Today, I’m going to answer eight of the most important questions about how to start selling on Amazon FBA.
I started selling on Amazon after I doubled a single dime into $400 and then used that cash to buy and sell products, turning that investment eventually into millions of dollars. This training not only comes from me, but also the coaches at Just One Dime who have over 50 years combined experience selling on Amazon.
1. How does Amazon FBA work?
FBA stands for fulfilled/fulfillment by Amazon.
When you shop on Amazon, you might notice a little orange checkmark next to a blue “prime” icon on certain products. That means those products are eligible for Amazon prime’s 2-day shipping guarantee.
That guarantee is usually only possible if that product is stored in an Amazon FBA fulfillment center.
Those products are then shipped (fulfilled) to buyers by Amazon. In other words, those products are “FBA”.
Most of the time, products fulfilled by prime are built and sold by third party sellers like myself, and like you want to become.
When you sell as an Amazon FBA seller, you will have your inventory shipped to one of these same fulfillment centers. This allows you to offer the prime guarantee to your customers.
However, sometimes when sellers talk about FBA, they mean “private label”, which refers to the overall business model rather than getting products fulfilled by Amazon.
Here’s how it works for US sellers:
- You pick a product to sell.
- You work with a manufacturer (typically in China) to create your product.
- You create a listing on Amazon for your product.
- You work with a logistics company to have your products shipped from China to an Amazon FBA fulfillment center in the US.
- A customer buys your product off your listing.
- Amazon packs up the product and ships it to the customer.
And if you do it right, you never even saw or touched your product, which is exactly what we teach in our Amazon FBA Mastery membership. It’s everything you need to know about how to sell on Amazon FBA.
Once you decide to start on Amazon, the first thing you’ll do is set up your company.
2. What type of company should you set up?
You can set your Amazon business up as one of several different company types. The two main business type options for most Amazon sellers are:
- Sole proprietorship
- LLC status
In a sole proprietorship, you are the sole (one) owner, operator, and employee. This is the easiest and least expensive option to start with.
If you are limited on funds, there is nothing wrong with operating as a sole proprietor. It is simple to upgrade to limited liability company (LLC) status, should you choose, later on.
LLC status offers you and your business a certain degree of protection. Should your business ever get into legal trouble, your personal belongings cannot be seized (just your business assets).
You will want the protection LLC status affords as you grow: the more money your business accrues, the bigger of a legal target you become. So if you plan to grow your business or sell higher-risk products, you should plan to upgrade to LLC status.
We break down both of these business structures, plus several more, here.
3. How do you open an Amazon seller account?
You run the greatest risk of having your Amazon seller account suspended when you set it up. But that’s good news!
Amazon recently raised the bar on who can open seller accounts to reduce the number of fraudulent, bad actors. In doing so, they’ve made the process more complex. We can help you navigate this process.
Here’s the overview on how to open an Amazon seller account:
First, decide whether you will open a professional or an individual seller account.
A professional seller account costs $39.99 per month. That’s the subscription fee. With a professional account, you get access to PPC ads (we’ll get to that), sales and data reports, and gift wrapping and discount options for your shoppers. You can even apply to sell in gated (locked) product categories. If you plan to sell large volumes, this is the plan for you.
In an individual seller account, you pay Amazon $0.99 per unit sold instead of the subscription fee. Because of that fee, an individual account may be right for you if you plan to sell fewer than 40 items per month. After you sell 40 items in a month, you will pay Amazon more in per item fees than the cost of the professional account subscription. If you’re unsure, you can always start with an individual account and later upgrade to a seller account.
Second, select which national marketplace you will sell in.
Currently, there are 19 marketplaces (countries) in which Amazon operates. These marketplaces exist across four different regions: the Americas, Europe, Asia-Pacific, and the Middle East and North Africa.
Keep in mind, these marketplaces are just where Amazon sells and ships to. As a seller, you do not have to physically be located in one of these marketplaces to run a store.
At Just One Dime we recommend you start in the USA versus in Europe, Canada, India, etc. The reason we recommend you start in the USA is because we Americans are so consumer-driven. We really like to buy things. There is more competition here, yes. But there is also much more opportunity.
Third, you will set up your Seller Central account.
For this process, you will need your:
- Credit card
- Computer and internet access
- Business legal documents
- Business banking information
- Personal banking statement
- Valid government-issued identification (such as a driver's license or passport)
To get started, go to sellercentral.amazon.com.
Click Sign up.
Follow the on-screen prompts to set up a user ID, enter your business info, enter payment info, etc. We cover all of that and more here.
4. How do you create your brand’s strategy?
Brand strategy is where things get fun. Instead of verifications and documents, this is where you can really think about branding and about your brand story if you’re not there already.
Develop an emotional brand story.
Your brand story is the difference between selling a product on Amazon versus creating a brand that customers will fall in love with.
The best way to create a sustainable brand is to tell a brand story that customers can connect with and experience through your products. Your brand story should, in a sense, tell the story of your customers over and over again. The better you know your ideal shopper, the better you can create your brand story and also develop products that they’ll enjoy.
This is simpler than it sounds. Let me give you an example:
I love spats-style shoes. Spats are black and white. They were popular in the late 1910s and into the early-to-mid 20s. A lot of brands created tap dance shoes in the spats style.
So why do I love these shoes?
Because I love that era. Tap dancing, jazz music, big band, I find it fascinating, which is why I’m a tap dancer!
I just gave you a great brand story. I gave you the emotional attachment to this passion I identify with. That’s the exact type of story your brand should have.
To build a brand you must understand people’s emotional attraction to the reason for your product, not the product itself. You need a connection between the experience your product provides and the emotional story shoppers can connect with.
Let’s use this fondue fountain as an example:
I can throw a great party with this. I can invite friends and family over to snack on anything and everything dipped in chocolate 🍫. My guests can enjoy the experience of whimsically twirling strawberries in this fountain 🍓. It’s messy, but in a fun way. It also reminds me of high school dances which brings me a warm, nostalgic feeling.
That’s a story. That’s emotional. That’s more than just the inches, pounds, and all the other metrics.
That emotional connection is what causes people to buy. Once they’ve made their purchase, then they justify their purchase decision with logic.
In short, your brand story is the reason people will give you their money.
Understand the solution your product provides.
Now that you’ve got your brand’s emotional story, you need to understand your customers, your product, and the solution that your product provides to your customers.
Think about what makes your brand story and your product unique in relation to how your customers will experience both of those things.
If you sell a generic fondue fountain with no story, no purpose behind the brand or product, your sales will probably be pretty blah.
If instead you develop an emotional story about throwing romantic anniversary celebrations for you and your partner, how you both love sticking your tongues directly into the chocolate fondue, and eating chocolate covered strawberries and marshmallows in front of the fire, you will find customers. They will relate to your story and the way you’ve taken an emotional experience and used it to create a stunning new fondue fountain. And these customers will buy your products like crazy.
So, all in all, understand the solution your product provides, pair that with a story your customer can relate to, and that’s what you feature on your Amazon listing.
5. Should you trademark your brand name and how do you start that process?
You do not need a trademark to build a strong business. In fact, you don’t ever have to get a trademark at all.
Can you succeed on Amazon without a trademark?
If you can’t afford a trademark right now, don’t panic. When I started on Amazon, I couldn't afford it either (in fact, I started with a dime).
Even if you don’t plan on trademarking, always choose your brand name as if you were going to trademark so that you can trademark in the future and protect yourself from possible legal changes.
I suggest you should plan to trademark at some point as you scale your business. Why?
Trademarking grants your business crucial advantages. Having a trademark adds credibility to your brand. It can give you exclusive rights and legal remedies for unauthorized use if anyone ever tries to sell under your name.
Trademarking can raise the value of your company drastically should you ever decide to sell.
Additionally, trademarking will open up a lot more tools for you.
To get the full scoop on all things trademark—reasons you (don’t) need one, how to get one, and all the benefits—visit JOD.com/freedom.
6. How do you find a product with high demand, low barrier to entry, and differentiation potential?
Well first, off, I love the way you asked the question. It shows you already know the essentials! 😉
Once you have a product niche idea it’s time to test it.
Evaluate your product niche’s market demand.
Market demand measures how many shoppers are looking to buy your product niche.
To test it, you will examine the monthly sales revenue of your top ten competitors.
How do you know who those ten competitors are?
Your top ten competitors are the top ten organic listings—the search results that are not “sponsored”—on the first page of search results when you search your seed (main) keyword (a word or phrase that shoppers search on Amazon to find what they’re looking to buy).
In this case, the seed keyword is “fondue fountain”. If you type that into Amazon’s shopper search bar, the top ten organic results are your biggest competitors. These are the listings that sell the most for that particular keyword:
Once you find those top ten competitors, ask yourself the simple question, “Do at least three of them do at least $5,000 revenue per month each?”
If they do, that’s a strong indicator of demand.
You can use product research tools like Just One Dime’s NicheHunter to find and track data on your competitors such as demand and customer reviews.
For example, Niche Hunter shows here that 9 out of the 10 top competitors do at least $5,000 revenue per month.
If your product has demand, it’s time to test ease of market entry.
Evaluate your product niche’s ease of market entry.
A market’s ease of entry measures how easily a new seller can begin to accrue revenue in a given market.
Now that you know who the top ten competitors in your market niche are, ask yourself, “Do at least three of them have fewer than 100 reviews?”
The reason you need to know your competitors’ number of reviews is because when your listing finally hits the market, you will not have any. To customers, this could mean you don’t have credibility or trust compared to sellers with thousands of reviews.
However, if at least three out of your top ten competitors have less than 100 reviews, that means there is relatively high ease of entry into the market. In other words, for that product and that product niche, customers might choose your product over your competition’s even when you don’t have many reviews.
On the other end, if all top ten competitors have over 5,000 reviews, and you show up with no reviews whatsoever, it will be a lot harder to persuade shoppers to buy your product. This means you will have to spend more money on PPC ads (we’ll get there) to promote your
product before it starts to rank organically on its own, which makes it more difficult to break into the niche.
The best way you can help your product’s sales when you have no or few reviews is to ensure that it is different from the competition.
Evaluate your product niche’s differentiation potential.
Differentiation refers to the unique attributes that make your product different from the competition.
Differentiating is when you accentuate, fix, or improve your product in a way your competitors cannot or do not. Regardless, your product should offer something unique that none of your competitors are doing. To do this ask yourself, “Why would a shopper buy my product instead of a competitor’s?”
For example, if you see that a lot of shoppers complain that your competitors’ fondue fountains have tiers that are too narrowly spaced to properly dip food, you can create your fountain with more space between tiers to differentiate it.
If you can successfully differentiate your product by fixing a competing product’s issue, then you will face less pressure to lower your listing price. You might be able to charge more than your competitors and still see strong conversions.
So how do you know how to best fix or improve a product?
You look at your competitors’ reviews. Specifically, read the two and three star reviews on your competitors’ listings. One star reviews tend to reflect a customer having a bad day. Two and three star reviews, however, are often full of objective comments on what customers wish were different about a product.
For example, we can see that multiple shoppers find the fondue fountain smaller than they had hoped.
Whatever the complaint(s) is, reviews are a plethora of priceless market data.
Once you know that there is opportunity to make your product better than other sellers’, you need to ensure that you can be profitable once you’ve built your product.
Evaluate your product’s niche’s potential profitability.
Okay… You know your product has demand, you know it has relatively high ease of market entry, and you know how to differentiate your version from the competition.
All of those things mean nothing if your product is not profitable.
Profitability measures how much money remains when you sell your product after you deduct fees and the cost of building and shipping your product.
So how do you set your product up for success?
You should first make sure that your product can sell for at least $30.
Because you are more likely to profit.
The cost to ship your product to the customer from Amazon is based on size and weight, not
The cost Amazon charges for their FBA service is also based on size and weight, not value.
These are both fixed costs that do not consider how much you charge for the product to shoppers.
If you can sell your product at a higher price point, the more you will make even after its landed cost (the total cost to manufacture and ship each product plus fees).
Let’s say you sell a cupcake stand for $20 and a fondue fountain for $50. They each cost $9 to make. This leaves you with a profit margin of:
- $20 - $9 = $11 for the cupcake stand
- $50 - $9 = $41 for the fondue fountain
Both of their Amazon FBA fees are:
- $3 to ship to an FBA center (FBA fee)
- $4 to pack and ship to your customer (fulfillment fees)
That’s a total of $16 ($9 to make + $3 FBA fee + $4 fulfillment fee) that you will not see when you sell each unit. When you deduct that cost from the selling price of each, you end up with
- $20 sell price - $16 fixed costs = $4 profit
- $50 sell price - $16 fixed costs= $34 profit
I don’t know about you, but I know which of those numbers I’d prefer to see in my bank account.
You should also shoot for a minimum of 40% profit margin before you factor in PPC costs.
In other words, ask yourself, “Can I sell my product for a high enough price that I am left with at least 40% of that price per unit?”
For example, if your product sells for $100, after everything is said and done, are you still left with at least $40 in profits?
If so, you now have margin to spend more money to advertise your product with PPC, which will ultimately help it to sell better and rank faster over time.
7. How do you launch your product with PPC?
PPC stands for pay per click. It’s Amazon’s built-in advertising platform.
When you run PPC campaigns, your listing will appear as a sponsored ad when a shopper searches Amazon using a relevant keyword. This ad looks just like your organic listing except it has the “sponsored” badge.
PPC works a lot like an auction. You place bids for specific keywords related to your listing. The higher your bid, the higher your sponsored ad will rank when shoppers search those keywords. Rank refers to where your listing appears in search results.
When a shopper clicks on your sponsored ad, you pay your bid amount to Amazon regardless of if that customer buys your product. As shoppers start to find and buy your product this way, your organic listing ranks higher for that keyword and gains increased visibility.
I will barely scratch the surface of this topic today. There are multiple PPC strategies you can take and different ways you can apply each.
Run your PPC campaign(s) so your listing appears as a sponsored ad in shopper search results.
When your product is brand new to Amazon, it might reside on page 27 of search results where no one will ever find it.
You run PPC ads for visibility. You don’t have visibility, yet. When shoppers search relevant keywords, your product does not rank in the top two, or even five, pages of search results.
To fix this, you will create PPC campaigns for different keywords related to your listing.
For example: Your fondue fountain listing is brand new. It has no reviews and it is all but undiscoverable on Amazon. To fix that, you create a PPC campaign for the keyword “fondue fountain”. Let’s say it takes a $1.51 bid to win the top sponsored ranking for that keyword. When a shopper searches the keyword “fondue fountain” on Amazon, your ad shows up with the word “sponsored” above it on the top of page one of search results. When the shopper clicks on this sponsored ad, you pay $1.51 for that click.
Bid aggressively on keywords.
If your product niche has any sort of real demand, you will bid against lots of other sellers for your keywords in your PPC campaigns.
Now, unlike an auction where only one person walks away with the prize, with PPC you can bid less than the highest bid and still get your sponsored ad placed decently. However, just like in an auction, you have to be the highest bidder to take away the grand PPC prize: the first sponsored ad ranking.
If you are the highest bidder for a keyword, you will win the top sponsored spot on page one of search results. That spot has the most customer visibility. You want that spot. If you bid the second highest, you will get the second highest ranked sponsored spot, and so on.
Find keywords that make you money.
The long term goal of your PPC campaigns is for your organic listing to rank on the first page of search results for the best keywords. However, when you first run your PPC campaigns, your goal is to collect data on the keywords in your listing.
PPC reports can also tell you which keywords in your listing are making you money and which are costing you money.
After you’ve run your PPC campaigns for at least two weeks, you will download your PPC reports. Then you will analyze each keyword for: impressions (views), conversions (sales), clicks, and advertising cost of sale (ACOS).
Categorize keywords by how well they perform for you across these metrics.
You should keep any keywords that convert well.
You should also keep keywords with high click rates, as this indicates shoppers are drawn to your listing when they search that term.
If a keyword has high impressions but low clicks, that may indicate you should pause your PPC campaign for that keyword.
You must also find out how much money you are spending versus generating per keyword. To know which keywords are worth the ad spend, and which are costing you more money than they’re worth, you need to assess advertising cost of sale (ACOS).
ACOS measures the percentage of a product’s sale price that you are spending on ads in order to get that sale. You can easily calculate ACOS by dividing your total ad spend for a keyword by the sales revenue that keyword generated within a specific time frame. To get the percentage, multiply that number by 100.
ACOS % = (ad spend per keyword / sales revenue from that keyword) x 100
For example, if in two weeks you spent $151 on PPC advertising for the word “aluminum fondue fountain” that generated $500 in revenue, your equation would be:
($151 / $500) x 100 = 23%.
That’s an amazing ACOS!
The higher the ACOS, the more money that keyword is costing you. When you first start, your ACOS might be over 100%, that’s ok. Overtime, as you collect data, however, your goal should be to lower your ACOS by only bidding on keywords that generate sales.
As you go through your reports, you will discover the best keywords that bring in revenue. You might also find some new keywords to add to your listing.
Now we could continue on about PPC campaigns for days. We could go into phrase match, exact match, automatic campaigns, the possibilities are endless. If you want the full PPC scoop, set up a consultation with one of our team members who will look at your business plan and see whether or not we’re a good fit to help you build your Amazon FBA store.
8. How do you invest back into your business?
This is something I talk about often. It’s a critical thing for sellers to consider.
A lot of people focus on how quickly they can turn a profit. They’re too concerned with how soon they can take money out of their business to either replace their paycheck or buy a shiny new car.
It is so important that sellers view profitability a bit differently, which is why I sometimes advocate people don’t quit their regular jobs to sell on Amazon. At least not right away. When you do that, you put tremendous pressure on your business right from the get go.
I did not leave my full time job at Apple—at the time the richest, most profitable company on the planet, where I had worked for years—until I made double my profits on Amazon compared to what Apple paid me.
Sure it sounds romantic and brave to just quit your day job and go all in. I get that feeling.
But if you depend on that job to pay your bills, to pay your mortgage or rent, to put food on the table, to provide for those who depend on you, you must be smart.
Don’t let emotion lead you over logic. In this situation, logic must come first. Be strategic. Set yourself up for success.
This is not to say you can’t eventually take a salary out of your profits, quit your regular job, or get that shiny new car. But your business needs that money like a baby needs food to grow. Reinvest into more inventory, better product photos, and more.
You need your profits to grow your business so that eventually you take a bigger salary from your Amazon store than you made at your day job. So you can buy a Tesla instead of a Toyota 🚗.
So what I mean by investing back into your business is: as you make profits, the sooner you put them right back into your store and put that money to work for you, the faster your business will grow. And the faster it grows, the more profits you will see, and eventually your business will begin to take on a life of its own. All of a sudden, the income starts to become more passive.
I have listings from 2014. Some of them I hardly touch anymore. The new listings I have to spend a lot more time on.
Why is that?
Well the longer a listing’s been going, the more history it develops, which leads to greater credibility and more reviews. And all of this means less time you must invest into your store. That income becomes passive.
So that’s why you want to invest back into your business. And then someday, when your business is strong enough to stand on its own two feet, then you can, by all means, fire your boss, take a monthly stipend out of your profits, buy a shiny new Tesla. But you’ll still have plenty more money to keep growing your business.
In fact, the cool thing about getting to this point is when you can finally quit your job, you can spend more time on your business and grow it faster. And the faster it grows, the more successful you will be and the more margin it creates so you can do the things you love with the people you love. That’s the whole reason I started selling on Amazon in the first place.
If you are really interested in us helping you with your business, we can.
Now, I’m not just talking about a single course. I’m talking about a full membership where you get one-on-one coaching sessions, group coaching, product ideas, access to full time employees in China who will find suppliers uniquely for your product, and so much more. If you’re interested in all of that, visit JOD.com/freedom. Set up a meeting with one of our team members who will sit down with you, talk to you and understand your goals, and see if we can’t help you.
In the meantime, what is your biggest struggle in your Amazon FBA journey? Let me know below.