How Fulfillment by Amazon (FBA) works

For those of you thinking of starting your own online business, take a look at this video. This is an opportunity not to be missed! Amazon have just made being an entrepreneur so much easier. If you have your own Ebay business, it may be time to switch. No more storing the inventory in your garage and no more trips to mail them out. How many of you out there already have your own Amazon businesses?

Why Amazon Private Label Is Great For Entrepreneurs

The Amazon logo in Santa Monica, Calif. (AP Photo/Reed Saxon, File)

Amazon’s reported plans to expand its private label program is major news for the consumer goods industry. And when the ninth largest retailer makes an announcement about strategy, there are always going to be winners and losers. And I believe entrepreneurs in consumer goods are the clear winners.

First, let's look at who loses by considering who private label products compete with. As consumers are getting more comfortable with private label, they view it as interchangeable with the established brands. In fact, more than 80 percent of consumers feel that private label products offer as good or better quality compared to national brand counterparts. Thus, the overall rise in private label offerings is one more assault on large consumer packaged goods brands, which are battling steady market share erosion.

This assault comes at time when numerous new, smaller brands have captured the demands of consumers, who are increasingly spending their money on products that meet unique personal preferences – non-GMO, vegan, ethnic, environmentally friendly. This trend, which I call Personalization of Consumer, is transforming the market. Large consumer brands have failed to adapt to the Personalization of Consumer, leading to some $18 billion in sales shifting from large to small companies from 2009 to 2014 across all consumer packaged goods categories, according to a report by Boston Consulting Group and IRI.

Facing weak sales and shrinking market share, due to failure to adapt and the innovation of small brands, the large consumer products corporations have turned to cost cutting to create shareholder value. And now Amazon’s expansion in private label is one more threat to the margins of large CPG companies. Sales of store brands rose above $118 billion in 2015, up 5% over two years, according to the Private Label Manufacturers Association.. Their historical lack of innovation, and focus on cost cutting to increase sales, doesn’t bode well in the face of more private label competition from Amazon. You don't beat private label by cutting costs, you stay ahead of private label by innovating.  

For entrepreneurs in the consumer goods space - those making high-quality new products driven by the personalization of consumers - Amazon’s move is not a threat. Consumer surveys have shown shoppers perceive private label products as a low-cost alternative to big brands. Emerging brands are small, at least relatively, and unique. Typically, it doesn’t make sense to private label or copy a product until it is much larger and mainstream, say above $100 million in revenue. That means consumer startups have a nice long runway to achieve lift off before they encounter any potential private label turbulence. In the meantime, if entrepreneurs continue to innovate, as the best CPG entrepreneurs do, they can maintain brand loyalty building and launching a portfolio of products.

Large strategics, however, don’t have a track record of innovation, so are not in a position to fend off private labels. Those corporations have neglected innovation for decades. Consider the innovation budgets of some of the biggest consumer companies: In 2015, Pepsico spent $2.4 billion on marketing (including consumer research costs), and just $754 million on product R&D, and Unilever spent eight times more on marketing than on innovation - $8 billion versus $1 billion on R&D - according to information shared by CB Insights.

So what’s the takeaway for entrepreneurs from the latest private label news out of Amazon – where total sales are rising at a staggering 20% year over year? It's great news, leaving them relatively unaffected, left alone to continue to grow, while strategics will feel the pressure. In fact, that additional pressure on strategics will work in their favor. This is why:

First, large CPG brands will increasing funding in emerging brands as they try to stay ahead of new competition. Corporate venture investing in consumer lags other industries. There are some active players, including Johnson & Johnson Development Corporation and Coke’s Venturing & Emerging Brands, but not enough. Moves by heavyweights such as Amazon should push consumer giants to invest more in emerging brands to try to find the next big thing.

Secondly, large consumer companies will step up their acquisition activity. Consumer M&A is already massive, having hit an all time high of $240 billion in 2015, according to PwC. With Amazon’s private label infringing on the turf of the stale old brands of large consumer strategics, the pressure pigeonholes them into doing deals that bolster their hold on the market by acquiring the innovation they can’t risk trying to develop internally.

That makes entrepreneurs in consumer the clear winners.

By Ryan Caldbeck

Article Source: http://www.forbes.com/sites/ryancaldbeck/2016/05/25/why-amazon-private-label-is-great-for-entrepreneurs/#793fab196705

Guide to Starting a Fulfillment by Amazon Business

The Fulfillment by Amazon (FBA) business model continues to grow in popularity, and for good reason. Fundamentally, it’s the same as a traditional ecommerce business. But, instead of your having to fulfill orders one by one, Amazon stores your products for you and even picks, packs and ships them out to customers.

Related: Fulfillment by Amazon Poses a Great Option for Those Looking to Break Into Ecommerce

This makes it a lot easier for you to build your business without having to worry about the logistics of warehouses, packaging materials, couriers and so on. With private labeling, you also have the opportunity to build your own brand and website, thereby increasing the value of your business.

Raring to go? Here’s our basic guide for starting an FBA business.

What Is Fulfillment by Amazon?

The FBA business model allows you to leverage Amazon’s robust distribution network and customer base. As noted, Amazon will warehouse your products, fulfill orders and even provide customer service so you don’t have to be hands-on with every aspect of the business.

What this means for entrepreneurs is that you can act like a big corporation without the headache of actually being one. You can focus on finding product opportunities while Amazon handles the rest on your behalf.

In a typical ecommerce business, you have to figure out the logistics of sending products to your customers in a timely manner. However, with FBA, Prime members get most orders shipped to their door within two to five days.

Another common challenge with an ecommerce store is that inventorying and listing additional products for sale can increase the complexity of your business. With FBA, all you need to do is ship the products to Amazon’s warehouse, and the company will take over from there. You can easily increase your product selection without significantly adding to your workload.

Create an Amazon seller account.

First things first: In order to get your FBA business up and running, you’re going to need to create an Amazon seller account. Go to Amazon’s website, scroll down to the footer and look for the heading marked “Make Money with Us.” Then, click on the link that reads “Sell on Amazon.”

Related: The Pros and Cons of Buying a 'Fulfillment by Amazon' Business

At this point, you can either sign up as an “Individual” or a “Professional." When you sign up as an “Individual,” you will not be charged a monthly subscription fee. If you’re looking to build a business over the long haul, then you’ll want to sign up as a “Professional.” The first month is free, and after that, it’s $39.99 per month plus selling fees.

Other than that, the signup process is relatively straightforward. Follow the onscreen instructions and complete setup.

Uncover product opportunities and establish your private label.

There are a number of different ways to leverage the FBA model, but the most popular way is private labeling. The idea is to establish a brand or label, apply it to your product and sell it on Amazon.

First, you will need to do your Amazon product research. This is the most important step for a variety of reasons. If you enter an unpopular product category and sell a product for more than your competition is selling it for, you could lose money on that product. If you take the time to find a popular product category, do competitive analysis, study product reviews and identify a product that you can improve upon or sell at a better price, you’ll have found the sweet spot.

Another popular way to sell products through Amazon is with retail arbitrage -- buying a brand name product and flipping it on Amazon for profit. This is a much easier way of making money on Amazon, at least in the short term.

With private labeling, you need capital. Ordering private label products may cost you several thousand dollars, but if you’re looking to build an asset that can later be sold, then this is the direction you want to go in.

Another key piece of the puzzle is your supplier. You can’t make money if you don’t have products in stock, so you need to ensure that the time delay between the placement and delivery of the order is as short as it can possibly be.

Tips for growing and scaling your FBA business

• Pursue your passion. If you enjoy doing it, you will stick with it for longer. Find a product category that interests and excites you.
• Increase your product offerings. You will need to do proper research for every new product offering you create. Having more products can reduce the risk of your business becoming dependent on just one product.
• Improve your Best Sellers Rank. BSR is an important metric for both your customers and your sales. This is also a key factor when the time comes to sell your business. Buyers will want to see steady growth in your BSR rank over time.
• Build your brand website. As you continue to expand your private label product offerings, you’ll want to build a professional, dedicated site for your business. This gives you another way to market your products, and can also make your business attractive to potential buyers.
• Become an Amazon Associate. Increase your revenues by becoming an affiliate with Amazon. Refer customers to your products from your own site, and start earning commissions.

Earning potential

How much do FBA business owners earn? What is the earning potential of an FBA business?

Spencer Haws from Niche Pursuits reports he was able to make nearly $40,000 within 30 days of starting his FBA business. Chris Guthrie from UpFuel made almost $3,000 within 30 days. James Amazio, founder of Feedbackz, went from zero to $50,000 per month in just eight months.

These results aren’t necessarily typical, but they do show that it is possible to build a five-, six- or even seven-figure business by leveraging the FBA model.

Final thoughts

Although starting an FBA business will require up-front capital, the effort will be nowhere near as intensive as it would be with a traditional ecommerce business. Getting your business off the ground is the easy part. Finding ways to grow your FBA business is the more difficult part. Take advantage of the resources available to you, and systematize your processes as you go.

By Thomas Smale

Article Source: https://www.entrepreneur.com/article/282277

Welcome to my new Blog about all things Amazon!

Allow me to introduce myself. My name is Kay and I’m an online entrepreneur. I left my full time job in healthcare to concentrate full time on growing and scaling my online businesses, of which I have several. In this blog, I hope to concentrate solely on sharing insights about my Amazon business. I will be updating regularly about the stage I’m currently at, any difficulties that I come across and how to overcome them and also to share my successes with you too. Not only that, but I’ll also be publishing regular updates on any changes within the Amazon platform and any new tools that I’ve come across that I think are helpful. If you want to receive regular updates. Please subscribe to our email list (top right). Look forward to connecting with other Amazon business owners out there.

Kay.