Everything is doom and gloom… Amazon doesn’t care about small businesses, Chinese sellers are running “fake review” factories, competition is rising every day, Brexit will increase importing costs and cause delays, PPC prices are skyrocketing, and on top of all that, the coronavirus will wipe out civilisation anyways!
Starting an Amazon FBA business in 2020 is MISSION IMPOSSIBLE, right? There’s no point in even getting started in this game. It’s too late, and the market is too saturated. This is the vibe you get if you spend too much time on Amazon seller forums OR any forums where people go to complain about how life is unfair. But is it the TRUTH? Is it really too late to get into the FBA game and make money by selling physical products on Amazon?
Well, I truly believe that this is the story of the half-full and half-empty glass. It really depends on how you look at things, in general. There are people who always look for negativity, so for them, yes, I agree, the future doesn’t look so bright. But then there are people who, instead of moaning, look for solutions. They look for ways to get around problems and simply make it work.
I definitely belong to the second group, and I think it shows in my career. Over the last fifteen years, I’ve had to change direction (radically) quite a few times, and it has always ended up being for better. And I don’t complain. I definitely don’t blame Amazon for the fact that competition has increased. Of course, that would happen—it was just a matter of time!
People don’t have any perspective about how blessed we actually are. We can start selling products on platforms like Amazon with just a few clicks, import products from China without leaving our homes, travel around the world and manage businesses using a laptop.
Everyone takes all of this for granted, when just a short twenty years ago, people had to open PHYSICAL STORES, sign expensive, long-term leases and hire employees if they wanted to start selling any product to the general public. It was super-expensive and risky!
So, personally, I don’t feel sorry for ANYONE who blames Amazon for anything. We should all be grateful that we even have the opportunity to start home-based businesses with relatively small budgets and risk levels. At least, I am!
The REAL problem lies somewhere else:
Many people are simply delusional about their ability to start and run successful businesses.
By that, I mean: not everyone is cut out to be an entrepreneur, but somehow everyone these days thinks that they have the skills, mindset and work ethic to be one. This is the real problem—not Amazon. Amazon is the biggest small-business opportunity of our lifetime, but if you’re not built for the game, it doesn’t matter because you won’t be able to see it.
So, in 2020, before you start blaming everyone else for your failures on Amazon, take a hard look at yourself and make a decision. Maybe it’s time for you to be honest with yourself and realise that business is not for you. Maybe you don’t want to spend long evenings doing product research? Maybe you’d rather go to the pub on Sundays than wake up at 4 AM and work on PPC keywords?
Just be honest with yourself and understand that only the fittest will survive in this game. So, if you’re not ready to fight, there’s really no point in getting started. You can get lucky for a while, but in the long term, you have to stay at the top of the game at all times. With a negative attitude, you won’t get far. Trust me. I have personally worked with thousands of people over the last decade. I know that complainers don’t succeed—they just don’t.
For those of you who are still reading this and want to make it work, stick with me. I will show you three secrets to create a profitable Amazon FBA business in 2020 and beyond! Before we get to that, we need to address the elephant in the room….
Who likes competition? Buyers! Competition gives them plenty of choice and lower prices—what more could they ask for, right? That’s called capitalism, and it’s the system most of the world revolves around these days.
As a company, Amazon couldn’t be happier with what they have achieved with their marketplace:
They have created a phenomenal business model where millions of sellers are serving their customers in the best possible way (improving products, finding new trends, etc.) and, at the same time, they pay Amazon service fees, FBA fees and PPC fees.
Obviously, Amazon is the TRUE winner in this whole game, and while ordinary people are trying to make just a few thousand in profit per month on the platform, Amazon is raking in BILLIONS of dollars every year.
But for us Amazon sellers, increased competition means lower margins, higher PPC costs and a harder time getting noticed in the search results as dozens, hundreds or even thousands of sellers offer the same product.
People are also complaining that Chinese sellers are taking over the Amazon UK marketplace and that we can’t compete with them. I can’t really agree with this, because when you fully understand how the Amazon FBA business cost structure is built, you will understand that Chinese sellers have a very small advantage over the UK sellers. That is, if they play by the rules. But then again, not every seller in the UK plays by the rules anyway, so you can’t pick one nationality and blame them for all the nasty black-hat tricks that are being played out on Amazon, right?
Yes, I agree that Chinese sellers are dominating eBay in many goods categories—especially for small items where they can take advantage of super-cheap shipping prices, sourcing prices and sell all kinds of products for rock-bottom prices. On eBay, price is everything, and the cheaper you can sell an item, the more business you will get.
Amazon is a different game, though. First of all, to make it work, you do have to use FBA, which means that Chinese sellers have to send their goods to the UK (or Europe) in BULK and can’t take advantage of the super-cheap shipping prices that China Post offers for small AirMail packages. So, they have to use couriers or freight companies and basically pay the same prices for shipping as we do.
Secondly, as they have to store goods in the UK or EU, they have to register for VAT from day one. This actually works as a disadvantage to them, as UK-based sellers, for example, can start an Amazon FBA business and NOT register for VAT until they reach £85k in sales for the last 12 months.
Lastly, Amazon FBA fees, Amazon seller fees and PPC costs are exactly the same for ANY seller, regardless of whether they are UK-based or China-based. The playing field is exactly the same for everyone.
The only real advantage Chinese sellers have is in the sourcing process. Obviously, it’s much easier for them to find the best/cheapest factories and negotiate lower prices and terms. Or, if it’s a factory that sells directly on Amazon, their costs will be even lower. But most factories don’t do this. They don’t sell on Amazon directly as they don’t have the skills or experience to do this. Most of the time, it’s trading companies and individuals in China who sell products on Amazon—not the factories.
But it’s not like the sourcing price is what makes or breaks an Amazon business. Far from it! Product cost is actually a small percentage of your overall costs, especially when we look at cheaper products that sell for less than £20 or £30 on Amazon.
For example, let’s imagine we sell a widget for £20 on Amazon and the cost structure looks like this:
- Item cost (landed) – £4
- FBA fees – £4
- Seller fees – £3
- PPC costs – £5
- TOTAL: £16
This would leave you with a net profit of £4 per unit sold, while the total cost incurred was £16 to achieve that £4 profit. The item cost was just £4 out of that £16, or 25%.
Now, let’s take a look at the same situation from a Chinese seller’s perspective:
- Item cost (landed) – £2
- FBA fees – £4
- Seller fees – £3
- PPC costs – £5
- TOTAL: £14
So, the Chinese seller managed to source the product at a 50% discount (which is very unlikely, unless they are indeed a factory selling directly on Amazon), and their overall costs are £14, leaving them with a profit of £6 per unit sold.
Sure, £6 profit is better than £4, but it doesn’t mean that both sellers can’t compete and make money selling that item.
Also, if you take VAT into account and imagine that both sellers are new to Amazon, the UK seller would actually make MORE money as they wouldn’t have to charge VAT on their sales, while Chinese seller would have to do this from their very first sale. And that would actually flip the profit numbers, making the Chinese seller the loser in terms of profitability. To learn more about how VAT works for Amazon sellers, check out my detailed VAT post here.
I wanted to give this example to simply illustrate that Chinese sellers are no better or worse than sellers/competitors from any other country.
Yes, when it comes to higher-priced items, China-based sellers will have a bigger advantage. For example, if they can source an item for £60, while you can only get the same item for £100, that’s a huge difference and a disadvantage for you. But 99% of people who are starting out on Amazon won’t even come close to selling such expensive items as their buying power will not be high enough.
More and more manufacturers in China have started selling directly on Amazon, but what did you expect? Of course they want to do this! It was only a matter of time. It’s the way the world is going: direct-to-consumer sales. More and more brands are selling directly to their customers, cutting out the middleman. That’s just how things will be, so get used to it.
You’re not complaining about Uber, Airbnb or Booking.com, right? You don’t feel sorry for travel agencies, taxi companies and big hotel chains. In the same way, you don’t feel sorry for all the wholesalers, distributors and brick-and-mortar stores that have closed down over the last decade.
There’s no point in getting frustrated by progress. Everything is changing, and you have to continue to adapt to the new reality. Don’t be that sad person who always complains about everything and tells stories about how life was great ten or twenty years ago. Just don’t be that person if you want to continue to evolve in eCommerce and make this work.
There’s another interesting angle I’ve noticed on the whole Chinese-seller agenda. I don’t know why, but many UK/EU/USA-based sellers think that, somehow, THEY deserve more than people in China? I mean, why do you think you have some sort of privilege and Chinese people can’t sell on Amazon or make a profit from it? Why do you think you deserve it more than they do?
I actually think that Chinese sellers deserve it more than us. They work much harder, they actually manufacture the products we sell, and they’re simply much HUNGRIER than we are! They have a level of ambition that most people in the UK or the USA don’t have anymore because our lifestyles are so much better by default compared to theirs.
Chinese people are happy to work long hours, seven days a week because they’re HUNGRY for a better life, money and success. No wonder US companies are opening universities in China and offering FREE education to the brightest minds. These companies understand the huge intellectual potential these people can bring to science, business and technology in the future.
We’re simply living too comfortably—that’s what it comes down to. If you study the stories of self-made millionaires, you will see that it’s not their education, it’s not their background story, and it’s not luck (in most cases). Usually, their success is built on their personal ambition and how far they want to go. If you don’t have that insatiable hunger for more and more, you will never make millions.
I know for sure that I can apply this 100% to myself. I simply don’t have that BIG ambition in me to become a super-wealthy multimillionaire. I just don’t have it. Once I reach a level of comfortable living, I basically become a lazy person (business-wise) and stop my progress. I start to spend more time with my family, travelling and less on the business stuff. That’s how I operate, and I’m fine with that.
At the same time, there are people who would continue hustling/working sixteen hours a day, seven days a week to build more businesses, make more money, etc. until they reach their goal, whether that be £10 million, £100 million or £1 billion.
Sorry, I got sidetracked, but I think it is important to understand that you can’t blame other sellers (competition) for having more ambition than you. It simply doesn’t make sense. Either you accept the rules of this game and don’t complain or quit it altogether.
Now you might be thinking that the situation is even worse than you imagined, but I wouldn’t write this post if there wasn’t a solution or way around this. You can still start a successful Amazon FBA business in the UK in 2020 and make it work. You will just have to be a bit smarter than the majority of sellers and use the RIGHT strategy.
This strategy is built for people who have limited budgets—i.e., less than £10k to get started. If you have tens of thousands of pounds to invest, you can still follow this model, of course, but for you, it may be better to use a different strategy (like higher-priced goods, for example).
This is nothing new, obviously, and I teach the same thing in my Amazon Sharks video course, but the sad reality is that most people don’t follow it or don’t want to follow it. They look for the next shiny thing or the next trendy marketing tactic, instead of using a proven and tested business model. I want you to take this post and information seriously and simply FOLLOW IT! I know that it works because:
- I have applied the same principles to my own Amazon FBA businesses; and
- I have seen many people create successful businesses in my Amazon Sharks program.
So, this stuff works. You just need to accept it AND work hard with these strategies to make your business a success.
Without going into every small detail and making this post too long, here are the three main principles you should follow to create a successful Amazon FBA business in 2020:
- Niche down
- Expand horizontally
Let’s take a closer look at each one individually.
Here’s the main thing you need to understand: the world doesn’t need 46 garlic presses with different brand names on them. It’s a waste of resources, Amazon’s real estate (search results), people’s time (browsing through all those identical results) and your time and money.
The days of private labelling in competitive niches are over. Branding, in most cases, is NOT enough to make it as a success on Amazon. You should still create an amazing brand for your product, of course, but you can’t rely on that alone.
Branding strategy alone worked very well ten years ago on eBay and three to five years ago on Amazon, but with most product categories becoming more saturated and people getting better at branding, it’s simply not enough anymore. Yes, you can still find niches with low competition and stand out there with branding alone, BUT it won’t be for a long time. Other sellers will enter that niche sooner or later. When that happens, you will be doomed if all you have is a pretty brand.
So, the only way to create a long-term business and have a sustainable product on Amazon is to think outside the box and come up with a unique product.
Or, at least reinvent something around that product, the use of the product, its packaging, shape, materials, etc. The more things you change about the product, the better. If you successfully merge a great BRAND with such a unique product version, you will stand out in the search results on Amazon and will make a profit. The best part is that when you have such a unique offer, price is secondary, as I will show you with this example:
I am personally involved in the supplements market and love to research new trends and products in this niche. Collagen is one of the product categories I have a personal business interest in, so I have done a lot of research in this category.
It all started a few years ago with people selling collagen in tablets or capsules. Then, everyone realised that the dosage in these capsules was far too low, so collagen powder took over. Companies like Vital Proteins built a $100M-a-year business around selling collagen powder.
On Amazon UK, it all started with just a few sellers selling the powder in 300g to 450g plastic jars. Some sellers cut their costs by using pouches, but most are using plastic jars. Some offer free spoons, some don’t.
Either way, if you search for “collagen powder” on Amazon UK, you will get dozens of results. They will all seem virtually identical to you, especially if this is your first time buying collagen. You will basically see different designs/branding of the same product, and you will most likely go with whichever one has the best reviews or the best price ratio.
Most people won’t even realise that there are different sources of collagen, different manufacturing processes, various origins (China vs EU vs USA), etc.
Of course, you can garner some attention by selling a super high-quality product in this space, and customer reviews will reveal that, but in the search results, all of the products will still pretty much look the same.
So, what is the solution to a situation like this? How can you stand out in such a competitive niche?
You create a unique version of the product. A good example is this listing:
They have created a liquid form of collagen supplement, packed into small, daily-dose sachets, which creates a unique offer and product in the marketplace.
This listing currently makes more than £23k in sales per month (according to Jungle Scout), and the best part is that their pricing is CRAZY HIGH!!! They sell fourteen sachets of the product for £33.99, which means they have super-high margins on this product. I can guarantee you that the whole pack doesn’t cost them more than £10 to manufacture. In fact, I think it costs them less than £6 to £7 to manufacture this product because when you look at the ingredients, they’re super-simple:
Hydrolysed Marine Collagen (65%) (fish), Water, Preservative: Citric Acid, Antioxidant: Vitamin C, Sweetener: Stevia, Natural Lemon Flavouring.
The most expensive ingredient here is marine collagen, which costs about £20 a kg directly from a manufacturer. All the other ingredients are super-cheap, which means that the ingredients for the whole pack cost no more than £3 or so. Then there’s the box, sachets and manufacturing costs. As I said, the total cost of the product is definitely below the £10 mark—and they’re selling it for £33.99!
That’s what I call a unique angle and a creative approach to a market that is very saturated.
“But, Andrew,” I hear you say, “I don’t want to build a factory to manufacture custom products like these!”
Well, you don’t have to! There are plenty of manufacturers and co-packers who could manufacture these items for you. This specific collagen product is made in the UK, which means that they’re simply sourcing from a factory that creates similar products. They outsource the manufacturing process so they don’t need to build their own factory. At least, not in the beginning.
Obviously, this is a very extreme example due to the massive competition, but the same principles can be applied to any product and niche. And as I said, even if, at the moment, you don’t have much competition in your niche, they will come. So, you better be ready by having a unique product already worked out.
2. Niche Down!
The next element in this success formula is niching down. By that, I mean:
DO NOT get into competitive niches with massive sales numbers, especially if you’re just starting out.
Let’s consider the same collagen example. Yes, it’s a super-popular product with sales worth hundreds of thousands of pounds per month on Amazon UK alone, BUT the competition is also extremely high there.
I showed you one good example of someone thinking outside the box and coming up with a unique product in the collagen niche, but most people in that category basically sell the same product in different packaging. It’s no good.
So, unless you can come up with a great, unique product idea, STAY AWAY from competitive niches. I know that those crazy-high sales numbers can blind you and make you dream about how much money you could make there, but trust me, when you start selling in a competitive niche and are hit with £5 PPC prices and nasty competitor tactics in the form of fake reviews, you will quickly realise that there’s no such a thing as free lunch on Amazon…
For that reason, I personally follow a different strategy, and I recommend you do the same:
Work in niches that are smaller than average. Sell products that don’t attract attention from too many sellers.
Yes, this means that you will make less profit per month from each product in your portfolio, but the risk of getting started is also much smaller.
I talk in detail about how to pick good products with low competition in my Amazon Sharks course, but to give you some indication of what I consider a small niche with little competition:
- Total monthly sales for top-twenty listings will be in the region of £10k to £30k;
- 90% of the top-twenty listings will have less than 50 to 100 reviews, with many having just 10 or 20 reviews.
This is a simple filter set you can use with the Jungle Scout Chrome extension to quickly see the size and competition for any given product. There are lots more to look out for, but this article is not about that.
The main idea of going with such products is that, with little to no risk, you can start making money on Amazon and build your business on a stable foundation.
Yes, this strategy will require more time and patience. You won’t be able to quit your day job with just one product, but I also believe that you will sleep better at night, and, in the long term, you will have a more stable business in place.
It’s a question of what you would prefer:
- One product that makes £5k in profit per month;
- Ten products that each make £500 in profit per month.
I’d take option B any time, as I know that it’s a less risky business model in the long term.
It’s also a question of perspective, I guess. We now live in a day and age where twenty-two-year-olds are raising millions for their start-ups without even having a plan for how it will make a profit (it doesn’t matter as they just want to flip it a few years later). Every three-month-old business on Shark Tank is now worth $1 million (or more), etc. This bubble will burst one day, but it has totally f****ed up reality for so many people.
Call me old-school or whatever, but to me, a product that can make £500 to £1000 profit per month still sounds like a good deal and an investment worth making. On Amazon, over time, you can build a portfolio of 5, 10, 20+ products like these in small niches and create a very good living for yourself WITHOUT risking it all on just one product.
Lastly, I also want to mention rankings. Everyone is so obsessed with getting top-three rankings on Amazon, and I get it, it’s so lucrative to be in those positions. With all the free traffic you get, it’s great! But most newbies don’t realise that there’s a cost for everything, including those top-three rankings.
In most niches, especially the competitive ones, to get into the top-three rankings, you:
- Have to get lucky (sometimes Amazon simply prefers a listing out of the blue);
- Have an amazingly high conversion rate; and/or
- Burn an awful lot of money on PPC and external traffic to get a super-high sales velocity.
Unless you get lucky, it will cost a lot of money to get into one of the top-three positions. You will lose a lot of money on PPC and external traffic before you get there. Of course, if the niche has very low competition, you can get there quicker and cheaper, but it will usually still be expensive.
What do I do? I don’t care that much about getting those top organic rankings. I know how much they cost, and I also know that it’s not always possible to get there because your listing conversion rate won’t be good enough.
My strategy is to follow a clear launch plan, build up sales velocity for keywords that convert well, and be happy with whatever ranking Amazon gives me after I have done this work.
Usually, it’s somewhere between the 5th and 10th position on average. I also do get lots of top-three positions for smaller, long-tail keywords, but not that many top positions for MAIN keywords. As I know the cost of it, I simply don’t bother.
I don’t want to burn all my profits on PPC just to get to that top search position. What’s the point? There will always be someone with bigger pockets who can outrank you the next day anyways.
The way I increase the overall profit for my business is to have a diversified product portfolio with a low to medium sales volume, and then I….
3. Expand horizontally!
Yes, this is the best thing I have done in my business for years. I started selling into Amazon EU marketplaces. I have seen phenomenal success.
In fact, more than half of my sales now come from EU Amazon marketplaces, and what I like most about this whole thing is that I really feel safe and stable in a situation like this with dozens of products spread across five websites (soon it will be six, if I decide to join the Netherlands platform). It means that each individual listing has to make just few sales a day and I have a very solid monthly profit guaranteed.
Seriously, just think about: if you work on your Amazon FBA business for next three years and build a nice portfolio of ten products by following the criteria I have explained in this post, you will have fifty product listings. Even if you sell just three units a day (on average) from each listing, that’s 150 sales a day. Even if you make just £2 in profit on each sale, that’s £300 profit per day or almost £10,000 per month.
Suddenly, it all comes together, right? Yes! And this formula has worked for so many people, including me. All you have to do is pick a product with low competition, in a small niche, create a unique version of it, brand it properly and launch it sensibly without burning too much money. Rinse and repeat as many times as you can and as often as your budget/cashflow situation allows.
I’m just talking about the EU marketplaces here, but if you are more ambitious, you can look into Amazon USA, Amazon Australia and Amazon Japan. There are tax implications for doing this, but once your business has reached a certain level, it may be well worth expanding it even further.
The best part about expanding your business horizontally via other Amazon marketplaces is that you don’t have to find new products! You already have a successful product, and you already have your product images and description done. All you have to do is get someone on Fiverr.com to translate the texts for you, and that’s it! There’s not much extra investment required.
I have talked a lot about my EU expansion on the blog recently, and you can find multiple blog posts on my success here:
- My Amazon.es SPAIN FBA results UPDATE! (€14,052.09)
- My Amazon ITALY FBA Business Update! (€10,846.26)
- My Amazon FBA Germany 11,586.85 EUR sales UPDATE!
- Expanding to Amazon FBA FRANCE: €4,190.53 Results UPDATE!
And that’s the formula for creating a successful Amazon FBA business in 2020! You can use any of these three elements separately and it may work just fine, but for the biggest impact, you must use all three strategies together:
Create a unique product in a small niche and sell it on as many platforms as possible!
Once you have one product successfully launched following this model, work on your second, third, fourth product, and continue for as many products as you want! If you think about it, there are no limits here as there are millions of products being sold on Amazon. I know for sure that most people (like me) will stop at a certain level when they get too comfortable, and only very few will build multimillion-pound businesses, but nonetheless, the opportunity is there.
Obviously, this is just an outline of the strategy. There are hundreds of smaller things you need to get right, but even if you just follow these rules in the beginning, you’ll have a much higher chance of succeeding. Everything else you can learn and fix along the way as you make progress.
Please understand that this process takes time. There is no QUICK way to do this! You will have to spend many hours on each product you research, and you will often have to drop the idea at the last minute when something bad comes up. That’s just part of the game. You have to be ready to work hard—period!
Also, I see so many people in Amazon FBA groups on Facebook who are spending their time on numbers and posting Jungle Scout screenshots. They think that they can magically find a product that has super-high demand with low competition. Even if you find such a product, by the time you launch it, the competition will already be there—I can guarantee you that!
This game is NOT about numbers!!!
It’s all about listening to customers and finding unique angles so you can best serve the customer’s needs.
If we go back to my collagen powder example: I wonder what exactly those people were thinking when they launched yet another identical product with a different label in that niche? Sure, some of them got lucky and make a nice profit every month, but knowing how expensive clicks can be in the supplements market, my guess is that most of the sellers in that niche burn all their profits on PPC.
Anyways, I really hope that this post will open your eyes and will help you find the right path to starting a successful Amazon FBA business in 2020.
If you want to learn more about how I build and run my businesses, check out my Amazon Sharks course here. It’s got 20+ hours of step-by-step video lessons that cover everything you need to know about starting an Amazon FBA business from scratch. With the course, you also get my personal support and free updates.
If you can’t afford the course or simply don’t want to take it, feel free to join my FREE Facebook group here. It won’t cost you a penny to learn from other sellers, ask questions and get advice.
Lastly, I’m also giving free advice in the form of replies to comments on this blog. So, if you have questions related to anything I have covered in this blog post, please leave them in the comments section below. I will personally reply within 24h, Mon-Fri.