can do this yourself (though using a consultant may be best). You’ll find everything you need to do at the Amazon Services page. There’s a link on the page that allows you to set up an account to begin selling.

Amazon Fulfillment FBA Delivery
Once you click on that link, you need to consider two options – Individual or Professional accounts.

Individual accounts are those that have no monthly subscription fee. If you are a very small business and just starting up, it is okay to choose this option. However, nearly every business that plans to be here long term needs to consider the benefits of a professional account.

Amazon Fulfillment FBA Delivery

2.2 Do Some Product Research

Later, we’ll provide some additional insight into how to establish more advanced product research. At this stage, though, you need to consider what you can sell on Amazon.

What research should you do?

It’s important to understand the Amazon business model. You need to be sure that the type of product you plan to sell can do well on the site. If you don’t have a good working knowledge of the company’s platform, start there.

Then, you need to consider more advanced research. This includes looking at the product category to see if it is one that’s worthwhile. Determine if there’s a market on the site for your product by starting with the category it falls under.

Amazon Fulfillment FBA Delivery

Then, look at the competitors on the site.

  • Are there many that are a direct competitor for you?
  • Do a competitive analysis to determine how well you can compete with them.
  • Look at product reviews to see how well the products have faired and what concerns consumers have had.
  • Look for ways to make your product a solution to those problems.
  • Be sure there is room for profit with the product you select.

Once you have a good idea of what you plan to sell, you can move on to choosing the business model.

What is private label?

One of the key best practices for doing well on FBA is to establish a private label business model. There are other options (we’ll come back to that), but what you will find is that a private label business model offers some key advantages.

Amazon Fulfillment FBA Delivery

When you use Amazon FBA with your private label, you still maintain complete control. It’s a misconception that Amazon takes away from brand recognition and establishment. In fact, building your brand using the site is often easier than doing so offsite.

Amazon Fulfillment FBA Delivery

At this point, you have your sellers account in place, you have your product research done, and you’re making your product (if you choose to use a private label business model). What happens next?

Get Your Product to Amazon

Remember, Amazon will manage the warehousing and sorting of your product. That’s what makes it so effortless to use the site. You have to cover inbound fulfillment yourself, though. You’ll need to work with your supplier, or use an Amazon Delivery Service Partner to get the product delivered to the warehouses that Amazon needs them at. This can be an initially confusing step, but Amazon has the reps and support to help you. With Amazon FBA consulting available, this even makes it easier to get shipment to Amazon set up.

Amazon Fulfillment FBA Delivery

They Order, Amazon Ships, and Handles Returns

When establishing your account, you’ll learn just how handy Amazon can be in these areas. There are no customers to talk to over the phone or complications to worry about in managing a UPS pickup. It is all done for you. Even better, Amazon is all about impressing their customers and, to do so, they work hard to get your products where they are supposed to be on time.

If there is any instance where a customer has a problem, your FBA account means they handle that work for you as well. That means effortless returns of your product.

Now that you have your account established, let’s talk about some best practices as they relate to choosing a business model and products. This is an area that’s important to get right and we have more of an Amazon FBA startup guide here to help you make the right decisions.

3. What Will Do Well on FBA – Establishing Your Business Model

One of the best reasons to use FBA is because it is versatile. It is something you can use for most types of products. And, you can sell those products in a way that works for your needs. The question is, then, which formula is right for your needs?

We’ve mentioned private label a bit, but let’s talk about the other options available to you as well. Any of these methods can work well, depending on how you implement it and manage it.

3.1 The Arbitrage Business Model

One of the ways you can create an Amazon FBA is to use the arbitrage model where you find low-priced products and then resell them on Amazon. Your goal is to sell them at a higher value than you’ve purchased them. You need to factor in your time, any investments you’ll need to make, and the Amazon fees to make this method a profitable option.

Amazon Fulfillment FBA Delivery

It’s much like the old eBay model used to be. People would purchase clearance products, mark them up, and then list them on the site. It can work well, if you have access to products like this. Frankly, many people don’t. For those who have a resource for finding products like this to sell on a consistent basis (it’s important to know that Amazon FBA is best for those who have true inventory, not just one or two items to sell), it can work profitably.

3.2 The Wholesale Business Model

Let’s go back even further. If you have access to purchasing wholesale products – and there are various ways to do that – you can purchase them at wholesale prices, mark them up, and sell them on Amazon. This is a pretty straightforward solution overall.

Amazon Fulfillment FBA Delivery

You’ll buy product in bulk at a discounted rate. Then, you can resell them on Amazon at a higher price point. If you go this route, it’s best to purchase branded products. There are many websites that sell “cheap” quality products at highly discounted prices. That’s, again, not what Amazon is aiming for within its business model. As such, it may not be an option for you, either. Instead, look for a wholesaler of a product you love and buy directly at a discount.

Wholesale options like this can work for startups, too. If your friend or colleague has a company that is starting up and manufacturing products, and you have access, this is one way you could participate in their model.

3.3 The Private Label Business Model

There are many ways to sell on Amazon, but this particular method is one of the best overall. As noted previously, in this model, you will be researching and then manufacturing a product – one that you brand yourself – and selling it on Amazon.

Amazon Fulfillment FBA Delivery

This is a fantastic way to reach your initial customers and to build a brand following. Amazon’s private label business is where you can reach new customers and really get the attention of investors, too. Your goal is to sell your product and what better audience to do that than on the largest e-commerce website in the world?

As we’ve mentioned, when it comes to best practices, this is the golden option in business models. Choosing to go private label gives you more of the playing cards and a much higher profit potential. Let’s talk about why.

3.4 What Are the Advantages of Selling Through a Private Label Model?

As noted, a private label product is one that you are manufacturing (or having a third-party manufacturer) and then you sell it under your brand name as a retailer. When you do this, you gain several key benefits.

Positive Reviews

#1. You Control the Pricing More Effectively

When you list your own product on the site, there is no other competition for it. That means you do not have to undercut the pricing on your product to get consumers to buy it.

To be authentic, you do have some limitations here. For example, if there are competitor products much like your own, you have to make sure you’re priced competitively in order to gain market share in your product’s category effectively. There are still Amazon FBA fees to consider, and the struggles inherent to identifying market opportunities and creating products to fill those opportunities, but we recommend creating products that only you can sell and registering your brand name through Amazon, this will effectively negate the risk of hijacking from merchant resellers.

Positive Reviews

#2: You Are Not Doing the Hard Work of Sourcing

Every business owner will find this to be a relief if you’ve worked any of the other Amazon models. You want to put your time within your Amazon FBA business towards building your marketing and product sales, not finding products.

All you have to do is to source a single product. And, you need to purchase large quantities of it to be able to sell it under your brand on Amazon. That is far easier to do than trying to find individual items to sell in small batches.

3.5 Digging Deeper with Your Amazon FBA Beginners Guide – Where’s Your Product

Here’s the biggest concern many people have when trying to build their Amazon FBA business. “Where can I actually find products like this to sell?”

We can’t provide you with the exact sources, especially without knowing your goals and needs, though some Amazon FBA consulting can help with this need. However, we can offer some ideas to help you get started.

Positive Reviews

High Demand Products with Little Competition

Start with some research. Look for products that are in high demand, but tend to have little competition on the site. These are the best products to seek out because no one else is. Don’t focus on profit margins yet. Just look for categories and product types that can fit this area.

Positive Reviews

Look on Foreign Marketplaces

Start with some research. Look for products that are in high demand, but tend to have little competition on the site. These are the best products to seek out because no one else is. Don’t focus on profit margins yet. Just look for categories and product types that can fit this area.

Positive Reviews

Turn to Your Local Manufacturers and Distributors

You can also work with companies you already know that may have products that are fantastic but not sold on Amazon just yet. Talk to the manufacturer about how to sell on Amazon FBA under your brand.
As your business grows, you’ll gain access to more products that can work well in the same area. Once you have a product in hand, get it listed on Amazon. Later, you’ll learn more about creating an Amazon listing and optimizing it for the best possible sale. For now, your goal is to create your business model.

Even in this step by step Amazon FBA guide, we can’t tell you outright what products are going to do the very best on Amazon. It’s about research and uncovering the types of businesses already doing well. If you have a niche that interests you dig into the data to find a product that can perform well. Let our consultants offer some help in guiding this decision, too.

3.6 What About Best-Seller Rankings?

Here’s another best practices tip for you. If you want to choose a product that is sure to do well, check out the best-seller rankings. This is a valuable part of researching your product and it is easier to do than you may think.

While best-seller rankings may make it easier for you to see if a product is worth buying if you’re a customer. Yet, it is also a very valuable tool for determining if you should think about selling a product, too.

It’s easy to locate this on any product search page. It’s generally listed under the “product details” section. You’ll see it lists as a rank with a pound sign, such as “#12 in category” – this is called Best Seller Ranking and is a per-category metric that Amazon uses to determine which products are selling best within a given category of products. . With any category of product, there is also a Best Sellers page that users can navigate to and browse:

Amazon Fulfillment FBA Delivery

What does this mean to you, then? Although it seems unintuitive, you want your product listing’s rank to be lower: as close to #1 as possible. If the rank is lower, that means it sells more readily on the site than other products that rank higher. And, that means a low rank offers more sales for you. It takes about 10 minutes to check out a range of products like this, but the insight it offers is fantastic.

Now that you have some product insight and may have some homework to do, let’s move on to the cost of using FBA. Amazon wouldn’t have launched this service if it wasn’t going to be profitable for them. It is, and because it does so well, it is also profitable for you, too.

4. Understand Amazon FBA Fees and Rates – Here’s What It Costs to Run Your Business

Amazon charges fees based on the amount of work it does for you. Remember, the key benefit of building a business on the site is that the company does all of the work for you. Yes, that costs some, but because the company is so large and has so many network opportunities available to your business, you are unlikely to find the same success outside of this site with the same opportunities.

In other words, don’t try to focus on the lowest figure available. Instead, look at how much each figure is saving you instead of doing this on your own outside of the site.

Competitive rates and fees are present. Most businesses find moving onto the site can save them some costs. And, because it comes with access to things like free shipping for your consumer – something just about determines whether or not a consumer buys today – it’s worth it. You also get more exposure of your product to a larger, global audience and all of the background help with customer service.

Now that we’ve plugged all the good of the company, let’s break down some fees. Fees can change. Be sure to verify this with Amazon before you get started.

4.1 What Are Fulfillment Fees?

Amazon charges these fees per unit. They include the cost of picking your orders and packing those orders – all of the work done within the warehouse. It also includes your shipping and handling, customer service, and product returns. In short, your fulfillment fees are the base structure of what it will cost.

Amazon Fulfillment FBA Delivery

The company breaks this down by size. Items that are considered standard size, which range from 10 ounces or less up to 21 pounds, are charged a rate per unit. Oversized items are charged at a higher rate. This accounts for products that are 71 pounds or less, but are smaller in package size, up to very large items that are 150 pounds or higher.

There are also some additional fees. Clothing items tend to have a bit of a markup as well. Any product that is sold that includes lithium batteries will also pay an additional fee.

4.2 Inventory Storage Fees

These fees are charged to you each month. They are charged per cubic foot for the items. It covers the cost to store your products at the company’s fulfillment centers across the. Fees are based on size, but there’s also a time factor. During the months of January through September, rates are lower than they are for October through December. This is due to the holiday season.

Amazon Fulfillment FBA Delivery

4.3 How to Determine Your Costs

Every product out there is going to have a different pricing point to consider. However, Amazon offers a nice little tool to help you. The Fulfillment by Amazon Revenue Calculator can provide you with specific information about just about any product with real-time accuracy. Check it out for more insight.

Amazon Fulfillment FBA Delivery

Also, remember that Amazon offers a number of different specialized services. These also can change up the pricing you’ll pay.

4.4 More Details on Fees and Rates

Check out a few other things you should know about rates. Remember, what you pay can vary from this information, too.

  • Account type is a key concern. Individual seller fees will pay a flat fee per item shipped. Professional accounts have a monthly subscription fee.
  • Referral fees are costs you pay after a product is sold on the site. It is usually a percentage of the sale price of the product. It varies significantly by the category of the item. Most of the time, these are under 15 percent of your sale price.
  • Variable closing fees are attached to some products. This usually is in categories such as DVDs and books. There is a flat fee in addition.

It sounds like a lot of costs, but it really isn’t much when you consider how you would have to pay for these costs out of your own pocket otherwise. That’s a very important decision for those who are hoping to have a successful business.

Positive Reviews

Account Type

Account type is a key concern. Individual seller fees will pay a flat fee per item shipped. Professional accounts have a monthly subscription fee.

Positive Reviews

Referral Fees

Referral fees are costs you pay after a product is sold on the site. It is usually a percentage of the sale price of the product. It varies significantly by the category of the item. Most of the time, these are under 15 percent of your sale price.

Positive Reviews

Variable Closing Fees

These fees are attached to some products and usually are in categories such as DVDs and books. There is a flat fee in addition.
It sounds like a lot of costs, but it really isn’t much when you consider how you would have to pay for these costs out of your own pocket otherwise. That’s a very important decision for those who are hoping to have a successful business.

5. Know the Rules – Amazon Has Some Key Standards to Follow

Throughout this Amazon FBA startup guide, we’ve talked about the company’s goal to dominate the e-commerce industry. You can be a part of that if you follow the company’s rules. Most of the time, they are rules that are best for all companies and create a better product or level of service for the customer. That’s good for everyone, of course!

5.1 Important rules you should know

Feedback on the Site

Like it or not, Amazon wants customers to rate sellers both on the quality of product and the rate of defect in supply.  Customer reviews and seller feedback both play into the health of an account.

Mislabeling Rules

Be clear about your labeling. Any product that is listed on the site needs to be labeled properly with the necessary barcodes. You also will find that you are violating the company’s rules if you are not authentic about what you’re selling in any way.

Amazon Fulfillment FBA Delivery

Long-Term Fulfillment Center Storage of Your Products

Amazon wants product to move out of its warehouses fast. If a product fails to move, you could be charged a fee for long-term storage there. It’s important to view this space is very valuable. Why should the company keep products not selling in stock?

Amazon Fulfillment FBA Delivery

Fake Items

Amazon – like many other e-commerce websites today – has had a lot of pressure on it for fake products. It’s taken steps to find and remove sellers who have fake products on its site. If you cannot verify the brand’s authenticity, you cannot sell it on the site.

Moreover they announce Project Zero, a new program that empowers brands to help drive counterfeits to zero. Project Zero combines Amazon’s advanced technology, machine learning, and innovation with the sophisticated knowledge that brands have of their own intellectual property and how best to detect counterfeits of their products.

Amazon Fulfillment FBA Delivery

It’s always best to go right to the source. Read the FBA policies and requirements on the company’s site as a failsafe. This is the information you have to have.

Are You Ready to Launch Your Business Model?

So far, we’ve covered just about every tip and trick for setting up your business on Amazon FBA.  Whether you use any type of Amazon FBA UK guide or one from the U.S., one thing is important. You need to develop a successful product listing to sell on the site.

Your product listing, or the site page that your customers will view when they visit your page, simply has to be as accurate and as optimized as possible to do well. Because this is so key, you should follow our Amazon FBA guide to creating your product listing as well.

Even better, turn to our Amazon consulting experts. We can help you every step of the way to set up your business and to make sure it thrives.  You don’t have to do that on your own. Our team has the tools to help you find the right products, create the best product listings, and to build your business from the ground up.

Why not be the next big seller on the world’s biggest e-commerce stage? It’s most certainly possible with Amazon FBA.

Still have questions?
Let’s get started!

Book an Amazon Consultation session from experts with experience of selling 100s of Millions online

Ryan Flannagan
Ryan Flannagan

Ryan Flannagan is the Founder & CEO of Nuanced Media, an international eCommerce marketing agency specializing in Amazon. Nuanced has sold $100s of Millions online and Ryan has built a client base representing a total revenue of over 1.5 billion dollars. Ryan is a published author and has been quoted by a number of media sources such as BuzzFeed, CNBC, and Modern Retail.

Share This