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 2023 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 you 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, as well as investigate various supplier choices. As an Amazon FBA seller with limited funding, it is advisable to carefully examine the sales history and profit margin of each product.
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.
While there are millions of products to choose from, you will only need to focus on a small portion of them. 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. As much as possible, avoid products that are fragile or generally cannot handle 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 that will likely 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 a logical move 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, there’s an alternative option you can explore 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 your point of comparison regarding 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 will be starting an Amazon FBA business on a tight budget, it is recommended to research the potential Amazon 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 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 the storage space your products occupy 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 private label products.
Knowing these Amazon selling fees and other potential expenditures can help you properly manage your capital 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 becoming proficient in utilizing Amazon seller tools to improve the efficiency and precision of your operations. To make the most out of your initial investment, consider incorporating Amazon seller tools into your business.
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, resulting in lower business expenses while improving profitability.
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 2023. 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 expenses of selling on Amazon in order 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. Optimizing your packaging should be done before sending your products to Amazon fulfillment centers.
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.
Another way to start an Amazon FBA business on a small budget is by selling 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 own products to the market and differentiate your own brand from other sellers, especially from private label sellers.
Creating handmade or DIY products is less expensive 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 make the most of your available funds.
To expand your Amazon business, it is essential to explore methods of gaining a competitive advantage. By strategically planning, conducting research, optimizing operations, and leveraging Amazon seller tools effectively, you can achieve a competitive advantage that will propel your FBA business to success.