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Hidden Truths About Starting An Amazon FBA Store – What You Need To Know
Amazon FBA is a service where sellers send their products directly to Amazon warehouses, for Amazon to fulfill orders placed by customers on their website. These products become eligible for the coveted Amazon Prime shipping service. And yes you can make a lot of money very quickly for your business. But before you sign up for an Amazon FBA crash course and pay thousands of dollars for your new adventure, here’s a few things you need to know before you get started with Amazon FBA to boost your chances of success.
FBA Fact #1 – Product Ranking
During the product selection research phase, a lot of sellers use third-party tools to find products that they believe help ensure they can make a good profit and guarantee higher sales.
(I will not disclose these tools in this article, as I am not a fan of those tools, for several reasons.)
As you do your research and narrow down a potential product, you need to realize this one critical thing:
Your product listing starts at the bottom.
What I mean by this is that the product you pick will be starting at the bottom of the search results. You will not make the same level of sales as the listing you researched.
When you add a product to Amazon, in most cases, Amazon sees it as a “new” product, not as the same product.
Even if you have the same product, you do not have an identical product listing. Product listings are individual in most cases, and yours will be- well, YOURS. Not theirs.
You will need to build up the ranking of your listing with other strategic tactics, like Amazon PPC (pay-per-click ads).
Yes, theoretically, you could list your product under the existing product listing, but I feel that it is unethical and I do not encourage this practice.
Why? Because that’s technically another seller’s listing, and not only do you not have control over the listing images, features, specs, etc., but you would also be hijacking their hard work to sell your product, which is just flat-out not nice. (Is using the word unethical twice here overkill?) You do want GOOD karma, right?
FBA Fact #2 – Product Theft Is A Real Problem
Once your product starts to gain ranking and increase sales (and it will if you’re putting in the work), other sellers will try to highjack your product listing by capturing the BuyBox.
You know that unethical thing we just talked about- listing your product under another seller’s listing? At some point, most Amazon sellers have this happen to them. And most likely, it will happen to you.
The Buy Box is when a specific product seller is the main one listed for sale on an Amazon listing.
This means that when a customer goes to click the ‘Add To Cart’ button, they automatically purchase the item from whichever seller is listed in the ‘Buy Box’.
So how does this affect you as a seller?
What happens is the highjacker usually sells a counterfeit (or duplication) product on YOUR listing at a price that is well below your manufacturing cost.
That lower price gives them the automatic Buy Box, giving them the sales, and making it impossible for you to sell your inventory.
And the worst part of the whole thing? The product is usually garbage because it’s not your authentic product- it’s a rip-off copy.
We’ve had counterfeit sellers ship products (with our brand name on it) that were half the size and sometimes even manufactured BACKWARDS.
And all of the customer reviews that come in from the buyers of those counterfeit items ALSO go on YOUR listing and destroy your product listing rankings and future sales.
One way to prevent this is by registering your product for the Amazon Brand Registry program. Please note this does not stop the highjacking 100%. Product listing highjacking happens. But it gives you a MUCH faster and stronger ability to stop it when it does happen.
You need to be vigilant with your product and monitor the Buy Box regularly.
FBA Fact #3 – A Trademark Is A Powerful, Beautiful Thing
This brings me to the next thing you need to know. Having a trademark is the biggest form of protection you can buy for your business.
Amazon Brand Registry is a program developed by Amazon to help protect registered trademarked brands.
Keywords there: Registered Trademark.
Yep, that means you filed the correct paperwork to get your brand registered for protection with a government agency, most often the United States Patent and Trademark Office.
This is an easy, but time consuming process that EVERY product-based business should set up for themselves. This registration can take anywhere from 8 months to 20 months.
Yes, that is a LONG time to wait, but it is absolutely worth it for many reasons. The USPTO website states that it could take up to 18 months to get your brand registered with the agency.
Please consult with your lawyer before filing for a Trademark, and be wary of ‘servicers’ and agencies that offer to register this for you. Research everything yourself first.
Once you register and get your official trademark, it can some time for Amazon to get your brand enrolled in its program. The shortest time we have seen is about a week, and the longest was six weeks.
We would recommend that you get your brand registered with the USPTO as soon as possible.
That way, the approval is in the works while you are getting your product research done and inventory is getting shipped.
FBA Fact #4 – FBA Storage Is A Costly Beast
Amazon FBA fees come into two parts: the FBA listing fees and the FBA storage fees.
The storage fee is essentially rent you pay for everything you’re putting in the Amazon FBA warehouses.
This fee is actually pretty cheap at first, but once you hit long term storage the costs start to add up quickly.
You can read about their fee structure here.
As of Feb 2019, the cost for storage below 365 days per cubic foot is Jan-Sep is $0.75 USD per cubic foot. The cost between Oct-Dec is $2.40 USD per cubic foot.
The long term storage fee for inventory longer than 365 days is $6.90 USD per cubic foot EVERY 15th of the MONTH!
That is 10x times the price for long-term storage! Whoa!
For example, ONE pallet of inventory will cost over $1700.00 USD in storage for just 18 months.
When you plan your inventory costs, take into account that you WILL get long term storage if your product does not rotate quickly. (And most new products will take some time to get moving, that’s just the way it works.)
These fees start to add up, and can eat up your profit margin- potentially even ALL of your profits if you don’t boost sales quickly.
This is where having an alternative plan helps. Knowing other ways to sell your product, having room to lower your price, etc. (We talk about this a bit more in this article here.)
So now you’re armed with some powerful information to help you make smart decisions with your products and Amazon seller store. So much stuff to know, right?
Don’t worry, that’s what we’re here for- to help guide you through all these things you’ve got to keep straight in your head at every turn. We had to learn most of this through a decade of bumps and road blocks. Yikes!
Key Things To Remember:
- Your product listing starts at the bottom of the rankings, not the same level as products you may have researched.
- Other sellers can and will highjack your product listing steal your sales. Vigilance is key.
- Getting a trademark to enroll in the Brand Registry program takes anywhere from 6 months to 20 months. This gives your business leverage and more control over your listings.
- Monitor your inventory and have a backup plan to help prevent long terms storage fees so you can maximize your profits.
Selling on Amazon can help anyone get a business going. Right now, Amazon accounts for more than half of all eCommerce sales. It’s a powerhouse that literally brings the customers to you.
It is also a great way to get your existing brand and business to grow. But like anything else in business, it is not guaranteed. So please do your due diligence before you get your FBA store up and running, and ask the questions that a devil’s advocate would ask.
This article is meant to help you consider some things that not everyone wants to talk about- so that you can make knowledgeable decisions with your Amazon store and boost your Amazon success. Sometimes, just knowing a bigger picture can prevent a future disaster- and protect our profits a little bit better.
If you still have questions, drop them in the comments below! You can also check out our other articles to help give info on pricing, product choice, and more.