You decided to start a business on Amazon and sell products through the biggest marketplace? At the same time you want to use the Fulfillment by Amazon solution? But you are still unsure how to build your Amazon FBA business? No worries! In the following guide we explain the steps necessary to successfully sell with Amazon FBA.
Last Updated on 29 October 2020
In our Amazon FBA Guide, we start with the initial phase of your business and clarify the most important cornerstones of your self-employment. After all, we want to make sure that all tax regulations and obligations are met right from the start and that the path to self-employment does start smoothly. In addition, compliance with these regulations is important for your Amazon business, because they are required at the latest when you register on Amazon and not meeting the regulations can lead to a ban of your account.
Once the formal business issues are resolved, we focus on the Amazon FBA specific steps. Please note that the steps are based on each other. It is recommended to work through all of them one after another.
1. The business registration – your Amazon foundation
By selling products via Amazon FBA you are trading products commercially, because an unlimited number of customers can purchase your goods. You also have a profit motive. In Germany and basically in almost all other countries a business registration is required for this. The income must also be taxed.
2. The business account
There is no obligation to create a separate business account in the initial phase of your Amazon FBA business. However, it is recommended to do so, because you will strictly separate your costs, income and expenses from your private payment flows from the very beginning. It is also possible that your bank, where you have your private current account, prohibits the commercial use of your account. In the worst case, the bank reserves the right to terminate the contract without notice if you violate these terms and conditions. For this reason alone, you should create a separate business account for your business.
In order to save your existing capital at the beginning of your young independence, it is advisable to fall back on free online banks such as Holvi or N26. These Fintech banks offer a free business account to sole proprietorships. But the free entry-level account models are tied to limited cash flows. This means that fees may apply if a number of transfers or incoming payments are exceeded. Still, these cost flows are negligible at first.
3. Register for a Tax and a VAT number?
With the business registration you have already laid the foundation for your independence.
In order for you to be able to create legally valid and compliant invoices and annually submit your income to the tax office, you will need additional identifiers. The VAT Idenficiation Number – also known as VAT-ID – and a tax number.
In principle, the city where the business is registered sends the registration of the companies to the responsible tax office. The latter in turn submits a questionnaire for tax registration. If you would like to speed up this intermediate step with the authorities, you can contact the responsible tax office directly and ask for the questionnaire and fill it out directly on site. This saves you valuable time. After all tax aspects are recorded, you will be assigned a tax number. This enables you to issue a legally valid and compliant invoice.
In the context of the tax-legal collection it is also inquired whether at the same time a value added tax ID should be applied for. If entrepreneurs do not make use of the small business regulation, the VAT ID is mandatory. If you would like to make use of this regulation, it is still recommended to apply for a VAT ID before you start using Amazon FBA as this service implies certain VAT duties. For example, when storing in a FBA warehouse, registering for VAT and filing regular returns in the country of storage is required.
4. What is an EORI number?
Surely, at the beginning of your business you will not produce the goods yourself, but you will buy and import them from suppliers in the EU or non-EU countries. For this you need a so-called EORI number (Economic Operators’ Registration and Identification).
The EORI number is meant to identify economic operators within the EU in a uniform way, regarding their relation and interaction with the customs authorities and can be regarded as some sort of customs number.
This number replaces the former German customs number and serves as a means of identification for customs. With this number, the respective customs authorities have the possibility to request all information of the respective trader. The EORI number is indispensable for a smooth import process.
5. What to sell on Amazon? How to make money with Amazon FBA?
Finding attractive products is crucial to your Amazon FBA business model. In the end it is the product that determines the success of your business.
This means that potential customers must actively demand the product and at the same time the market should not be overwhelmed by competitors. This can result in higher barriers to entry, but it can also hinder your success on Amazon FBA. Because in the case of a surplus of offers and a lack of product differentiation, the differentiation is made solely by the price. This can become economically unattractive for newcomers, who for example have higher purchase prices compared to larger competitors – the profit margin is reduced to a maximum.
Therefore, it is advisable to conduct a detailed product research on Amazon at the beginning. The key to success here is that you don’t just rush to the Amazon bestseller list, but that you look beyond your own nose. You don’t look for a needle in a haystack, but for hip (media) trends. Such trends can be easily researched via social networks, for example. Not every viral idea contains a product idea.
Nevertheless, it is advisable to carefully analyze the trends and the resulting search behavior. When researching products, you should also keep in mind that the demand is not temporary, but at least seasonal or, in the best case, has the potential of an all-time favorite. Various tools are available on the market to measure competitors and ranking before creating a own listing.
6. Product acquisition via Alibaba and Alibaba alternatives
After a suitable product has been researched, it must be procured for sale through Amazon FBA. For the start, setting up your own production is costly, but also time-consuming. Therefore, it is advisable to work with partners who already have the necessary production facilities. You can easily find such partners on the B2B trading platform Alibaba. On this platform manufacturers offer already finished products or are open for new productions. In both cases, it is a good idea to purchase products from several manufacturers and to evaluate the quality and reliability in particular within the framework of a selection process. After all, the product is fundamental to success on Amazon.
Although Alibaba is the most popular trading platform for finding manufacturers, there are also two good alternatives GlobalSources and DHGate.
GlobalSources is almost on par with Alibaba and therefore a strong competitor. Basically, the platform is no different from Alibaba. The structure and the principle are identical. However, the somewhat more demanding inclusion process for the manufacturers stands out. As a result, only genuine manufacturers are listed on the platform and no intermediaries, which increases the quality of the products.
But DHGate does not differ visually either and uses the same functional principle. Nevertheless, the platform has its raison to be. It is often the place where smaller, but economically attractive producers can be found. Thus, compared to Alibaba, more favorable purchase prices can be realized.
7. The process to the final product
Product and manufacturer research is by no means everything. To launch a successful product on Amazon, further steps are necessary or recommended:
- Rechtliche Aufgaben
- Vor dem Kauf von großen Chargen beim Hersteller ist es ratsam, das Produkt auf gegenwärtige Patentrechtsverletzungen zu überprüfen.
- Logo und Verpackung
- Ein Logo sowie eine einzigartige Verpackung sind wichtig, um bei deinen Kunden einen WOW-Effekt auszulösen und diese somit an deine Marke und Produkte langfristig zu binden.
- Überleg dir, welche Werte deine Marke transportieren soll. Diese sollten idealerweise in die Logogestaltung mit einfließen.
- EAN-Nummer erwerben
- Für die Einlagerung deines Produkts bei Amazon ist eine EAN-Nummer notwendig. Eine EAN-Nummer ist eindeutig deinem Produkt zugeordnet und birgt den Vorteil, dass Amazon aber auch deine Kunden unter dieser Nummer dein Produkt jederzeit erkennen und auffinden können. Die richtige Anlaufstelle für EAN-Nummern ist die GS1 Germany. Hierüber erhältst du eine international fähige EAN-Nummer, welche auch jegliche Standards einhält. Auf Angebote von dubiosen Anbietern solltest du verzichten. Grundsätzlich kostet eine EAN-Nummer einmalig etwa 230 EUR und jährlich 150 EUR.
8. How to create an Amazon listing?
The Amazon Listing is one of the essential building blocks for a successful Amazon FBA business, besides the product and manufacturer search. When creating the Amazon Listing it is advisable to pay attention to sales psychological logics on the one hand and to parameters for the Amazon algorithm on the other hand. The former aims at describing the product in advertising terms and at the same time creating incentives to buy. In contrast, the optimization for the Amazon algorithm creates content to be listed on a higher listing position for customer search queries.
The Amazon listing essentially consists of the following elements:
- The title describes the product name. You should make sure that the title concisely describes your product and the most important product features. It is also helpful to include your unique selling points (USPs) in the title, where appropriate.
- The title allows a description of up to 200 characters including spaces. To ensure that the title is always displayed completely on Amazon, it is advisable to limit the title to a maximum of 120 characters.
- Bullet points
- Bullet points should be used to highlight customer benefits. So focus on the benefits of your product instead of technical details, if they are not USPs.
- You can specify a maximum of five bullet points. Each bulletpoint has a maximum character length of 200 characters. So try to be concise and meaningful here as well.
- The description should detail your product and brand. You are welcome to go into more detail here and use storytelling to promote your product.
- Although the product description is not read by all customers, it is advisable to maintain it in detail and conscientiously for two reasons: First, the description text is relevant for the listing within the search results at Amazon and second, you can use it to explain a product in need of explanation in detail and thus distinguish yourself from your competitors.
- Here you should enter the keywords that match your product but are also searched for by customers on Amazon.
- For this purpose, 250 characters including spaces are provided by Amazon. The maximum character length must also be observed here. Otherwise the stored keywords will be ignored by Amazon.
- It is also advisable that only those keywords are maintained under the keywords that have not already been considered in the title or in the description text. Because these keywords are already considered by Amazon for positioning.
- The product photos should show the product in the best possible light. If possible, the photos should also be used to record the intended use. Please note that the photos are decisive for the purchase decision. Therefore they should be taken as professional as possible.
The path to your own FBA business is in itself uncomplicated, but still involves many steps. These steps can basically be divided into the steps of founding a company and product development. There are few hurdles to setting up a company, provided that the company is initially a partnership.
As soon as the business framework is in place and all legal and tax aspects have been clarified, the product can be developed. It can be stated that the product decides on success or failure. Therefore it is important to find demand-oriented products and to market them specifically via the listing on Amazon. However, during the product search it should be ensured that the product is not limited by a temporary demand.