first steps to selling on amazon

What would I do with $1,000 and no prior knowledge of FBA?

June 15th, 2016

In today’s blog post I am going to answer a question that was sent to me by a reader. That question is: if I had to start all over again with $1,000 and no prior knowledge of FBA what would I do? She then asks some related sub-questions that I will answer as well. For those of you who are new to selling, I definitely recommend reading my guide where I outline how to sell on Amazon for beginners.

The first thing that I would do is get a scanning app so that I can make buying decisions to find out which products will be good to resell on Amazon.

Whether you are an Android or an iPhone user, I would recommend starting with the Amazon Seller App. It’s completely free and is offered directly by Amazon. This app will give you the information you need in order to make decisions on any products that might be good to resell.  Here’s a link to the app for android users, and for iPhone users.

Effectively the way app works is that you use the camera on your phone to scan the barcode of items. The app can even recognize items without the barcode, but it’s not quite as accurate as scanning the barcode. My recommendation is to scan the barcodes to make sure your items are a complete match to the Amazon product pages.

I would then go to retail stores to begin looking for products to resell online. This practice of finding low priced items in stores and selling them online is known as Retail Arbitrage. I would recommend starting with retail arbitrage as it is very easy to get started, and will help you learn the process of selling on Amazon. This knowledge can then transfer over to many different sourcing methods you may expand into in the future.

The sub-questions begin below and cover the majority of my other answers related to starting again with $1,000 and no prior knowledge of FBA.

The first sub question is: what niche or sub-niche of products are you getting into and why?

I would not try to focus on a specific niche or sub-niche. I would instead focus on what items I have available in my area that I can find at a price that allows me to make a profit. So let’s say I have $1,000 and I’m to go to Target to look for products to resell. I’m not going to pick the toys category and only try to find toys that I can resell. What I would do is look at all of the different clearance and sale items throughout the store and see which products I can buy that allow me to make my desired return on investment.

I would go about it looking for what I can find that is available at prices that allow me to resell items for a profit available in my area, as opposed to focusing on a specific niche or sub-niche.

Next question: What criteria would you look for when selecting products?

The first thing that I would look for is the potential return on investment (ROI) of a product. Typically the minimum ROI that I recommend to people just getting started is 100%. For example, if I spend $10 after all fees, shipping costs, etc. I want to end up with $10 profit.

If you are more risk tolerant you could go as low as a 50% return on investment. The higher the threshold you set the more cushion you will have for things to go wrong and still make some money.

The Amazon Seller App will allow you to easily calculate your return on investment for any item that scans.

The next thing that I would look at is the sales rank of an item. This gives you an idea of when the last time an item sold on Amazon. The lower the sales rank number, the better. My typical recommendation for people just getting started is to look for items with a sales rank lower than 100,000. Over time you will likely want to base your decisions on much more than sales rank, but this will get you started.

The ROI and sales rank would be my top 2 factors. You really could stop with those 2 if you want when setting your buying criteria.

I will continue on with some other factors of items that you might also want to take into consideration. These are more “wants” than “needs.” First, the smaller the item the better because then it’s easier and cheaper to send to FBA warehouses.

I would try to avoid products with expiration dates. I would tend to stay away from the grocery and health and beauty category because many of those products expire. In addition to that, these product categories require approval to sell. I think you are better off focusing on categories you can sell in rather than going through the approval process right out of the gate. The main categories that require approval are: Grocery, Beauty, Health & Personal Care, Clothing, Shoes, Jewelry, Luggage, and Automotive.

That might seem like a lot of products you can’t sell, but here is a short list of large categories that you will be able to sell in: Toys & Games, Home Improvement, Lawn & Garden, Home, Kitchen & Dining, Books, Electronics, and Video Games, among many others.

A couple other things I would look for are items that are not breakable, and are good name brand. If you take toys for example, Fisher-Price would be an example of a good brand people are buying all the time.

Those would be some of the other factors that are I am considering beyond the sales rank and the ROI.

Ready to start creating an income on Amazon? You can learn everything you need to know in my self-paced course, Make Your First $1,000 Selling on Amazon. It covers everything you need to know. From setting up your seller account to finding profitable inventory to getting the right legal protection — it’s all here. Learn more now.

Next question: How many items would I buy in any one category?

I wouldn’t really be too concerned with what categories the items I found were in. If I found $1,000 worth of toys that I could resell on Amazon that’s completely fine with me. I wouldn’t have any issue with all $1,000 being invested in the toys category. As you continue to grow your business, this wouldn’t necessarily be the case, but when you’re just getting started I wouldn’t be overly concerned with diversifying between categories.

Next question: how to price the items when you list them on Amazon?

I am going to assume we’re using Fulfillment by Amazon for this answer. I generally like to price items a little bit higher than the lowest FBA competition. I find I still get the buy box occasionally when pricing in this manner. In addition, I’m not creating a race to the bottom or causing other sellers of freak out and lower their prices.

So at the lowest, I would match the lowest FBA price and in general I would probably price slightly above, as in 1 to 5% higher, than the lowest FBA price. I find that I will still get sales at that price. You can read a couple other posts I did on pricing items on Amazon and my two primary pricing strategies for selling on Amazon.

Next question: How many items would I send to Amazon in a week?

This would largely depend on the price point of the items that I was finding. My top priority would be to invest the $1,000 in inventory and get it sent in to Amazon warehouses. Whether that is 10 different items that cost $100 each, or 200 different items that cost $5 each, wouldn’t be overly important to me.

Once I hit the $1,000 in spend I would then send those items in to FBA warehouses. If I didn’t have $1,000 in inventory after my first week of going sourcing regularly, then I would send in the items I had found so far to get the ball rolling.

If you’ve never created an FBA shipment, you can download a free pdf that walks through the entire process by clicking the button below.

Click here to download a free step by step guide to creating your first FBA Shipment

The next question is how to pack items to send to Amazon?

The main thing with packing is to put the items in a box and make sure you have enough padding so the items arrive safely. You want to use a small enough box so that there is not an excessive amount of empty space. If there is empty space you will want to use void fill to take up the extra space. The void fill I use, kraft paper, which can be found on my resources page. However, I wouldn’t recommend paying for void fill right out of the gate if you can help it. The $1,000 would be better spent on inventory. Overall though, I wouldn’t overanalyze how to box up the items. Use your best judgment and pack carefully.

In terms of boxes, I’d recommend looking for free boxes if at all possible. Go to Wal-Mart, a grocery store, or somewhere like that and see if they have any used boxes you can have. If you want to buy them Home Depot, Lowes, and U-Haul are all good options.

Last question: Any other tips I would have for people just getting started?

I would recommend putting in consistent effort for a predetermined amount of time. Right away it might be frustrating as you won’t know exactly what to look for and you probably won’t come out of stores with carts full of inventory, unless you get a little bit lucky on your first few trips. The more you do it, the easier it gets.

One final note is that if you are looking for a complete course to help you get started selling on Amazon, I have an option for you.  I have put together a complete course to help you get started selling on Amazon.   The course is designed to help you build your business from scratch to making $1,000 in profit per month.  It will walk you through everything you need to do to become profitable in step by step detail.  You can learn more and checkout the course HERE.

That’s all I have for today.  If you have any questions or comments about this post, please let me know below.  Also, if there’s a question you would like to see me answer in a future blog post, please leave it in a question below.  If you found this post helpful, please consider sharing using one of the buttons below.

 

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70 responses to “What would I do with $1,000 and no prior knowledge of FBA?”

  1. Pam says:

    Thanks Ryan:

    Very sound, thorough, detailed advice. Would have been extremely helpful to me when I started. I couldn’t agree more on the sourcing tips getting out of the gate. Deciding on your profit margin and factoring in the fees, shipping costs etc. — very important.

  2. Marie says:

    Thank you Ryan.

  3. Ron says:

    How do you scan with a cell phone, and would it be better to use a hand Scanner, and with one would you Suggest?

    • Ryan Grant says:

      Hi Ron,

      The app will use the phone’s camera to scan barcodes. I would recommend starting off with just the cell phone’s camera. I rarely use a bluetooth scanner anymore with how quickly the technology of phone cameras have advanced. If you are going to get a scanner, the one I have is the KDC200. There’s a link to it on my resources page: ose.wpengine.com/resources if you have any issue finding one just by searching.

      Best Regards,
      Ryan

  4. Terry says:

    Hi Ryan – I have a related question on this topic. If you were going to go the retail arbitrage thing, and you didn’t have $1000 to start with, how much (or how little) could you start with ? Everyone knows that if you have cash available, it makes things easier, but what if you’re in a position where you don’t have $1000, but you want to make a go of FBA ?

    • Ryan Grant says:

      Hi Terry,

      If I was starting with less than $1,000, then I would likely focus on used items at thrift stores to get started. You could likely source used books at thrift stores for around $2 a piece. If you could find 20 used books, and then ship them off to Amazon, you could get started with as little as about $50.

      You could also start with items you have around the house that might have value, and then you would only have to pay the inbound shipping.

      I would possibly sell on eBay or merchant fulfilled on Amazon to help to build up some cash.

      Those are a few of the options I would consider.

      Best Regards,
      Ryan

  5. CJ says:

    .I really don’t understand ROI. If I feel that the dollar amount is a good profit that percentage number isn’t important to me. Sometimes I wonder if we over complicate things.

    • Ryan Grant says:

      Hi CJ,

      In my opinion ROI is extremely important. It comes into play significantly if the selling price of an item goes down from when you initially listed it, costs associated with items being returned, or in the ability to cover any other overhead costs you might have.

      Making $20 on a $200 investment, is very different than making $20 on a $40 investment.

      The other extremely important thing about ROI is that it sets a bench mark so that you invest your capital in the best manner possible. If you have a limited budget for inventory it makes sense to set an ROI requirement so that you maximize the return on this capital. It might force you to invest your $1,000 at a minimum ROI of 75%, instead of only getting 25% by just buying what you find first.

      If capital isn’t an issue, than accepting lower ROIs might make sense, but setting a threshold out of the gate helps immensely in compounding your overall returns over time.

      Best Regards,
      Ryan

      • Mike says:

        ROI is certainly important but you can’t focus on it exclusively. The absolute dollar amount you make is crucial. Someone could find 10 books for $1 each, and if they netted $3 each after profit they’d earn a 200% ROI. Sounds impressive, but only works out to $20. Once you take into account the time investment, that $20 might as we’ll be $0.

        Nice website, by the way!

  6. Shawnda Morrissey says:

    Thanks Ryan for your sharing your thoughts with us. I was wondering if you also would take into consideration whether or not Amazon is selling item, how many 3rd party sellers are also selling the item? Does picking a high 50-100% ROI and a rank of <100,000 cancel out having to consider those 2 extra factors? I was experimenting with a 30% ROI and <150,000 Rank but not married to these conditions.
    Thank so much for taking the time to share with us.
    Best Regards,
    Shawn

    • Ryan Grant says:

      Hi Shawn,

      Thanks for the comment.

      Those are all good thoughts as well, and might be worth adding into your sourcing guidelines. My goal for individuals just starting out is to make the guidelines as simple as possible, and then over time and with your own experience you are able to make meaningful tweaks to your own sourcing guidelines.

      There’s many variances for how the inputs affect things in different categories, so I like to start with one set of guidelines and then continually revise and evaluate them on an ongoing basis based on how my results have turned out.

      Hope that helps!

      Best Regards,
      Ryan

  7. Jordan Malik says:

    Ryan thanks for posting this as many newcoming FBA folks are asking for help here. I will share on my channels.

  8. James says:

    Thank you Ryan for this eye-opening guide. Would it be possible for you to give equivalent advice to a similar newcomer who is located overseas where one may have to rely on online sourcing exclusively?

    Regards
    James

    • Ryan Grant says:

      Hi James,

      Thanks for the suggestion. I will add this to my list of potential blog posts for the future.

      Best Regards,
      Ryan

  9. Ron says:

    Thank you Ryan for this eye-opening guide, I, being a newbie would like to know step-by-step(if possible) how to set up my Samsung S4 to be able to do the scanning?
    Again; Ryan you are doing a find job!!!

    • Ryan Grant says:

      Hi Ron,

      If you install the app I mentioned in the post, you shouldn’t have to do anything else to get setup.

      Best Regards,
      Ryan

  10. Brian says:

    Hi Ryan,I’m from Australia and we do not have amazon warehouses here.Any advice for me.Cheers Brian.

  11. stacey says:

    When you pack your items to send to Amazon, do they need to be packed individually or can all items be packaged together and then Amazon packs individually as orders come in?

    • Ryan Grant says:

      Hi Stacey,

      You can pack the items together to send them to FBA warehouses. Amazon will determine which locations items will be sent to, but generally you will be sending many items together.

      Best Regards,
      Ryan

  12. Jenny says:

    This is great. Would your advice be any different for a newbie who has $10,000 to start? $100,000? I have been buying a house a year and renting them out, but am thinking of diversifying into FSA reselling. But $1000 sounds really small.

    • Ryan Grant says:

      Hi Jenny,

      Thanks for the comment, my advice would definitely be different for $100K, and would have some changes for $10K as well. Potentially these will be topics for a future post. I like your strategy of buying a house per year to rent out, I am looking to expand more into real estate myself in the near future.

      Best Regards,
      Ryan

  13. Matt says:

    Hi-thanks so much for the tips, I am excited to get started. I just want to confirm that Amazon charges a monthly fee to be a seller for FBA. I am not balking at the fee, I just want to make sure I am signing up for the right thing because I did not see a mention of the fee before. Thanks

  14. Dan says:

    Ryan, It’s nice to find some actionable content that lays a clear path to what needs to be done. Thank you for that. My question has to do with shipping to Amazon. Do you have a preference for FedEx, UPS, or USPS and why?

  15. Alex says:

    Hey Ryan,

    I just have a quick question regarding RA. I’m located in Australia and have been researching selling on Amazon. I’m curious if, with your experience, have you been in contact with anyone in Australia who has been successful on Amazon through streams of retail arbitrage?

    Many thrift stores located in my area are more or less still ‘rip-offs’ funnily enough. Prior to reading through your experiment, I had mostly been focused on sourcing products through Alibaba, however, the notion of retail arbitrage (and online arbitrage) sounds incredibly interesting. I’m very interested in purchasing your course today.

    Keep up the fantastic work, you’re a huge inspiration to a lot of people.

    • Ryan Grant says:

      Hi Alex,

      Thanks for the comment! I actually haven’t heard of anyone selling successfully on Amazon in Australia. I’m sure they are out there though!

      Best Regards,
      Ryan

      • Brian Guy says:

        Hi Alex,there many people selling on amazon in Australia.We sell products in the U.S. Online Arbitrage and Private Label.Most of us do not send products over there as the freight would cost too much.Join a facebook group like Amazon FBA Downunder.Cheers Brian.

  16. jayess says:

    Hi Ryan,

    Thank you for the informative post. When you go to Target/Walmart or any other store to find cheaper items for re-sale on Amazon, has it ever happened that you were not able to sell those items on Amazon? Or, you sent some products to Amazon FBA and they just sat in their warehouse and never sold? Thanks

    • Ryan Grant says:

      Hi Jayess,

      There are some times that have happened where there are items that I have not been able to sell on Amazon. Most of the time, this will be known in advance as the Amazon Seller app will show you the different restrictions.

      There’s also times when items have been in stock for 6 months or more and haven’t sold. This only happens on a very small % of items, but it has happened.

      Hope that helps and let me know if you have further questions!

      Best Regards,
      Ryan

  17. Scott says:

    Hi Ryan,
    I am going to the canton fair in three weeks to make a purchase for a friend. I would like to sell on Amazon and have only E-Bay experience. I have 5k to invest and am sure that it will be overwhelming with options. Please help me, What would you focus on and will the scan app be applicable at the source of products in China or will I need some other way to check an items sale-ability on Amazon before I make a purchase? I am looking for as much advise as possible before I go, can you help? Thank You, Scott

    • Ryan Grant says:

      Hi Scott,

      Thanks for the comment.

      Sourcing products at the Canton fair is honestly outside my area of expertise. My recommendation would be to start with something similar to what is outlined in this blog post to learn the basics, and then from there you could use that experience to buy from the Canton fair, brand your own products, etc.

      So with only 3 weeks to go, my recommendation would be to go, learn as much as possible, but I wouldn’t go with the intent of needing to buy a product to sell online.

      Best Regards,
      Ryan

  18. Josh says:

    Hi Ryan,
    Thanks for the very insightful post. I’m very interested in starting an amazon business and really puts things in perspective for me.

    I’m based in Dubai, UAE and sadly, it is not among the list amazon seller countries. I’m considering setting up an LLC business in the USA and getting a bank account there among other requirements based on my research.

    Please, do you think this is the right approach to take and can you advise on what are the chances that I can run the business effectively from down here in Dubai?

    Thanks for your kind feedback.
    Josh

    • Ryan Grant says:

      Hi Josh,

      Thanks for the comment. I do think that approach makes sense, it’s not something I have done personally as I am based in the US, but that would be the method I would take if I was going about setting up an account in the US.

      Best Regards,
      Ryan

  19. Ryan S says:

    Hey Ryan,

    Thanks for the info, to be clear, do you have to have an authorized seller account before you can start using the app to scan and find good items for resale?

    Ryan

  20. Sabir says:

    Ryan,

    How have you dealt with Amazon blocking your listing. Two specific brands I’ve had mixed issues with are Nyko and Disney Infinity. From the information I’ve learned is bad sellers mess it up for those of us selling legit products.

    • Ryan Grant says:

      Hi Sabir,

      If Amazon blocks a listing or says I am restricted on a product, then I will either not sell that product, or I will seek approval to sell it.

      Let me know if you have further questions on this.

      Best Regards,
      Ryan

      • Sabir says:

        I’ve had pretty good luck sourcing from liquidation.com But unfortunately sellersupport is a hassle to speak to. The horrible part is its more profitable to sell items on Amazon than going to ebay. I spent all of Sept going back and forth before I gave up. Sad part is managed to sell them easily on ebay but was at a considerably lower price. The bad part is Amazon blocked my listings after sending them to FBA. And unfortunately had to pay to get my items back. Not much but still aggravating.

  21. panayiotis says:

    Hi

    I live outside Usa so the barcodes in our retail stores do not match with any products on amazon..what is my alternative?

  22. Jamie says:

    Hey Ryan- great info. I understand about ROI and you may have answered this somewhere but do you use a tool to determine your overall profitability that includes fees, shipping, taxes, services (like InventoryLab) etc. ( does InventoryLab itself do this?).

    Also- how are returns handled and where/how is that taken in to account-

    thanks much-

    Jamie

    • Ryan Grant says:

      Hi Jamie,

      For overall profitability I use a mix of InventoryLab and Quickbooks. Returns are factored in through these tools as well.

      Let me know if that helps or if you have further questions on this.

      Best Regards,
      Ryan

  23. Craig says:

    Hi Ryan,

    Did you start off selling on Amazon with the Individual account or Professional account?

  24. Laura Martin says:

    Hi Ryan,

    When you are purchasing your items from Walmart, Target, etc. do you have to pay sales tax?

    Thank you,
    Laura

    • Ryan Grant says:

      Hi Laura,

      It depends on the store. Technically you shouldn’t have to when you are buying items to resell, but each store will have a different policy. Target doesn’t allow tax exempt for resale for example, but Walmart does.

      Best Regards,
      Ryan

  25. Laura says:

    Hi Ryan,

    When you are purchasing your items from Walmart, Target, etc. do you have to pay sales tax?

    Thank you,
    Laura

  26. Ryan O says:

    Hi Ryan,

    My wife & I plan on signing up for your course. Will this course walk us through step by step, we are complete newbies.

    Can we start with $500 and expect to start making profits immediately or does it take months and months to start seeing profits?

    I know your listing says the course will help you earn $1,000 a month, first, is this the max ? And also, the $1,000 a month what is that number projected off of? Meaning how much would roughly needed to be invested monthly to expect a roughly $1000 month profit.

    Thank you Ryan,

    Ryan O

    • Ryan Grant says:

      Hi Ryan,

      Thanks for the comment, and great to hear you and your wife plan on signing up.

      You can start with $500 and see profits within 1 to 2 months. It really depends on how much you want to reinvest back into the business though. If you want to grow the business then I’d recommend holding off as long as possible from actually pulling the profits out of the business.

      $1,000 is definitely not a max. The info is what I used to get started and my business is now much larger. To make $1,000 a month, you will likely need to be spending around $1,500 to $2,000 per month on inventory. So while this might not be the case month 1, if you reinvest the profits after your initial $500, you will quickly have $1,000 to $2,000 to be able to invest in inventory each month.

      Best Regards,
      Ryan

  27. Hayden H. says:

    Good Morning Ryan,

    I have not set up my 39.99 selling account to log in with my amazon seller app yet, but just from reading this, I have a question about selling products and the retail price a product is listed for. When you scan a product’s barcode at the store, using the seller app, does the app automatically give you a default retail price that specific product should sell for online, or do you have to manually enter and determine that price yourself? Just trying to figure out how hard it will be to calculate fees and projected profit if you don’t know what something would sell for.

    Love the articles brother, businesses and the economy are moving online at a rapid pace, we are all in a good spot selling online, thanks to you.

    • Ryan Grant says:

      Hi Hayden,

      The app will show you exactly what the current market prices are for any item that is available for sale, so you don’t have to enter any information about the selling price on Amazon. Amazon does have a free account that doesn’t have the monthly fee as well. You can find more details on that HERE.

      Best Regards,
      Ryan

  28. Joe says:

    Hi Ryan,

    Can you provide some additional clarity on how returns are handled? Shipping costs, return times, where the return items are sent, any extra charges or fees from Amazon, etc.

    Thanks!
    Joe

  29. COLLEEN M SELTZ says:

    What is needed when packing things up to go to Amazon FBA? Do I print the listing I made for each item or how does Amazon identify that the things I sent are my things, how do they identify the shipment as mine and how do they find the listing?

    Thank you so much Ryan for all of this great information.

  30. Jacque says:

    Hi Ryan.. just love this idea. I’m retired and have the time and expertise in clearance shopping in my personal life. My question is tax related. This is a small personal business, such as housecleaning if I’m correct. If so do I 1099 myself for profits?

    • Ryan Grant says:

      Hi Jacque,

      Amazon will issue a 1099 if you sell over $20,000 and 200 transactions in a calendar year.

      Even if you fall below that threshold of sales, you are required to pay taxes on any profits.

      Best Regards,
      Ryan

  31. James Streetman says:

    Hi Ryan,

    My question is concerning volume. 1k/month of items doesn’t require a lot of work to build an inventory, but selling $10k/month is a significant volume. That would require $10k investment in items from retail clearance shelves. Is that realistic? How do you manage building your inventory to a level that can make bigger income. A product supply that is dependent upon retail clearance shelves seem limited. Do you purchase items from other suppliers as well?
    thanks
    James

    • Ryan Grant says:

      Hi James,

      On your first question, I think it is realistic. Read through some of my initial financial results posts and you can get a better idea as well.

      I do buy from other suppliers as well. We do retail arbitrage, online arbitrage, and wholesale. Wholesale is buying from distributors and manufacturers directly.

      Best Regards,
      Ryan

  32. Justin says:

    Hey Ryan,

    When signing up for a Amazon seller account would you sign up with your prime membership account or create a new one? With Black Friday coming up what would be some of the best categories to invest in?

    • Ryan Grant says:

      Hi Justin,

      I would use a separate email in a perfect world.

      In terms of categories, I would focus on what you can find as discussed in this post, as opposed to specific categories. But looking for things that can be given as gifts is likely a good starting point.

      Best Regards,
      Ryan

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