Selling through Amazon FBA is a great way to streamline your business and stay on top of fixed costs, but it’s certainly not the fast-track to online riches!
Yes, there is now a huge amount of competition from other Amazon vendors and it’s not easy to make the kind of sales numbers which allow you to focus fulltime on FBA, but it’s still doable. FBA is far from saturated and there are good opportunities for those who are willing to do the work.
So, that begs the question, what does “the work” look like? What are the smartest FBA sellers doing that set them apart from the rest? Here’s what we’ve found:
#1. They Purchase Strategically
The most successful FBA sellers don’t shoot in the dark when it comes to product decisions, they make each purchase logically and strategically. They develop a set of criteria for product selection and they test out the product before committing to a large order.
Here are some further tips for purchasing strategy:
- Avoid products sold by Amazon — you are unlikely to be able to compete and offer the best deals.
- Look for few or no FBA sellers of the product.
- Look for very high or no sales rank. Low means you have the opportunity to establish yourself as a dominant seller, while high means the product is already popular.
- Look for products that can be bundled with others to maximize sales.
- Look at the price history for the ASIN. If you see dramatic peaks and troughs, this may indicate that a product has high competition and price wars have been initiated. These products are best avoided.
- Look for opportunities to expand your categories. Related categories are a great place to start.
#2. They Base Strategy on the Product
A “one size fits all” strategy will almost never work for your entire product range. If you’re in the game long enough and you diversify your product range enough, you’ll find that you need to approach strategy based on how the particular product is doing.
For example, you might have some regular, best-sellers among your products for which strategy remains relatively stable throughout the year. On the other hand, you may have other products which provide you with a good opportunity to make a pile of seasonal-based cash.
The smartest FBA sellers tend to approach their product strategies much like a successful stock portfolio. They focus on getting the maximum profit possible out of each product they have and maintain a diverse range in order to spread risk. They look for “high volume, high margin” product opportunities rather than trying to labor over lower volume products.
That being said, how many times does the stock market go sideways? Smart FBA sellers are flexible enough that they can adjust their game plan if a product is not doing well. It’s the “don’t put all your eggs in one basket” approach. Be prepared to change direction quickly and acknowledge any mistakes.
#3. They Manage Inventory Well
Having FBA manage your order fulfillment can create something of a disconnect for some sellers around what is going on with their inventory. The smartest FBA sellers stay on top of inventory, ensuring best sellers are always in stock and that any stale inventory gets dealt with promptly.
While stock-outs of your popular products can be very costly to your business, stale inventory can also be a killer. Not only do you literally have money sitting on the shelf, but you’ll end up being charged Amazon’s long-term storage fees for having inventory in the FBA warehouse for too long.
The answer is to use good software (such as Forecastly) to be on top of inventory issues early. Know when to “fold ‘em” when it comes to inventory that has been sitting too long and plan a sale ahead of the long-term storage charges.
#4. They Stay on Top of Pricing
There are a number of strategies when it comes to pricing, but the bottom line is that smart FBA sellers have found a strategy which works for them. They are thoughtful about pricing, rather than simply being reactive. Here are some particular strategies successful sellers have been using:
- Use a good repricing tool such as RepricerExpress to help win the buy box.
- Go for “competitive affordability” rather than “cheapest price” as fighting to the bottom on price can convey the message that your products are of cheap quality. Some suggest to price 1.5% higher than the lowest price.
- Go for items that are priced at $10 and above. This is because it’s difficult to make decent margins on lower-priced products.
- Combine pricing with inventory management. Mark down slow stock first.
- Consider the “rule of 3”. This is where you price by applying a markup multiple of 3 to your products, e.g. buy at $6, sell for $18.
#5. They Find a Unique Selling Point
The advice a couple of years ago went something like; “find products which already have high demand, sell those.” Given the potentially high volumes of competing offers, this is not the best recipe for success now.
Smart sellers still look for what is already selling, but they look to put their own unique spin on it. For example, perhaps you have a uniquely modified version of a product which you can private label and get a unique ASIN for.
An alternative unique selling point may be that you bundle that product together with some related products to create an attractive package. As another idea, perhaps you sell popular spare or additional parts for another popular item. In a Side Hustle Nation podcast, they give the example of sellers who were selling additional mouthpieces for the popular Hasbro game, Speak Out.
#6. They Know their Numbers
Smart FBA sellers stay on top of the vital metrics of their business. They know what their profit margins are, sales volumes and which products are really not working at any given time. They also know what and where all their costs are being incurred.
We recently wrote two articles on the vital numbers FBA sellers should know:
#7. They Use a Good Combination of Tools
Your seller dashboard provides you with a few tools to monitor and measure your business, but sometimes you need a bit more data and assistance with making the right decisions. Listed below are some of the additional tools smart FBA sellers are using:
- Merchantwords – helps you to figure out which keywords people are searching on Amazon.
- Jungle Scout – helps you to narrow down and simplify your product research.
- Forecastly – make smart decisions on managing your inventory.
- Camel Camel Camel – free tool which allows you to look at pricing history.
- Leadpages – gather leads on your own website so you can follow up and market to your list.
One of the key things to remember is that the smartest FBA sellers have thoughtful, logical strategy behind them, they don’t run a successful business based on guess-work.
It’s not easy to compete and do well as an FBA seller, but adopting these strategies can provide you with more advantages than the “dabbler” who takes a shot in the dark.
Do you have any favorite, smart strategies? We’d love to hear about them in the comments below.