The FBA Experiment (Part 3)

The Fulfillment-by-Amazon Experiment, Part 3I got signed up late last month as a Fulfillment by Amazon (FBA) seller.

I wanted to experiment with retail arbitrage as another way to make extra money, and FBA sounded interesting precisely because Amazon would be in charge of fulfilling the orders.

Here’s my experience so far.

Getting ready

I started out by doing a little research so that I could learn at least the basics of what I might be getting into. (See part one of this series for more info on that.) I especially concentrated on Amazon’s shipping requirements, since I wanted to be sure I understood. I decided to look only for items that could be shipped without additional prep, which narrowed down the types of things I would sell considerably.

Then I moved on to what I figured would be the fun part: shopping. (See part two for what I did there.) At this point it was time to actually sign up and sell.

Signing up as a seller

The sign-up process was pretty simple for me, mainly because I already have an existing company, an Amazon account, and a transaction privilege tax license (which Arizona requires for businesses that sell products). I went to the Sell on Amazon page, clicked Start Selling on the 1-month free trial, and followed their prompts. If you don’t already have an existing company and an Amazon account there will be more involved. (Although I assume you could sign up as a sole proprietor, so you probably wouldn’t need to get fancy with setting up a company to try it out.)

Then I nervously listed my first item, which was a grilling sheet. (I’d bought blinds, reusable grilling sheets, grip liner for drawers, and sidewalk chalk to sell.)

Listing that first item using my Seller Central account was super easy. I chose the Inventory > Add a Product option, and then typed in the UPC from the package. Like magic, Amazon pulled it up:

Add a product

So I clicked Sell yours and — since this was my first listing ever — was presented with a screen that asked me to set my Fulfillment by Amazon Label preferences. This meant I had accept or decline the FBA Label Service and the Stickerless, Commingled Inventory options. Let’s talk about those options for a minute.

Labeling vs. Commingled Inventory

With labeling, when someone buys your item on Amazon they are truly buying an item that YOU sent in to be sold. Basically, the items you ship to Amazon are labeled with your individual information so that they can be picked and shipped upon sale. Accepting the FBA Label Service means that Amazon will label each of your items for you IF they have a scannable barcode (ISBN, UPC, EAN or JAN). Of course, there is a fee for doing this. If you choose to decline the service and want your items to be kept separate, you have to apply the item labels yourself.

If you don’t want to do either of those things, you can decline the label service, accept the stickerless, commingled inventory option, and send your items in without a label. Stickerless commingled inventory means that the items you ship to Amazon for sale are put in with other identical items. When someone then buys “your” item, Amazon picks that type of item from the bin and sends it to the customer. The customer probably doesn’t receive an item that you actually sent in with this option. They just receive the type of item they ordered.

Either way, you have to remove any price tags that may be on the items you send in.

I accepted the commingled inventory option for two reasons:

  1. I wanted to do as little prep work as possible
  2. I wasn’t selling anything likely to be a target for counterfeiters

Why does that last bit matter? Well, obviously selling a counterfeited item is illegal. Equally obviously, I wouldn’t do that. But if you choose commingled inventory and someone else sends in a fake version of your item, and the customer gets sent that fake, it could be bad news. Check out this horror story for what happened to one large seller. If I were to do this as my business I would switch to labeled inventory to be safer.

Listing my remaining items

Once I made my choices on this screen, I set the price for that first item and finished entering my other 3 items. This took a while for a couple of them. In one case, I must have entered the UPC incorrectly, because the item didn’t come up at first. After wasting a bit of time there, I found it on Amazon, entered the ASIN for it instead of the UPC, and all was well. In another case, the item really wasn’t in Amazon’s catalog already. That sucked.

I had to enter all of that item’s information manually. And there’s a LOT of required information. I also had to shoot photos of it for the listing, and meet Amazon’s photo requirements. Lesson learned there: for ease of selling choose something that Amazon already knows about, not something that’s just similar to an item already being sold on Amazon.

As you enter each item, you can choose to fill out the Send/Replenish Inventory information right away, or you can come back and do it later. I decided to do it later because I wanted to get everything entered first.

When I entered my items for sale, they were set by default to be fulfilled by merchant (me). To use FBA, I switched them to be fulfilled by Amazon. I was able to review my items by selecting Inventory > Manage Inventory in Seller Central.

Example of an Amazon selling fee estimateAmazon estimates the fees associated with selling each item, and if you click on those fees a popup will appear that breaks them down for you. (Like in the screenshot to the right.) Note that the fees shown don’t include your shipping costs for sending your items to Amazon.

I had no per item fees (normally 99 cents) shown because I was using the one-month free trial of the $39.99 monthly fee. With that you also have no listing, credit card, or closing fees, so keep in mind that there would be additional fees if I were on an Individual Selling Plan. Here’s a list of Amazon’s selling fees.

Ready to ship

Finally, I was ready to send in my first shipment to Amazon. I went back to the Inventory > Manage Inventory section of Seller Central, selected my items, and chose Send/Replenish Inventory in the Actions drop down. I just followed the prompts to create a shipping plan. I also decided to use UPS to ship my products in. (You get to use Amazon’s rates, so that’s a good thing.)

This is where I got frustrated. Amazon automatically split my shipment into three, providing me with 3 different addresses to send my items to and letting me know how many of each type of item to include in each shipment. That would have been fine, except remember the blinds I’d bought? They were really long. Longer than all but one of the boxes I had available, and buying a box they would fit in would have been about $10 and/or required a lot of (Amazon-approved) filler.

So I made a box myself using these steps. It took forever and was ugly, but it did the trick. The one box I had available already that was long enough was also giant. So I cut it down to size too. That still left me with 2 blinds that I couldn’t ship, so I stuck them in the garage for now. (Maybe I’ll sell them on eBay someday, who knows.)

Once I got everything packed up, I used our scale to estimate the weights and measured the box dimensions. I had to enter all that information in, and then Amazon provided the estimated shipping costs and allowed me to create mailing labels. If you’re doing this, don’t forget to factor in the costs of shipping to Amazon when setting your prices. Yes, you’re getting their rates, but it’s still an added expense.

Of course after I got everything set and shipped off to three different Amazon locations, I discovered that they have a service called Inventory Placement that allows you to send everything to one location for an additional fee. (I’m not sure what the fee is though.) This would have saved me a lot of hassle because I could have fit everything in the existing box I had, but I didn’t discover it in time. The service does add time to getting your items listed for sale, since they’re basically being shipped out twice.

This post is already huge, so I’ll talk about my actual results and what I thought of the experience in a future post.

Update: Read more about the FBA experiment below

The FBA Experiment: Part 1
The FBA Experiment: Part 2
The FBA Experiment: Part 3
The FBA Experiment: Part 4

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9 comments

  • My husband loves to buy the clearanced items from big box stores. Problem is we don’t have room to store this stuff and very often it gets left in the trunk of the car, or maybe even laid out in the open in the yard (and thereby ruined in most cases after not too much time). Usually I’m not with him when he’s buying but this time I was there and I caved and agreed to buy $80 worth of stuff having read your first post – I thought maybe this was a case where we could make some money through FBA. Most of what we bought was marked down to $1 – $2 and for handheld electronics (and retailed for $4-$30). Covers for the mini iPad, custom covers for the iPhone, etc. But now reading today’s post, that sounds like a lot of work. I’m very curious to see how it works out for you in the end. The plus in all this is that the product is stored safely in Amazon’s warehouse. Thanks for sharing your experience with us.

    • If you’re already buying the stuff, AND you buy the right kind of stuff (that you can also sell for enough to overcome all the fees & expenses) I don’t think it’s really a ton of work unless you do it full time.

      • Well… when I read the part about needing a transaction sales privilege account that really put me off. I had to do that for my husband’s business and it was a PITA. Granted he was providing services in two counties and several different cities which all have different tax rates so that complicated matters, but even on the months where he made not one dime I still had to remember to log in and report, and that’s just one more thing to have to do. Do you know if there is any way to know if the items will sell? I know on eBay you could look to see if that item had sold recently, but I don’t know if we can do that on Amazon. I just feel like I’ll be using up time I really don’t have hoping the items will sell. I’m still very interested to see how your experience goes. Maybe I’ll reconsider in the future when I have more spare time. :-)

  • I interested to hear more of your experiment. I don’t think I have the patience (nor time) to do this, but maybe down the road. Good luck, Jackie!

  • There is another way to avoid having to ship the blinds to three different centers. When you have multiples of the same items you should use the case packing option. So if you had three blinds you would say that they came in a case of three and that way you could ship them all to the same fulfillment center and they will still be sold as individual units.

  • I just started back up with FBA after a few months off. I spent a few hours buying and packing up items and have already sold half of what I bought and am earning over 20% return. It’s a great way to earn some extra income. It does take some work to find good products to get a high return on your money, but when it do, it is totally worth it.