MBA1855 Q&A Wednesday: Is Amazon FBA a viable business?

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Hey O welcome to the $100 MBA Show. Powerful business lessons delivered to you every single with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and today's episode is Q and A Wednesday. On Q and A Wednesdays we answer a question from one of you, one of our listeners. Today's question is from Cheryl and Cheryl asks, hey Omar, I am looking forward to starting my first business. I'm looking into the world of Amazon fba. Is Amazon FBA a viable business business? Do you recommend it? Would love to learn more. Thanks Sheryl. Thank you so much for the question Sheryl. And I love this question because I know a lot of people are being bombarded with the message, you should start an Amazon FBA business. For those who don't know, FBA stands for Fulfillment by Amazon and we'll talk about it in today's episode. What FBA is, what kind of business is it, what is required of you to be successful, all that kind of stuff. And of course answering Cheryl's question, is it a viable business? Amazon is a huge, huge business, of course, and therefore this option to be a part of Amazon FBA has become quite popular recently. There's a lot of gurus out there selling their programs on how to do it, but I'm basically going to outline what's important in today's episode so you can save yourself a bit of cash and a bit of time. So let's get into it. Let's get down to business.

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So Sheryl asks, is Amazon FBA a viable business? So fulfillment by Amazon is a business model? That is exactly what it sounds like. Amazon is creating a option for you to start a business on Amazon with very, very little legwork. So, in a nutshell, what is Amazon fba? Well, it's actually quite simple. You choose a physical product that you want to sell. Let's say house slippers. You send the house slippers to Amazon, Amazon will put it in their warehouse, they'll hold it for you, they'll. They'll store it for you. You list your slippers on Amazon. When somebody orders your slippers on Amazon, Amazon will automatically pick and pack it, meaning it'll take your slippers off the shelf, put it in a box, ship it to whoever bought it, and basically take care of all the logistics of your physical product business. Of course, they take a cut, they take some fees, but in exchange, you don't have to worry about the product being in your hands at all. No warehouse, in your garage, no sending things to the post office, none of that stuff. Now, obviously a lot of people love this idea because they don't need to do any of the heavy lifting. People like this idea of being a part of Amazon's ecosystem, part of the Amazon store. People shop. Amazon people have Amazon prime, so they'll go to Amazon to buy things, to get free shipping. So this is why FBA has become so popular. With the popularity of Amazon getting so big, a lot of people are shifting your business and selling their stuff on Amazon, using fulfillment by Amazon. Now, is this a viable business? Well, like every business, it depends. It depends on the product you're selling. And here is your FBA masterclass. Your Amazon FBA business is going to be made or go bust on one factor. Your product, your product or products is what's going to make or break your business in Amazon fba. So having the right product is really important. And even with Amazon taking their cut in their fees, it can be very, very successful. In fact, there's a lot of successful FBA businesses that do not even touch their inventory at all. They literally buy product from China. It gets shipped directly to Amazon. They don't even see it at all. They take care of all the labeling that Amazon wants for their inventory. They know what to do. Many people just go to a site called Alibaba, which allows you to buy common goods. And when I say common goods, that's a little bit of an understanding. But they'll literally sell you anything in bulk, from house slippers to musical keyboards to motorcycles. I know, it's crazy. You would have a ball just exploring Alibaba. Well, the point here is that Alibaba will sell you anything in bulk. Meaning, say, for example, you buy a thousand pieces of something like iPhone cases, and you literally just buy from Alibaba. They'll send it directly to Amazon FBA with the instructions to put it in your inventory, and you can just sell it directly on Amazon. You don't even touch the product whatsoever. But my recommendation is that you don't go that route. It may not be a bad idea for your first product or two to go the Alibaba route or the Arbitrage route. Buy in bulk, sell on a markup price on Amazon buy. But you're gonna be in with a lot of competition because there's so many people that do that. And you'll literally see like 3, 4, 5, 10, 20 sellers selling the same product on Amazon because they're doing this arbitrage. Where FBA really works is with unique products, with products that are special. And guess what? You can create your own products. You can create your own physical products and sell them, and you can do them in China and send them straight into Amazon as well. For example, a very popular Amazon FBA seller created a very special unique product and created in China and sent it over to Amazon. What was that product? Well, they created a poster, like world map. And this world map was fun and special because it was one of those you could scratch off the countries that you have visited. And it's sort of like a goal or a dream board where it's like, I want to visit so many countries. And every time you visit it, you take a coin and you scratch off that country on the map and it would reveal a vibrant color of that country. Now, the key to a great product like that is to make it high quality. Why? Because even if it's unique today, it won't be unique tomorrow. You know, you'll sell on Amazon. People will see that it's a best seller and people will try to copy it. And if you keep your quality high, you'll get high reviews. You'll get great reviews in many of them and people will Tell you, don't waste your time with the other ones. This is the one to go. So keep your quality high, don't go cheap, but keep your margins high as well. So if the map is a little bit more expensive than the others, most people will pay the extra money if the reviews are better. Another way to create a product that is kind of future proof and people won't copy and that is unique is to create something that has unique IP so you're protected by copyright or if you incorporate your company then you will have some sort of IP protection. What do I mean by that? Well, IP is basically just intellectual property. Ideas of the way you've invented something or created something. So uh, for example, the five minute Journal, very popular. It's a type of journal that allows you to journal and self reflect every single day. And guess what? People can't copy it because it has intellectual property. It's going to be the only five minute journal on Amazon. So if you can embed some sort of intellectual property in your product, you are going to protect yourself and allow it to be a unique seller. Now a word of caution. You need to understand that if you're going to Amazon fba, you are going into the retail business. Retail is totally different than working in other industries because you're dealing with direct to customer. You're dealing with prices that can fluctuate. You're going to deal with inventory, you're going to deal with seasons. You can't just keep your inventory at Amazon forever. You'll be paying extra fees if it's there for more than a year. Products have a shelf life. Whether it's because it's in season or it's fashionable, or it literally expires because it's perishable or it's just not going to be great quality forever. Clothing is one of those. I know because I used to have a clothing line myself and I couldn't keep my inventory for more than a year because the quality of the clothing, no matter how well I stored it in climate controlled warehouses, would, you know, would degrade. It would not be as good. Now one of the huge advantages of Amazon FBA is they deal with customer service, they deal with refunds, you don't have to deal with any of that. Exchanges, refunds, all that kind of stuff is dealt with Amazon. They take care of it. Customer service, they will take care of the customers for you. Shipping and negotiating a great shipping rate done for you, taxes done for you. You get it. So Amazon is really taking all the heavy lifting off the plate. So my recommendation is that you should check it out. If you love retail, if you love physical products, and you can create something unique in the market, FBA is a great way to get some momentum because you're going to be part of Amazon's ecosystem.

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To wrap up today's lesson and today's question from Cheryl. Yes, Amazon FBA is viable, but choose your product carefully and don't feel like you need to have thousands of products. You can start with one product, then two, then three, then four. Get your feet wet, understand the ecosystem, understand your margins, make sure they're healthy, get some credibility, get some reviews. And one of the reasons why people love FBA so much is because there's low overhead, but there's a lot of things that are taken care of for you so you can actually start your FBA business on the side. You don't have to do this full time. You can start with one product and it could be a passion project. On the weekends, get your freeway and understand how the system goes and then grow at your own pace. Thanks so much for listening. Thanks Gerald for that great question. If you got a question you want to ask, just email me over@omar00mba.net and I'll make sure to answer it right here on Q and A Wednesday. Before I go, I want to leave you with this. If you're interested in getting into Amazon fba, do some research. Find out what are the best selling products on Amazon that is using Amazon fba. Do some research. What are the best products on Amazon? What do they all have in common? What do they look like? What do they do? What pain points do they fulfill? What industries are there in Read the reviews, see how they put their listing together and their description and all that kind of stuff. Observe who's winning, how they're winning and then apply what you learn in your first product. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

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