Before Starting an Amazon Business

By DAVID ORRO

Starting an Amazon business can be a life changing and lucrative venture. It can provide you with the work/life balance you desire, a supplementary source of income or even replace your primary income if you are successful enough. But before you jump in, you must consider all the factors involved in starting and running this form of online business.

It Takes

There is no way around this. You cannot create a successful Amazon business unless you are committed to the task and willing to work extremely hard to make it happen.  

Ignore the hype online claiming it can be done quickly, easily and with minimal effort. This could not be further from the truth.  This kind of mindset has led to hordes of sellers becoming complacent, expecting the success to happen by itself and in the process losing a lot of money. It takes hours of dedication to even have a shot at listing successfully, let alone thriving and growing!

As a general rule, 90% of all start-ups fail.  This is no different for Amazon business’s with 9/10 new Amazon seller accounts do not even list a single product!

The process sounds easy. Pick a product, manufacture it in China and sell through Amazon. Easy, right? Wrong. There are dozens of other steps that need to be followed and a plethora of potholes that need to be avoided to make it as a seller on Amazon.

Amazon Rules The Jungle

You need to remember that your business is completely at the mercy of Amazon and their business model. They can change the rules at any time which can have a huge impact on the business you are running.

If they increase the fees, eliminate the FBA program or even withdraw from a country you are selling in, then you and your business will be scrambling to survive. 

Although these seem like unlikely scenarios, it is still worth remembering that Amazon has all the power in your relationship with them. They hold ALL the cards.

“9/10 new Amazon seller accounts do not even list a single product!”

Perceived Vs Actual Profit

You must have a clear understanding of costs involved to produce, ship and sell one unit of your product.  Many sellers take the price of a product on Ali Baba, subtract it from the price of a similar product selling on Amazon and believe that equates to their profit margin. 

They don’t factor in costs such as modifying the Ali Baba design, shipping from China to the Amazon warehouse, the Amazon FBA fees, Marketing costs and long-term storage fees. 

It is critical to use a spreadsheet and accurately list all your relevant selling costs before making ANY purchases from a supplier.  

If you fail to calculate your margins correctly, the whole process could be for nothing.  You could sell through your product and end up with no profit.

We will cover all the costs associated with selling in future posts.

Capital Required

These are expenses such as business and brand creation, product development, first order production, shipping, etc. 

Usually, you will require between 5-10k to start an Amazon business correctly. If you read or hear that you can start with $500 initial capital….turn and run.

Not every product is successful.  If your product does not sell, you stand to lose a substantial amount of money. This is an outcome that must be acknowledged by all sellers.  Obviously there are many strategies that give you the best chance of being successful, but it is still important to maintain a realistic mindset.

One of the most common expenses I hear about are the expensive online Amazon programs. These programs can be hit and miss, but are usually not worth the money. I educated myself with online research and direct coaching. It was far cheaper and I was able to use the money I saved to invest in my first shipment of product.

Different Work Schedule

Although many people fantasise about leaving the 9-5 behind and embarking on the entrepreneurial roller-coaster, there are still lifestyle changes that need to be taken into account. 

You may be able to work from home or abroad, but you will also need to work late sometimes, early other times and for many hours often. This is especially true when first launching and building your business. 

For those who like the 9-5 work structure, this may be a bit of a shock to the system. For others it will be the utter fulfilment of a dream.

Shortcuts

No matter how many “Gurus” claim it, there are no shortcuts! Although there are many different approaches, the formula remains the same for everyone.

You must invest the time in clever branding, product choice, product differentiation, listing quality, marketing and customer support. If any of these areas are rushed or skipped, it can significantly diminish your chances of being successful.

For additional Amazon Business Support, please contact us or check out our comprehensive consulting services.

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