The A to Z of Amazon FBA: A Step By Step Guide to Building a Profitable Amazon Business

By Abraham Mussio

Follow along as we walk you through launching and running your own Fulfillment by Amazon (FBA) business. No hype, no nonsense, just thirty in-depth chapters that cover all aspects of starting and maintaining a profitable FBA business.

• Language: English
• Publisher: BookBaby
• Release date: Oct 1, 2017
• ISBN: 9781543914290

Book preview

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Chapter 1 – Our Story

In August of 2014 my good friend, Kamel Atarieh, had a dilemma. Like many other hard working nine-to-fivers, his job just wasn’t providing enough money to make much of a dent in his student loans after all his living expenses had been paid. Having been an avid movie collector, he decided to sell his collection to generate some side income.

So here we are in August of 2014 and Kamel has approximately 600 movies (a mix of DVD’s and Blu-Ray’s) to sell; many of which were still new and unopened. So where to sell them?

eBay? Too much work creating individual listings for each movie and then having to ship them one by one as they sell. Craigslist? Too many scams and you run the risk that comes with dealing with strangers face to face. Eventually, after much research, he discovered Amazon’s FBA program.

Simply send the movies in as inventory against the existing product listings on Amazon’s website and they take care of the fulfillment and customer service when it sells? Sounds easy enough… So he dived head first into the Amazon FBA program using a spare room in his house as an office/workspace.

There’s no way around it, the first few months were nothing short of sloppy. Just look at this photo of his original work space:

He was working off a single monitor on plastic picnic tables and had exactly one inventory shelf (a repurposed IKEA bookshelf). There were boxes, supplies & inventory strewn about in no coherent order. If you’re like me, the workspace would make you anxious just walking into it due to the sheer clutter!

And yet it worked… He was up and running on Amazon in less than a week and by the middle of September, a mere month after starting, had all of his movies at an FBA warehouse and listed on Amazon.com. By the end of September, he had sold $2,223.47 worth of his movie collection and made $1,663.90 after Amazon’s fees:

As his movie collection dwindled and having experienced some success selling on Amazon, Kamel decided to reinvest the proceeds and expand into retail arbitrage: the practice of buying items from retail stores and selling them for a higher price on Amazon. Unfortunately, retail arbitrage is much harder to get into nowadays, but there are still opportunities to make money on Amazon using this method (more on that later in the book). 

By the end of the fourth quarter of 2014, Kamel had sold nearly 80% of the movies he sent in and was making a few hundred dollars a month from selling items he sourced at retail stores through Amazon. Here was his last payment from Amazon in 2014:

But things were starting to get messy: supplies & inventory started to creep into his living spaces, he was spending long hours at retail stores looking for the next item to sell, and finagling his way through spreadsheets to keep up with various business reports and financials. The business he bulldozed his way into was starting to take up too much of his time

This is where I come in. My name is Abraham Mussio and I am the one writing this book. Where Kamel prefers to brute force his way to results, I prefer finding the most efficient way of doing something. Suffice to say, our skillsets were a perfect match. And so, in February of 2015, Kyle’s Corner was born.

That’s the name of our FBA store. We each contributed $1500 to the business, formalized it under an LLC and began working on growing it: Kamel focusing on finding inventory to sell and I on streamlining operations. Fast forward to today and we have been using Amazon’s FBA program to bring in a healthy side income for years.

How successful is our FBA business? That’s up to your opinion. Here are our last month’s figures (July 2017):

We made $4,229.98 in profit working about 10 hours a week on the business. Not get rich quick money, but an extra $2,000 a month for each of us doesn’t hurt.

The business currently brings in about $4-5,000 a month year-round with upticks to about $8,000 during the busy Q4 season (when holiday shopping is in full effect).

August is shaping up to be another $4-5,000 month in net profit (we still have 4 days left in the month):

So Why Disclose Our Business Operations?

A fair question. There are 4 main reasons why we decided to write this book (in no particular order):

Bring in Operating Cash

Let’s be frank: One of the reasons we are writing this book is to make money. Every sale of this book generates cash for our business, which will be used to further expand it. It took us years to gain the necessary knowledge to write a book about FBA so we figured we should capitalize on it.

There’s No Comprehensive Guide Out There

Over the years, we’ve bought countless eBooks, online courses and training programs covering FBA. While many of these resources were helpful, none of them were comprehensive. That is, they would mainly focus on one aspect of FBA and nothing else.

For example, the last book we bought was a course on how to identify and maximize reimbursements from Amazon when they damage or misplace your inventory. While this guide was great when reviewed from the perspective of that one topic, ultimately, we paid $40 to learn about a single facet of our FBA business.

We also bought a course on accounting for FBA. $30 for that one. It covered how to use an online bookkeeping system to keep up with your accounting. That’s it.

See a pattern? A lot of successful FBA sellers turned teachers do something that is somewhat annoying: they compartmentalize their business and sell training on each part separately. Don’t take this as an attack on them, as I am rational enough to respect the business model.

Why sell one comprehensive guide that teaches someone everything when you could sell them multiple guides (that eventually teaches them everything) for more money. But while it makes sense from a business perspective, we personally don’t like the model and instead will be giving you everything we know!

Secrets, Secrets Everywhere

Another common theme we see in books and courses about FBA is authors staying anonymous. In all of the books we’ve read, we have yet to come across an author that tells you their store name on Amazon. What gives? They don’t want you competing against them but they want you buying their training material? We won’t do that. Our store name is Kyles Corner. You can look it up on Amazon. Or better yet, here is the link: http://www.amazon.com/s?me=A2BDYYWVZAO8Q8

Yes, you could go to our store and try to source every single product we carry and begin selling it yourself. But who cares! We welcome competition since it forces us to adapt and compete, which forces growth. We are always expanding into new products, establishing better terms with our current vendors, streamlining operations, etc.

And we will teach you how to do this too. We will show you all facets of our operations and the tools & processes we use to allow us to do what we do. No hiding, no segmenting, just black & white information.

Just Because

This last reason is mostly personal: I just want to see if I can successfully write and publish a book. Which would be pretty cool in my opinion. Let’s make it happen!

Chapter 2 – What is Amazon FBA

Feel free to skip this chapter if you feel you already have a firm grasp as to what Amazon’s FBA (fulfilled by Amazon) program is and how it works. If you don’t know what FBA is, or are only familiar with the basics of the program, then continue reading.

Have you ever shopped on Amazon.com? You probably have. And you probably have an Amazon prime account (free 2-day shipping among other benefits). What you may not have known is that Amazon itself is not selling all of the products it has on it’s website. Hidden in plain sight is Amazon FBA. Let’s look at one particular product listing on Amazon’s website:

If you take a closer look at the product page, you’ll notice something:

When you go to add the item to your shopping cart, you see that the price is $26.99 and there is a statement saying, Sold by Kyle’s Corner and Fulfilled by Amazon. Kyle’s Corner. Sound familiar? That’s us!

This is one of the products that we sell through Amazon. Notice there are other sellers that sell this exact product, but Amazon’s algorithms have determined that we win the buy box (the all-important front page price box of the item listing). We will touch more on how to win the buy box in a later chapter.

Let’s look at the back end of a sale of this particular item (a probiotic we source from the manufacturer):

Each time we sell this probiotic at $26.99, Amazon takes $4.05 in commission for letting us use their platform and $3.02 in fees for order fulfillment (pick, pack, & ship fees). While we can’t tell you our exact cost of the item due to our supplier agreement, you can see that net profit after all fees and product cost is $5.53 a unit.

There are other not so obvious costs associated with selling this item. You have to label the item for FBA (cost per label: $0.03) and ship it to Amazon’s warehouse (average cost per unit shipped: $0.28). After those are factored in, we actually make about $5.22 net profit.

I know what you’re thinking: you sold it for $26.99 and only made $5.22 profit?! Why is Amazon making $7.07 on this item while you only get $5? Well, it’s a matter of costs and effort. Let’s say we wanted to have our own website where we sold this product directly to the end customer. What would be needed?

First, you’d need a warehouse space to store your inventory so plan for rent & utility costs. You would need a website to list the product so add in web development and hosting costs. You need marketing to get people to visit your website so you’d better have some money set aside for a marketing budget.

When the item sells, you will need to pick, pack and ship the item to the end customer. This requires physical labor (employees or DIY), shipping materials on hand (boxes, tape, dunnage), and paying shipping charges if you offer free shipping like Amazon does to its prime members.

What if the customer has a question or wants to return the item? You would need customer service reps ready to deal with the post-sale customer service.

With FBA, Amazon allows you to leverage their existing operations to do away with all of the costs you would incur trying to sell directly. Your only responsibility is to find profitable products to send to Amazon. No need for a warehouse, a website, workers, etc. However, Amazon is not a multi-billion-dollar company for no reason. They aren’t going to let you use their sales & distribution channel for free.

Let’s switch gears. Why doesn’t Amazon just carry this product themselves? Good question. Amazon is big. But the retail industry is a lot bigger. There are billions of products out there and new ones coming along every day. No company can possibly hope to carry every single item in existence as the logistics and costs involved trying to do so would quickly overwhelm any operation.

What Amazon has created in their FBA program is genius. They may not be able to offer every product out there, but they can open their distribution system up to sellers that can fill plenty of the gaps.

Not to mention all the while gaining invaluable data on these products. This particular probiotic was a strong seller for us for a year and a half. Unfortunately, we no longer sell it through Amazon since Amazon itself decided it would be a good idea to offer the product themselves. Look at the listing today:

We could never hope to compete with Amazon at $14.87. Which brings us to a good point: always be aware of the fact that Amazon is in it to win it. In other words, if they see that a product is doing 3rd party FBA sellers good, they may decide it’s time for them to jump in on the action.

Nine times out of ten, that means the particular item is no longer worth selling via FBA (it’s never a good idea to compete with Amazon). But again, there are millions of products out there. Move on and find others!

Returning to the product listing, let’s take a closer look at the additional information available:

The product details section has some valuable information such as the UPC (Universal Product Code), ASIN (Amazon’s specific product identification code), customer reviews (the higher, the better) and the sales rank.

Sales rank is a number assigned to an item in a given category that tells you how well it sells in that category. This specific probiotic is ranked 17,594 in the health and household category and 550 in the digestive supplement sub-category. Sales rank plays a big role in your sourcing decisions, but we will get into that later in the book. For now, just know that the lower the sales rank the better.

Let’s look at another item we sell via FBA:

We buy this spice from our local grocery store for about $3 and it sells consistently for $8.49 on Amazon. This is an example of retail arbitrage. As we mentioned earlier, retail arbitrage has gotten a lot harder since 2015 due to new rules Amazon implemented over the years, but it is still possible to add profit to your FBA business through this method.

Just how profitable is this item? Here are the 90 days sales figures:

In 3 months, we’ve had 42 orders that brought in $75.37 total net profit. This little spice makes us about $25 a month. That may not seem like a lot of money, but what if you had 15 items that all made you $25 a month in profit routinely? That’s $375 a month. Find 25 items that make you $25 a month and you’re at $625 profit a month. We can’t stress this enough: Your sole job in FBA is to find profitable products to sell on Amazon.

And $25 a month from a single SKU (stock keeping unit, or item number) is low. Here are our top 5 SKU’s for the last 30 days and their profitability:

Our top 5 products have brought in $1,852.66 in profit in the last 30 days.

Back to the spice example: Why would people go online and pay nearly $9 for a spice they could potentially find at their grocery store for 1/3 the price? The answer lies in circumstances.

Perhaps no local grocery store in their area has this specific spice. Maybe they don’t have the time to go to the grocery store and instead rely on the convenience of Amazon. Or they may not know it’s available for much cheaper elsewhere.

Whatever the reason, I like to look at it in terms of basic supply and demand. There is a demand point created when someone needs this item and turns to Amazon to buy it. Because Amazon does not carry it, the demand point goes unfulfilled.

This is where you and I come in with our FBA business. By supplying the item through Amazon’s FBA program, we match the demand point with the respective supply point. This is a very simple black & white way of looking at it through the goggles of economics. But it’s this simple concept that forms the foundation of how to make money with FBA. 

Chapter 3 – Considerations

Before you start the adventure that is having your own FBA business, there are a few questions you should honestly ask yourself to determine if FBA is for you.

Do you expect to Get Rich Quick?

We acknowledge that money is one of the primary motivators to starting any business. And an FBA business definitely has the potential to make you more money. That being said, don’t expect to get rich quick.

It could take a few months before you actually turn a profit. One of the FBA websites we subscribe to (Jungle Scout: www.junglescout.com) publishes an annual FBA survey where they ask thousands of FBA sellers questions about the outlook of FBA. Here is an interesting factoid from this year’s study regarding profitability:

The majority of FBA sellers don’t experience much of a profit until about 18 months into operations. Some have success earlier than that (we hope this book helps put you into that category).

Keep in mind that the profitability of your business doesn’t equate to your actual income. Like any business, you have to decide how much of the profits to pay yourself (known as owner distributions) and how much to re-invest in the business. The more profits you keep in the business, the more spending cash you have when it comes to sourcing inventory (the key to growing your FBA business).

You can read more from Jungle Scout’s Seller Survey here: https://www.junglescout.com/bright-future-for-amazon-sellers/

Do you have at least $2,000 to start with?

Every business requires startup capital. Luckily, an Amazon FBA business has a somewhat low requirement. In theory, you could start with as low as $500 ($30 a month for a Seller Pro subscription, $100 for supplies and $300-400 for inventory). However, if you are following our book you will need at least $2,000 to start with.

This is because we steer you down the path of working with wholesalers and distributors right away, which requires a bit more money to meet minimum orders.

Can you afford to lose that $2,000?

Don’t go blowing through your emergency savings just to get your FBA business started. As with any business, there is a risk of losing the money you invest. We will do our best to equip you with the knowledge to avoid losing money, but can’t guarantee that you won’t. As such,

Reviews for The A to Z of Amazon FBA

[Julian Ortiz · Rating: 5 out of 5 stars]

An amazing book on how to setup and run an Amazon FBA business. All their tips are very actionable and right to the point. Highly recommended!