Despite the growing popularity of the Amazon FBA business model, some individuals remain hesitant to enter the Amazon marketplace through the FBA program. Many are under the assumption that significant funds or capital are required to start selling on Amazon.
This idea is inaccurate, for there are viable ways to start an Amazon business in 2024 with minimal funds or capital.
Tips to Start Your Amazon FBA Business When on a Tight Budget
If you wish to sell on Amazon but are on a tight budget, here are some tips on how to start an Amazon FBA business with little money.
TIP #1: Identify the Amazon Product That You Intend to Sell
If you wish to make money on Amazon FBA, invest time in product research. Amazon product research, together with keyword research, are crucial steps in starting an Amazon FBA business with limited capital.
To prevent expensive errors, it’s important to brainstorm and pinpoint your niche and investigate various supplier choices. As an Amazon FBA seller with limited funding, it is advisable to carefully examine each product’s sales history and profit margin.
Apart from Amazon product research tools, you can also utilize the Amazon FBA calculator to help you have a clear overview of potential monthly sales and revenue that a particular item could generate for your Amazon FBA business.
TIP #2: Narrow Down Your Amazon Inventory Options
Once you have identified potential products to sell on Amazon, focus on narrowing down your inventory options. With a limited budget, it is necessary to narrow down the vast array of products available on Amazon to only a select few. Consequently, narrowing down your inventory options leads to decreased inventory costs.
While there are millions of products to choose from, you only need to focus on a small portion. Some of the essential factors to consider when narrowing down your Amazon inventory options include the following:
Return on Investment (ROI): You should look for items with a higher investment return.
Size: Since you are on a budget, you can further lower your expenses by choosing small and lightweight Amazon products. Choosing small-sized and lightweight products for your Amazon inventory means lower shipping costs.
Risk: Select products that are less likely to be damaged during transport. Avoid products that are fragile or generally cannot withstand rough handling. Sticking to risk items for your Amazon inventory means additional fees for special handling.
Seasonality: When evaluating products to sell on Amazon, you should consider seasonal demand. Refrain from risking your capital for items likely to lose market demand after a particular season or annual event.
Brand Competition: If you aim to start your Amazon FBA business with little money, you should avoid competing with huge brands. Competition is tough when you sell branded products, not to mention the stringent branding and selling regulations.
TIP #3: Check Alibaba and Other International Suppliers for Better Deals
Sourcing your product locally is logical if you are starting an Amazon FBA business with minimal capital. One strategy to acquire inventory products for your Amazon business is through Amazon retail arbitrage. This involves sourcing products from retail, liquidation, and discount stores in your local area.
In addition to Amazon retail arbitrage, you can explore an alternative option that will suit your restricted budget. Most online sellers for eCommerce businesses utilize Alibaba.com to find the cheapest deals.
You can use the products sold on Alibaba as a point of comparison for potential profit. You can better see how much you will likely profit from products sold on Alibaba by comparing them to items sold in retail stores or those from local suppliers.
TIP #4: Amazon FBA Fees and Other Expenses
If you are starting an Amazon FBA business on a tight budget, it is recommended that you research the potential Amazon selling fees and other expenses you may incur ahead of time. Some of the standard Amazon fees to anticipate include the following:
Monthly Subscription Fee: The Amazon seller account subscription fee is the recurring monthly fee Amazon charges to sellers with a Professional Seller account.
Fulfillment Fees: This Amazon seller fee refers to the cost of shipping products to customers.
Storage Fees: Inventory storage fees refer to the monthly charge for your products’ storage space in an Amazon fulfillment center.
Referral Fees: This Amazon FBA fee pertains to the amount Amazon charges for each item sold. However, unlike other Amazon fees, the Amazon referral fee is charged post-sale.
Apart from the above-mentioned, you should be aware of other Amazon FBA business expenses. Some of these potential business expenses include but are not limited to subscription fees for Amazon seller tools, brand registry expenses, advertising expenses, overhead expenses, and customization fees for own private label brand.
Knowing these Amazon selling fees and other potential expenditures can help you properly manage spending money and avoid going overboard. It also gives you an idea of which aspect of your business your funds should be focused on. You can further check this via the Amazon Seller Central dashboard for other fees you may incur.
TIP #5: Use Amazon Seller Tools
If you’re operating an Amazon FBA business on a tight budget, it is crucial to become proficient in utilizing Amazon seller tools to improve the efficiency and precision of your operations. Consider incorporating Amazon seller tools into your business to make the most of your initial investment.
When using Amazon seller tools, you have the option to use free tools, including those Amazon Chrome extensions. However, you can opt for AI tools if you wish for better results.
These more sophisticated Amazon seller tools can streamline and optimize your Amazon business processes and help you obtain a competitive edge in the market. Examples of this AI software include AI Amazon repricers, inventory management tools, and customer service software.
By using advanced Amazon seller tools, you can save time and reduce costs by minimizing the need for additional employees to perform repetitive tasks. This results in lower business expenses while improving profitability.
Tip #6: Optimize Pricing Strategy
Succeeding on Amazon requires adopting strategies that can offer you a competitive edge. Among these strategies is competitive pricing, which most Amazon sellers employ to stand out in the Amazon marketplace.
Competitive pricing involves setting prices strategically, not solely based on costs or desired profit margins, but primarily on competitors’ pricing. To gain an upper hand in this approach, utilizing an AI repricer is highly recommended. This technology automates the repricing process, sparing you the need to adjust listing prices manually.
Rather than manually changing your listing prices, the AI repricer will automatically adjust the listing prices to remain competitive in the market, considering various market dynamics such as price change notifications, competitor behavior, and overall market condition.
TIP #7 Familiarize Amazon Policies
Starting an Amazon FBA business with minimal investment requires a deep understanding of Amazon’s policies to prevent financial setbacks. Knowing these essential rules helps avoid penalties, ensuring the sustainability and profitability of your Amazon business.
Since Amazon prioritizes customer satisfaction, all third-party sellers, including Amazon FBA sellers, must comply with its policies, especially its Seller Code of Conduct. This particular code mandates that all sellers must adhere to the following guidelines:
- Provide accurate information to Amazon and our customers at all times
- Act fairly and do not misuse Amazon’s features or services
- Not attempt to damage or abuse another Seller, their listings or ratings
- Not attempt to influence customers’ ratings, feedback, and reviews
- Not send unsolicited or inappropriate communications
- Not contact customers except through Buyer-Seller Messaging
- Not attempt to circumvent the Amazon sales process
- Not operate more than one selling account on Amazon without a legitimate business need
Failing to comply with Amazon’s Code of Conduct may result in actions such as cancellation of listings, suspension of accounts, loss of payments, and revocation of selling privileges. In addition to the Code of Conduct, Amazon FBA sellers are likewise expected to follow specific Amazon FBA policies, such as the ones highlighted in the presentation below:
TIP #8 Stay Informed
In addition to understanding crucial Amazon policies, staying informed about r eCommerce trends and industry developments is essential. Some of the emerging trends in eCommerce include the following:
- Social Commerce
- Marketing Automation
- Voice and Visual Searches
- Augmented and Virtual Reality
- Artificial Intelligence for Personalization
There are various online sources for obtaining insights into eCommerce trends and industry developments. Here are a few sources that provide either free or low-cost access to their industry reports, research findings, and updates:
Industry Reports: The most convenient way to check for eCommerce trends and updates is through industry reports from research firms like Forrester, Gartner, and eMarketer. You can rely on these firms for their regular reports concerning eCommerce market insights, trends, and forecasts.
Blogs and Websites: Another way to stay updated on eCommerce news is through blogs and websites. For Amazon-specific updates, reputable sources include the Amazon Business Blogs and Amazon Selling Partner blogs. They offer free and extensive reports concerning trends, updates, and market performances. Such a resource is highly recommended, especially for those who wish to start an Amazon FBA business with little money.
Social Media: Social media platforms also offer brief reports and insights on eCommerce trends and updates. Following industry experts and major brands on social media can keep you informed about the latest trends and conversations.
Live Streams and Podcasts: Listening to live streams and podcasts can provide valuable market insights. Some popular eCommerce podcasts to explore are Practical eCommerce Podcast, Future Commerce Podcast, and Seller Snap’s Not Another eComm Podcast. Regularly tuning in to these podcasts can keep you informed about emerging trends, helping you make strategic decisions for your business.
Academic Journals and Publications: Academic journals and publications offer another avenue for obtaining eCommerce insights and updates. Sometimes, the sources mentioned earlier rely on the comprehensive research and analysis found in academic journals. Google Scholar is a free and convenient starting point for accessing these academic resources.
TIP #9 Prioritize Exceptional Customer Service
Whether you are launching an Amazon FBA business with little money or substantial capital, top-notch customer service is indispensable for succeeding on Amazon. Given the intense competition within the Amazon marketplace, exceptional customer service distinguishes you from competitors.
High-quality customer service can lead to positive word-of-mouth (WOM) marketing, reducing the need for costly advertising for sellers operating on a tight budget. Moreover, implementing efficient customer service practices can help minimize Amazon returns and negative feedback, saving money in the long run.
Offering excellent customer service even with limited resources helps you build trust and loyalty with your customers, driving repeat purchases and achieving long-term sustainable growth.
TIP #10 Network With Industry Professionals
Networking with other Amazon sellers and industry professionals can notably enhance your Amazon business strategies, even with limited funds. The exchange of knowledge and learnings with these individuals can help you navigate the eCommerce landscape without costly investments in consultants or eCommerce courses.
If you are starting an Amazon FBA business with little money, these collaborative initiatives can help you expand your understanding of the business without incurring significant expenses. Overall, networking offers a cost-effective means of improving business strategies, accessing valuable resources, and fostering supportive business relationships, which is crucial for the success of your Amazon business.
How Much Money Do You Need to Start an Amazon Business?
Your business objectives and timeline influence the amount of money required to start an Amazon business in 2024. Typically, new sellers on Amazon invest between $2,500 to $5,000 to commence their Amazon FBA business venture.
However, around 17% of sellers manage to start their Amazon venture with $500 or less. Notably, most Amazon sellers spend an average of $3,800 at the outset of their business.
How To Reduce The Cost of Selling on Amazon
There are ways to decrease your selling expenses on Amazon to maximize your resources fully. In addition to utilizing advanced Amazon seller tools to streamline your Amazon business processes, there are other steps you can take to minimize the cost of selling on Amazon.
Optimize Product Packaging
Amazon FBA fulfillment fees are one of the fees new sellers should be aware of. Since Amazon charges fulfillment fees based on size and weight tier, you should be precise with your packaging.
If possible, reduce or eliminate empty spaces in the product box to minimize its dimensions. The same thing goes for bulky and unnecessary padding to reduce product weight. Before sending your products to Amazon fulfillment centers, your packaging should be optimized.
Avoid Bulk Orders
Since you are starting your Amazon FBA business with little money, you should begin your Amazon Business venture with select items. When ordering items from suppliers, try to negotiate as much as possible for the minimum order quantity and shipping fees. Avoid bulk orders at the onset of your Amazon business.
Introduce Product Bundles
Amazon allows sellers to create product bundles. It means that you can combine two or more products as one offer. This can help decrease per-unit storage and fulfillment costs while also increasing your Amazon FBA business profit margin on each sale.
Consider Handmade
Another way to start an Amazon FBA business on a small budget is to sell handicrafts on Amazon Handmade. Amazon created Amazon Handmade to accommodate the growing population of interested online sellers, primarily artisans and crafters.
Handmade allows you to introduce your products to the market and differentiate your brand from other sellers, especially from private label sellers.
Creating handmade or DIY products is cheaper than exporting products from China or other international marketplaces. With talent and creative skills, you can maximize your capital by venturing into Amazon Handmade.
Obtain a Competitive Edge
Starting an Amazon FBA business with limited funds can be challenging, but there are ways to optimize and enhance your business to maximize your available funds.
Exploring methods of gaining a competitive advantage is essential to expanding your Amazon business. By strategically planning, conducting research, optimizing operations, and effectively leveraging Amazon seller tools, you can achieve a competitive advantage that will propel your FBA business to success.
