Starting an Amazon FBA business can take time, hard work, and dedication. There would be a lot of trial and errors, ups and downs before you set the pace. Though the logic is simple, and businesses can be profitable, it may take a while before you succeed. Many new sellers make up to 3-6 months to pick up the momentum.
You have an option to buy an Amazon seller account just like you would buy a brick and mortar store. Amazon FBA business is profitable to both buyers and sellers. We know each business is unique. However, there are certain factors that you need to consider while buying an Amazon account.
Buying an Amazon account is as simple as updating your seller central account with the latest information. However, you need to know a few things before transferring the ownership.
I’ll provide my two cents in this article on all the things you need to know while buying an Amazon FBA business.
What should you know before buying an Amazon business?
You need to keep a few things in mind before buying an Amazon business. Here’s the list:
The first thing to do before considering to buy an Amazon seller account is to see the account records. Managing accounting records isn’t an easy task to do. You can also take help of a variety of accounting services such as Xero or Quickbooks, which can ease your job.
Learn about the suppliers
Suppliers are one of the most critical aspects of Amazon business. They play a major role in determining the success of your business.
Learn thoroughly about the agreements, understand the terms, lead times, and unforeseen costs involved. Talk to the manufacturer to get an idea of what working with them will be like.
Take time to discuss the following:
- Quantity price breakup on individual items and check if you get discounts for buying large quantities.
- Lead time. This means how long it takes to produce and ship the item.
- Manufacturing standards. See if the manufacturer can produce any certificates that attest the quality of the product which you may need to submit to Amazon if required.
It is always good to establish proper communication with the suppliers. Be clear and concise, and be sure that both parties are aware of the terms of the agreement. Do not try to squeeze additional cost savings as it may hurt your relationship with the supplier, or hurt the product quality.
Besides, ensure the legal aspects of the product are covered. If you are not well-versed with the process, get help from an experienced lawyer to review the process and product safety data sheets.
Understand Advertising metrics
You need to make use of Amazon sponsored ads to be visible and stay competitive in the marketplace. So get a hold of as much of advertising data as possible. Amazon only has the advertising data for the past 90 days, so find out as much as you can. Take a look at the monthly and bi-monthly reports, and gain insights into the PPC metrics. This helps you understand the CPC rates, ACoS, and other important metrics you need to know to stay ahead of the competition. You can also learn about product keywords and past trends. This helps you determine the profitability of an ad campaign and helps you set realistic and attainable goals.
See how the advertising costs fluctuate over time based on the campaigns. This helps you determine the market and competition.
Check seller account health
The Amazon account health is crucial to understand the viability of the FBA business.
Why? Because every seller must meet specific criteria to sell on Amazon. Failure to do so will result in account suspension. So make sure you don’t purchase an Amazon seller account with poor account metrics. Check the feedback score to understand the account health. This is important because once suspended, reinstating the account is extremely hard, and you don’t want that in the first place. Do you?
Calculate Amazon FBA fees
Amazon sellers can find it hard to estimate the profits from sales. The main reason for this is most of them don’t understand how Amazon fees work. So you need to get a grip on the storage fees, referral fees on Amazon which are unavoidable. If you are using FBA, you might pay up to 15% to ship your product. On the other hand, referral fees can take from 8-20% of your gross revenue.
You need to check all these figures thoroughly and make sure that the seller isn’t showing profits to deceive you.
Note: If you want to check the fee break up, you can make use of SellerApp’s free Amazon FBA calculator.
Take a look at giveaways and promotions
There are many ways to influence Amazon’s A9 algorithm. Using product promotions and giveaways to build sales history is one of them. At times, using giveaways to clear your inventory can be profitable, but that is not the case always.
Sales with discounts and promotions are still counted on Amazon. However, it’s not sustainable for everyone. So, don’t forget to check the promotional history.
Study your competition
Before you pick a business, studying your competitors is essential. Take a look at their top ranking keywords, reviews, and fulfillment method. There are a lot of free tools available to help you see the big picture. You can also download the SellerApp free chrome extension and take a look at your competitor’s fulfillment method, average sales, BSR, and other key metrics that aid your success.
Factors influencing the value of Amazon FBA business
Along with the aforementioned points, you need to keep in mind the following factors in buying an Amazon seller account. These factors can influence the value of the FBA business.
- Type of business
- Age of business
Each of these factors plays a role in determining profitability while selling the business. Let’s look at them one by one.
Type of business
You might already know that we have:
- Private label
- Proprietary products
You own your brand, but people can buy the same product from elsewhere too. You’ll get some leverage, and this type of business can be more attractive to the buyers as the supply is consistent. Since the item has sales history, the chances are high that the product will continue to sell.
In this model, a reseller will buy products from a wholesale store and get a margin for selling it on Amazon. This model is also called retail arbitrage. This type of FBA business can be less lucrative for buyers for numerous reasons.
- First, the business and the products can be highly volatile, and the competition isn’t low either.
- Everything must be bought and sold individually, and you cannot guarantee that you will find the item during high seasonal demand. So it can be hard to manage demand-supply.
- A buyer is only buying access to the seller central account. So you may not be able to make much profit.
On the other hand, if you have exclusive contracts with wholesalers, then it could make your job easy.
Only the seller or his company sells a particular item or group of items. It means the business is unique to the seller. So it continues to stand out and stays lucrative to the buyer.
Age of the business
The age of your business decides the value of your business while selling or buying.
- More than three years – Better
- One to two years – Good
- Less than a year – Expect offers with low value
How does selling an Amazon business work?
Selling an Amazon FBA business is straightforward. However, depending on the size of the company, the process can get complex and time-consuming. Let’s look at the steps usually involved.
- The seller decides to sell his Amazon business
- Gets the valuation of the business
- Build prospectus (with facts and figures surrounding the business)
- Find buyers to sell the business
- Negotiate price and terms of the deal
- Transfer money and all the assets
- Train the new buyer to get into the pace
Things to update after buying an Amazon seller account
Once you bought the account, here is a list of things that need to be updated:
- Charge method – You should properly update the charge method with which Amazon uses to charge you seller fees. For this, you need to update correct credit information.
- Login information – Get the correct login information from the seller and update the account information.
- Charge method (Credit card) – You need to update the credit card information so that Amazon will have the right details to charge its fee.
- Deposit bank account details – You should provide right bank account details so that Amazon deposits your amount moving forward.
- Tax details – New account owner should update their tax information such as EIN or SSN to complete the ownership of the account.
- Account name and email address – You should update your account name and email address to reflect in Amazon’s database. Amazon sends all the future communications to the same email address.
Buying an FBA business depends on your risk tolerance. Every business owner has certain goals and objectives. Of course, selling on FBA offers huge rewards, but it doesn’t come without risk. Sometimes the challenges can go out of hand. So make sure you sort out your priorities before you take up the business. If you have any questions about selling on Amazon, send us an email at email@example.com. SellerApp is happy to help!
Arishekar N has over five years web development experience and is the senior digital marketing strategies at SellerApp, Specialist in SEO, SEM and best conversion rate optimisation strategies that deliver industry leading ROI. Arishekar has helped companies through more effective search engine marketing and SEO strategies. He is most passionate about working with e-commerce companies.