My Amazon FBA Strategy

If you've followed the blog at all you know that I've been talking about selling through Amazon's FBA program for a few months now, at least over the summer. I haven't really gotten started on it though because frankly it takes an initial investment, and I just haven't had the extra income to invest. However, I'm actually glad that I didn't jump right in, because being forced to wait has made me research and read about this far more than I would've to start with. Doing all this research, and finding all these great groups and blogs has made me realize that I'm going to switch my strategy from what I initially thought I would.

Initially I planned on focusing on retail arbitrage, if you're not sure what I'm talking about you can read my post What Is Retail Arbitrage? here. The basic concept of it is to buy low and sell high. Generally walking into a retail store, like Walmart, and finding an item that sells for more online than they are selling it in store. Usually it's clearence and/or sales prices in the store, and you can make money with this strategy, and good money as well. Still, it takes a higher investment up front, because you're still needing to buy items in store and pay semi retail cost. The return on investment (ROI), which is how much you'll make off your initial investment, seems to be pretty low for this category. Most people shoot for at least 50% ROI, and that's still a good profit, but it means you dig a lot more for those hidden gems. Again, this is not a bad strategy, and many sellers seem to do very well doing this. Down the road I intend to try this out myself, but that's down the road, I needed a plan for what I'm going to do now.

So what I'm going to focus on to begin with is selling books through Amazon FBA. I'll admit that at first I had written off selling books, and let this be a lesson to never hastily write off a potential income stream, but I found a great blog called FBA Mastery that I highly suggest you take the time to read through and dig around in. This blog is by a guy named Peter Valley, and he makes a substantial (six figures a year) income selling books and media (mainly books) through Amazon FBA. It's through reading his articles that I've come to realize that there is a great market for these items, and as long as you know what you're doing the potential to make money is huge.

So why books? Well here's why:

• The initial investment is low - Ever been to a library sale, yard sale, estate sale etc. and seen books that are selling anywhere from .25 to $3 each? If you haven't than you should go into a thrift store or garage sale in your area sometime and just look at the prices they have their books. It's cheap, cheap, cheap. These are highly donated, throw away type items, that many places and people are just trying to get rid of. Ten or $20 can easily get you the same amount of items that you spent, if not more.
• The ROI Is Fantastic - Because you're spending so little to purchase these items upfront your profit margin is just that much better. For example, I just spent $2 on 4 books at my library, after researching I'll make around $20 on these books, after fees, shipping, etc. That's 20X my initial investment. That same $2 in a retail store will likely only net me $5 or $10 through retail arbitrage, if I'm lucky. 
• They are everywhere - Like I said, books are a common throwaway for most households. They take up space, most people only use or read them once or for one semester and then they don't want them anymore. So they donate by the boxes, or sell dirt cheap just to get rid of them. 
• There are NO long-term storage fees - Amazon charges storage fees for holding your items in their warehouse, and a more heftier fee for something that's been there a long time. They don't want a bunch of widgets sitting in their warehouse taking up space forever, so they discourage this through long-term storage fees. There is one exception, and that is long-tail items. That means it's a one off kind of product, that will take that special buyer to find it, and they realize that it may take more time for that buyer to come along. A single book will not incur this fee, but if you have multiples of that book it will. 

My reasoning, based on the above factors, is that with a small amount of money upfront I can double or triple my money if not even more. I've seen examples of books that were bought for $1 selling $25, or bought for $20 selling for $200. It's an easy to find product for me to find, considering I live in a fairly rural location and sourcing will likely be one of the hardest parts of my business. So a minimul effort and investment that gives me a greater return. Yep, that's what I'm all about with this business ;)

There are two main drawbacks that I see with books though. They are heavy, and will likely cost me more in shipping than most retail items. Secondly, most are not going to be quick sellers, it's likely that you will have a majority of your books in the warehouse for at least a month if not more. This isn't a quick way to make money, at least in the beginning. Building up a full inventory will be key to this strategy, and the way to daily sales I think. Personally I'm okay with both these things. Shipping is always going to be a cost, and there's really little I can do about that, and with the higher profit margin on books I'm comfortable knowing I'll spend more sending them in. I'm also prepared to be patient with this, I'm in it for the long haul, and knowing that I spent little to start with makes it easier to wait on sales. If I walked into a store and spent $100 or more on items then I would be much more concerned about how quickly I recouped my money and made some to boot. 

With all that being said I still can't get started until October, and there is a reason. October is when my family will be receiving a small amount of extra money, and with part of that money I'm going to invest in my family and get my business started. Now, that's not to say someone couldn't start without getting "extra" money, because they could, and I could too. It's merely that this makes it far easier for me to start and allows me to hit the ground running. So I'm taking $500, and I've already mapped out what I will be spending that money on.

1. Smartphone - This is the main reason I'm waiting on this money. I do not have a smartphone at this time, and you need one for the scouting apps that are available. Having a good scouting app is key to finding profitable books to sell. It allows me to scan the barcode and see the rank of an item, what it's selling for, and if other FBA sellers are offering the same item. 
2. 3 Month Unlimited Phone Plan - I am not getting a contract with a company as I think they're a waste of money. Straight talk lets you get unlimited text, minutes, and web browsing for only $45 a month, or $130 for three months. The plan is that by the time the three months is up profits will be coming in to the point that they can pay for the phone plan after that.
3. Book Sourcing Secrets Ebook - This is written by Peter Valley and is the most comprehensive guide to sourcing books for FBA out there. It's only $47, at this time, and I was honestly surprised it's that little compared to prices I've seen on other FBA books. Well worth the investment I hope.
4. Profit Bandit Ap - This is a scouting app, and at this point is the most recommended one at that.
5. Barcode Scanner - These are relatively inexpensive, around $25 - $30 and simply allow me to enter items into my Amazon FBA inventory quicker. Rather than entering in each ISBN by hand I can just scan the barcode and it'll populate it into the inventory for me. This isn't really a necessity to start with, but I've got the money, and the more time I can save the more time I have to find books!
6. Friends of the Library Membership - There is at least one library around me that offers a special sneak preview of their books sales (and their having one at the end of Oct) to FOL members. It's only $20 for a year, and the advantage of being able to get in early to find books is worth more than that.
7. Sourcing and Inventory Items - It's likely I'll only have around $200 left of the $500 for sourcing products, but that's okay, because we're talking items that are a couple bucks or less, so that's a lot of inventory that I can find. Really there's no reason, other than finding the items, that I can't get around 200 or more items to add to my inventory with that amount of money. 

As you can see the bulk of my initial investment is going to tools, ebooks, and apps, less than half is going towards sourcing. Again, if I was going the retail arbitrage route I would be way more concerned about that, but with books it's a little safer to do. Since January will be right around the corner when I do I would love to find a good selection of textbooks to add to my inventory as well. These will cost me more money, but the ROI on them is even better than average books most of the time. It also means that at a time, post Christmas, that many sellers see a slump in sales I will see a boost as the winter semester starts in January. 

Will I ever sell retail arbitrage? Probably, and it's likely that I'll use RA to scout out some books, think the clearence isle at a bookstore. While books are great, I hope, and seem the most promising I'm a big proponent of having multiple revenue streams. So while my items will all be through the same seller avenue, Amazon, I feel it's smarter and safer to offer a wider range of products than just one thing. Not to mention I like to change things up, I don't like to become bored with one thing or product. Bundling, retail arbitrage, "thrifting for profit" all these things intrigue me, and I'd love to try them out down the road. Of course when I do I'll share my experience with all of you so you can decide which route you would like to go.

So for now that's my game plan, and I feel pretty comfortable with it. Other than the suspense of waiting of course! I think in between I will try to take $10 or so every payday and pick up a few books. The nice thing about my library sale is it's ongoing, it's a room that's always open I can go into. That means that I could go in, find some interestig titles, write down the name and ISBN and then go home and research them on Amazon. Not the most efficient way to source inventory, hence my need for a smartphone and scouting app, but it'll work short term to try and build up a little inventory. Whether or not you can start right away with what you want to do it's a good idea to have a plan.