Why Start on Amazon FBA First For Your E-Commerce Business?

Michael MicheliniBlog, Business, Ecommerce, ECommerce Gladiator, Video1 Comment

As we are launching our new E-Commerce series, questions have been pouring in. One we got from Carlos at Shadow Factory VR Agency is:

Why are we putting our product on Amazon FBA to start? What would be the prime benefit of starting off with FBA? What would be the benefit of going beyond or off FBA? If you’re getting into e-commerce and actually selling products for the very first time, would this be an ideal step as well? How much time should I put into this?

Great question Carlos – we caught it on video here, and then I’ll write it up in text below.

I started my first e-commerce business in 2004. At that time, I believe Amazon was not yet open to third party sellers. Anyway, at that time eBay was the big elephant in the room. My partners and I tried to get people to buy off our own website (Stores Online – anyone ever use them?) but we couldn’t get the traffic. On a e-commerce forum someone told us we should list on eBay.

Similar reaction to Carlos – don’t we want the traffic on our own website? Don’t we want people to know who we are more instead of a rather “faceless” name to an Amazon customer.

I get the question and concern but –

Why Amazon FBA To Start? It’s Where the Customers Are

When you are first starting your e-commerce business, you want to get customers as soon as possible. You want to collect the data – see if they like your product, test your pricing strategy, etc.

You need turnover and volume. Get a flow. So back to my eBay days – I got in trouble quite a bit because I would like to my e-commerce store from the listing. So I stopped linking but I would design the page template to show my website banner, my color, branding, as much as possible.

Platforms don’t want the seller (or buyer) to go off their site – because of course they make their commission if the transaction happens there. Amazon is the same as eBay in that regard – and the Amazon system is much more commoditized – meaning you can’t design your own listing and branding as much. I joke with people saying I like Myspace over Facebook too. But seems the general public prefer these “boring” standardized formats like Amazon and Facebook over eBay and MySpace.

So even if we can’t drive too much traffic to our own website and brand – we want that turnover. This allows us to order more from the factory, to get our price down, and also validate our product.

Turnover Is Important in E-Commerce

Getting sales velocity is important in e-commerce. Amazon wants hot products because it wants more commission. It isn’t as concerned with pricing – heck – the higher the price – the more in commission they make. The most important is to have a listing that is converting.

But on the flip side, if you are turning over bigger volumes, you can buy bigger quantities from the factory. This gives you more leverage and more flexibility in your distribution strategy.

So where is the best place to get turnover? Amazon FBA – or Amazon of course – but their FBA program seems to be where it’s at to get maximum exposure and turnover.

Get Product Validation

You also want to go where you can “test” your hypothesis on the product. To ensure your “best guess” on a product is the right guess.

All too often as a business owner entrepreneur, we think that we know what the customer wants. We are Steve Jobs, and can predict the consumer’s habits without needing to ask them.

While I wish you and I had that “sixth sense” the reality is – many times we are wrong with our hypothesis of what “Mr. Market” (the consumer) wants.

So best place to test this hypothesis? Amazon!

They have the customers. You don’t need to invest a ton of money making your own website and buying traffic to it. You can start with a smaller production run and list on Amazon and see if people are biting.

Sales is the real data. Surveys sound nice, but until someone buys the product all the data is worthless (in my opinion).

Once You Have The Turnover And the Validation – Go Multi-Channel

So once you have the sales success on Amazon, then you can start to diversify. Which I can’t wait to do with our e-commerce series. But the key is once you get the turnover and validation – not before.

I’ve made this mistake in my previous e-commerce business – I expanded to multiple channels too early. It is going to take more time to setup and maintain those channels – and is it worth it? You can take some of your cash flow profits from Amazon FBA and invest in a virtual assistant to maintain that channel.

They key is – invest profits!

So again, we are leveraging Amazon and their FBA program to get started, validate, and get money in our pockets. Once we are confident we have a good product lineup, we can go into Walmart, Jet, our own website (shopify, etc).

Another one is Chinese e-commerce. I’m really excited to take this e-commerce series and sell to the Chinese consumers. But they want to see some traction in Amazon first. We will take that “social proof” of our Amazon sales and feedback and show that to the Chinese customer. Say that it is a hot seller in America and this is what people are saying (screenshots with translations).

Boom, another channel right there.

For our own e-commerce business, we will consider each channel once we feel Amazon FBA is going smooth and we are confident to diversify.

If We Were Creating a Brand New Creation – Kickstarter / Crowdfunding

Some have mentioned crowdfunding platforms such as Kickstarter and IndieGoGo. We could do that – but it would be a bit of a different business. That is meant for new and innovative products.

Our concept is not to re-invent the wheel here. We want to take a product in the market that is selling well, read some constructive feedback, and improve on it.

If we were starting a brand new product and design – crowdfunding would be a good place to get that initial traction and feedback. Many go to Kickstarter first, then after delivering their product, go into Amazon FBA, and then multi-channel.

What Do You Think? Is Amazon FBA A Good Place To Start Your E-commerce Business?

Now it’s your turn. Agree with Amazon FBA first?

Remember, this post is summer 2017. If this blog was 2004 I would be saying eBay first, the multiple channels.

The main concept here is – start with one channel. And when picking that channel, I would recommend doing one with the lowest investment for the higher ROI to validate what you are doing.

If brand new product – crowdfunding Kickstarter
If an existing product, but new brand – Amazon FBA

Sure, some people want to make a special new website and brand – which we WILL DO (believe MUST do for Amazon brand registry) – but the actual sales and e-commerce will all go into Amazon first.

Agree? Disagree? Please share your insights and questions below, let’s do this together.