Amazon FBA: How to Start on a Tight Budget in 2021
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Overview

Despite popular belief, Amazon FBA is still a profitable venture in 2021! As long as you tackle it with the right mindset & tools, it’s a viable business. Of course, the start-up cost is undeniably much higher than before. According to JungleScout statistics, nearly 60% of sellers spent $5000 or less to launch their Amazon FBA Store. The lowest start-up cost reported was below $500 but that was only by 18% out of that majority.

Up to $5000 just to start an Amazon FBA store? This figure is definitely not reasonable for everyone. That’s why we’re going to talk about how you can start Amazon FBA on a tight budget, even in 2021. We will break down how you can launch an Amazon FBA product with a budget as low as $1500. This is a third of the average budget most sellers stated they had in 2020!

Key Stages

Before we get into it, there are 3 key stages in starting an Amazon FBA Business:

1st Stage: Product Research – extensive research into product categories, and product selection at the end of the stage.

2nd Stage: Product Sourcing – sourcing and manufacture of selected products, testing and shipping samples

3rd Stage: Product Launch – launching the product on the marketplace using Amazon PPC to promote and advertise

Stage 1- Product Research

You will need extensive product research to find a successful product that’s easy to launch on a small budget. For this stage, we recommend using Helium10. It has a multitude of useful product research tools and analytics, at the cost of $97/month for their Platinum Plan. Other useful software for Amazon product research includes JungleScout and Keepa, which provide useful browser extensions and features. In this article, we will be using Helium10.

Filtering Competitor Data

To begin, you will use the Helium10 BlackBox tool (screenshot below), which will be vital for your product research stage.


Using BlackBox, follow these 5 easy steps to conduct effective product research:

  1. Select the Products tab, then select All categories
  2. Set a minimum monthly revenue of around $8000 or in that range
  3. Input a product price between $30 – $50, any lower yields low profit margins
  4. Set review count between 12 and 125 (as ballpark figures)
  5. In Advanced Filters, set monthly sales between 100-300 units per month

We want to start with a product with a medium or low monthly sales volume. This is the most manageable if you have a limited budget. For Amazon FBA sellers with a tight budget, it’s best to find a product that sells well, but doesn’t sell more than 100-200 units a month. This ensures your start-up cost will be low, since you will only need to order up to 500 units to kick off your Amazon FBA store.

Based on the assumption you get a minimum profit margin of 30%, with that monthly sales volume and a listing price between $30-50, you can easily make about $1000 in profit per month.

Finding a Niche

Now that you’ve set your main filters, it’s time to niche down before you finally select a product. You can further filter your Helium10 Black Box results based on these key factors:

  • Avoid seasonal products – Find evergreen products you can sell all year round. Selling seasonal products on a small budget is risky and inadvisable
  • Avoid products sold by big brands – Avoid products sold by Amazon Basics or any other big brand. They have a much bigger budget to spend on their product advertising than you do
  • Pick your category wisely – Some product categories are harder to sell in than others, e.g. Tools & Home Improvement was found to be most difficult to sell in 2021 by JungleScout
  • Find your niche within a category – Once you have picked a category, you have to niche down. In the BlackBox Title Keyword Search, insert descriptive adjectives that will help you find a niche, e.g. “hanging” or “running” or “golf”
  • Find a balance between reviews & sales – Find products that have had at least 2000+ sales in the past year. But make sure they have medium-to-low average reviews in the range of 20-50.
  • Focus on small-size products – You want to minimize your packing and shipping costs. Focus on products that are small, or can be folded into a smaller size.
  • Avoid fragile products – Any items that are fragile or may break during shipping are too risky to sell.
Businessman Chasing Flying Light Bulb | Poster background design, Graphic  design background templates, Character flat design

These may seem like fairly obvious suggestions….. Yet, once you start delving into product research it is easy to get side-tracked. You might see what appears to be a golden opportunity or a Eureka product, but is out of budget. Investing in that product will be foolhardy. Always stick to your budget! Hold onto this checklist to avoid getting trapped into an expensive first product.

Stage 2- Product Sourcing

Once you have selected the optimal product, the next stage is product sourcing. This is the stage where the majority of your start-up costs lie, and subsequently the stage where you can save the most amount of money by carefully budgeting and making reasonable tradeoffs in inventory quantity and quality.

Purchasing Inventory

Before you start sourcing your product, you need to set yourself a limit on how much you intend to spend on inventory.

This value can be anywhere between $500-$1000, or even more, but since the purpose of this article is to keep your budget as tight as possible we recommend going with the lower range. Set aside at least $500 for purchase, manufacture, and shipping of all your inventory. Try not to go over this limit; you may be tempted to spend more but it’s important to set yourself boundaries that you will follow.

Account & Inventory Management System :: Mitrah Technology

Using $500 as your start-up capital for inventory purchase, you can calculate your MOQ (minimum order quantity) based on the per-unit cost of your product. The most popular website to find cheap manufacturers for products is Aliexpress.com, but there are other websites you may also find useful such as DHgate.com, which offer MOQs as low as 1 unit, or 1688.com, which is a Chinese platform that offers very low prices but naturally, lower product quality.

Disclaimer: $500 does not include the costs of samples, if you choose to order samples of your product first this may cost up to $100 additional per sample.

We recommend you peruse these sites and see which works best for you. We highly recommend finding a supplier with an export license, so that they can ship your products directly to Amazon FBA for you once you have sampled them. This will allow you to save on costs of packing supplies, packing labels, and most important of all, your time. As a new FBA seller, your time is money, and it should be spent researching to make sure your product launch and advertising in later stages will go smoothly, which we will expand upon later.

Computing Costs

After narrowing down your suppliers, you need to compute costs and forecast your future revenue and profits before you make a final decision on where to source your product from. First and foremost, is the cost of the Amazon Seller Plan, which will cost you $39.99 per month.

To compute all other costs, an extremely useful tool is the FBA Revenue Calculator offered on Amazon Seller Central (screenshot below).

The Amazon FBA Revenue Calculator is user-friendly and quite easy to use, you only need to enter 4 main parameters:

  • Product ASIN – You can use a competitor ASIN for this field, or insert a keyword and find an ASIN
  • Item Price – Your intended selling price for the product, you can use competitor prices as a reference if needed
  • Shipping – Your estimate of the cost of shipping your order from your supplier to Amazon’s Fulfillment Centers, you can estimate this cost based on weight per unit
  • Product Cost – Your estimate or actual per-unit cost of purchasing the product from your supplier

With these parameters filled out, Amazon will calculate your total revenue and net profitability. In addition, it will break down any fees that will be incurred, including any referral fees, variable closing fees, and FBA fees that Amazon will deduct from your revenue. Note that you will also incur a cost of at least $250 to obtain UPC codes for your products.

You can play around with this calculator using different products and shipping costs from various suppliers, in order to settle on a profitable product that falls within your total budget.

Stage 3- Product Launch

The final stage after product research and product sourcing, is to launch your product. This is the stage that requires the most time and effort from you, because you need to gather enough reviews for Amazon shoppers to take notice of your product, and optimise your Amazon Advertising to make absolutely certain that clicks on your product listing will convert to sales.

Product Listing

Your listing is what the Amazon shopper will see first, it’s important to have clear and attractive product photos. You can hire a graphic designer, or to lower expenses, you can hire someone freelance to create logo designs and listing photos for your product launch. This will cost at minimum $100 and that is the very extreme lower end. If you have an aptitude for design, you can forego this cost and do it yourself.

Promotions & Giveaways

As soon as you launch your product, you need to gather as many reviews as possible. On Amazon, ratings and reviews are what sets your product listing apart from your competitors’ listings. The fastest way to gather reviews is to do promotional campaigns or product giveaways for your First X amount of Customers, in exchange for some honest reviews. You need set aside at least $100 to for product giveaways or rebate campaigns.

8 Amazing Examples of Instagram Giveaways - ShareThis

A reliable site to launch a Rebate Campaign or Product Giveaway is RebateKey, which has no subscription cost but will cost you $2.95 per rebate offered to a customer. There is a multitude of sites where you can advertise your listings for reviews, but be wary of customers who may scam you and simply take your product without offering a review in return!

Amazon PPC Advertising

Last, but definitely not the least important, is your Amazon PPC Campaigns. You simply cannot forego Amazon Advertising in 2021, the competition in every niche is far too high to leave it up to organic sales. As a baseline, we recommend keeping an Amazon PPC Campaign budget of minimum $10/day, this would total to $300 for the first month.

If done correctly, your initial month can drive sales for the future. If you pick the best keywords to bid on, it can push you ahead of your competition, build you a customer base and and get you more organic sales from then on. You may be thinking… How do I find out what keywords are the best? How do I know how high to place my bid for a particular keyword? Both are difficult questions that not only depend on your product category and product niche, but also your competitor’s bidding strategies.

Amazon Advertising Strategy in 2020 - Tips and Tricks - Hardik Somaiya

For new Amazon FBA sellers, Amazon PPC Software is your best bet to do a successful product launch on a budget. We do not explicitly include this in the $1500 total budget, because Amazon Advertising software is entirely optional. You can of course self-learn Amazon PPC bidding strategies through courses online instead of seeking the best Amazon PPC Software, but do not be deluded and think it will be easy. Amazon PPC management is extremely time-consuming, and difficult for new sellers to understand even after taking multiple Amazon Advertising courses.

For this reason, we highly recommend looking into Amazon PPC Management Software. Many offer Amazon FBA sellers a free trial for the 1st month, or huge discounts for product launches. Amazon PPC Tools are integral to the 2021 Amazon FBA Seller, and without Amazon PPC Tools, it’s very difficult to step into the Amazon marketplace.

Final Tally

At the beginning of the article we stated that it’s possible to start your Amazon FBA store with a budget as small as $1500. We outlined several costs throughout the article, now it’s time to see if that’s true:

Item Cost in US Dollars
Amazon Seller Account~$40/month
Helium10 Platinum Plan~$100/month
Product Sourcing$500
Product Samples $100/sample
Graphic Design$100
UPC Codes/GTIN$250
Promotions/Giveaways$100
Amazon PPC Budget$300/month
Total$1490

Indeed, the total costs add up to just about $1500, so it is absolutely possible to start and run Amazon FBA on a small and manageable budget.

Concluding Thoughts

Overall, starting an Amazon FBA store on a tight budget is a good way for some passive income, and serves as a great side hustle, but if you’re looking for greater profits and a sustainable way to expand, you will definitely have to save up some sizeable start-up capital to really make your Amazon FBA business soar.

The faster your Amazon FBA business expands, the more time and energy you will need to expend into managing it. The larger markets you break into, the more competition you will have; for which you will need streamlined and optimised Amazon PPC bidding strategies, which take consistent updates and analysis.

If you have questions or insights to share, please feel free to post them via the comments section. Please also consider joining our Facebook Group where we discuss any questions you may have about running an Amazon business.

We are SellerMetrics, our Amazon PPC Software helps Amazon sellers, brands, KDP Authors and agencies navigate Amazon Advertising PPC via bid automation, bulk manual bid changes, and analytics.

Sources

  1. eBusiness Boss
  2. JungleScout(1)
  3. JungleScout(2)
  4. RepricerExpress
  5. TheSellingFamily
  6. Web Retailer

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