Thinking of starting a Fulfillment by Amazon business? Smart idea. In 2015 alone, FBA sellers shipped over a billion items to more than 185 countries, and experts predict it’ll be a multi-billion-dollar industry by 2020.
What Is an FBA Business?
FBA stands for Fulfillment by Amazon. How does it work? Here’s an (admittedly oversimplified) explanation.
- Step One: Third party sellers (i.e., work-from-home entrepreneurs) either find or create a product. Typically, people source items from Chinese manufacturers because it’s infinitely cheaper than stateside options. Yes, most folks would prefer to use American manufacturers (understandably); but the price point is almost always too high for startups.
- Step Two: Once the inventory is ready, the seller has it shipped directly to an Amazon warehouse.
- Step Three: Sellers advertise their products on Amazon and elsewhere online.
- Step Four: When a customer places an order through Amazon.com, Amazon handles the shipping and inventory logistics.
At first, it may sound logistically complicated, but, typically, after reading a few websites (and books) on the subject, most people are up and running.
The Benefits of Running an FBA Business
Starting an FBA business is a great decision. Not only is the profit potential high, but e-commerce ventures can, theoretically, improve your happiness quotient.
How? Let’s break it down.
Of course, no business is without its stressors. But by letting Amazon handle quotidian administrative duties — returns, inventory management, shipping — many typical headaches associated with running a retail business are removed.
In many ways, an FBA business is the ideal residual income opportunity because (depending on the product) it falls into the “set it and forget it” model. Now, of course, the more you market, the better your products will sell.
Again, since Amazon assumes responsibility for shipping, returns, and warehousing administration, sellers have fewer logistical elements to administer. Plus, the e-commerce model is super scalable; you can start a business for as little as $400; plus, you don’t have to bother with fixed assets. In a statement, a company spokesperson explained: “With FBA, we take care of the order fulfillment, customer service and product returns, so that sellers can focus on growing their businesses and sourcing products that delight customers. In 2015, sellers worldwide adopting the FBA service grew more than 50 percent year-over-year. We are getting a tremendous response from sellers and we will continue to listen to their feedback to make the FBA service even better.”
Less stress, more money, and fewer responsibilities is pretty much the recipe for happiness. So, there you have it, starting an FBA business CAN lead to a more comfortable, stable life.
We Can Answer Your FBA Business Questions
To read more about laws and news that affect the private label e-commerce space, head here.