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.

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 mytwo 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.

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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24 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

  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

      • Jenny says:

        I look forward to the posts if you write them. If you want advice about getting started in real estate, I’m happy to share my experiences.

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