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What Is Amazon FBA: Understand How People Make Money Selling Physical Products on Amazon (in under 1,000 Words)

By Nate McCallister / a few months ago
What Is Amazon FBA

Most of my friends have no idea what I do for a living. If you read this blog, you know much better than they do.

The general assumption of what I do is based on what I did early on: sold random products on Amazon.

Now, I do much more than sell on Amazon (it is barely part of my business model anymore). I now make software and create content (free and paid). 

But, I find myself explaining what Amazon FBA is over and over. I felt like it was worth putting it down on paper.

Here is Amazon FBA in as few words as I can keep it to without missing anything critical. I have included a lot of links to additional articles that expand on each key point. 

  • tags

    There are various fees for selling on Amazon and using the FBA program. Sellers calculate these fees into their buying decisions.

    Amazon FBA Fees
  • barcode
    Most sellers start with a process called “retail arbitrage,” in which they go into stores with their smartphones and scan the barcodes of products to compare the store price to Amazon’s current list price. This process is straight forward. Scan any item, see if you can sell it and then see if there is any profit after fees and costs of goods. 
  • wrench
    There are a lot of tools for finding products to sell on Amazon that make the process possible. Some are paid, some are free. 
  • lock

    There are “gated” brands and categories that sellers must be approved to sell in. New sellers generally sell products like toys, household items and simple electronics.

  • plane

    You can have a massive inventory heavy business without needing a massive warehouse of your own or a large staff. Sellers pay storage fees based on how much inventory they have in warehouses and if it is oversized or not. 

  • podcast

    It is possible to do the process completely remotely with Online Arbitrage and the help of 3rd party prep and ship companies. It is possible to run an Amazon FBA business without ever seeing your products by using online arbitrage and 3rd party prep companies

  • signal
    The goal is to build capital and profit via economies of scale. This means as you have more money to spend on inventory, you can take lower margins but still earn more money each month.
  • life-bouy
    Amazon helps with returns and customer support.  Sellers can communicate with buyers but they can also hand over most of their customer support to Amazon.
  • server
    There are multiple ways to get products other than arbitrage. In addition to arbitrage (retail and online) mazon sellers can sell their own products (often called private labeling) or negotiate deals directly with suppliers (wholesaling). These methods are viewed as more scalable. 

Ok, that’s Amazon FBA in as few words as possible.

Check out the articles below if you want to gain a better understanding of selling on Amazon and be sure to join my free Facebook group FBA Today!

Additional amazon fba reading

About the author

Nate McCallister

Nate is the founder and main contributor of EntreResource.com. He is a lifestyle entrepreneur who spends his time building businesses and raising his two kids Sawyer and Brooks with his beautiful wife Emily. His main interests include copywriting, economics and piano.

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