Amazon FBA The Truth

If you are reading this post, it’s because you are interested in the Amazon FBA business and you must have already watched hundreds of videos, spent hundreds of hours, and even thought about buying a course from one of the gurus you found online. So you will be interested to know the truth about Amazon FBA from this post.

I’m going to tell you about my experience, as an example of what the Amazon FBA world really is. My case doesn’t create jurisprudence, but it shows a reality that I didn’t see in many YouTube videos, in contrast to the hundreds of videos telling wonderful stories.

Is Amazon FBA a Passive Income?

Let’s start at the beginning. If you entered this world looking for a passive income that will allow you to achieve financial freedom in an automatic and relaxed way, I can assure you right away to forget about that idea.

The first thing you need to keep in mind is that it is a business like any other, it takes a long time to start and manage, so it is difficult to combine with another job. Although if you are organized it is possible, it’s not easy. And above all, forget about those who say you should only spend an hour a day or even a couple of hours a week.

Online there are hundreds of videos to learn the steps to follow or tasks you will have to do before starting or once you are already selling your product, but the hard part is when you get stuck in the thousand and one obstacles you will find along the way.

Amazon FBA: My Experience

I started to get seriously interested about a year ago, although I had already watched many videos before that.

By July 2023, I thought I would try it, not with the idea of reaching the thousands and millions of euros that many sellers promote, but with the idea that it would be great to have a small recurring passive income every month, in addition to my main source of passive income, which is investing in P2P Crowdfunding loans (if you don’t know what that is, I invite you to read some of the posts on my website like P2P Crowdfunding for Beginners).

For now, I think it’s one of the only real passive income businesses out there that I’ve been able to successfully test.

Ask for Our Services on P2P Crowdfunding Loans Investments

HOW TO START AMAZON FBA BUSINESS

But let’s go back to the Amazon world. As I said, in July I decided to take the plunge and was presented with 3 options: the first was to hire a course from one of the network experts who show lots of videos with successful experiences from hundreds of students.

The second, after watching many tutorials, was to start on my own, and finally the third option, and the one I chose, was to do a hybrid: learn with videos but hire a Virtual Assistant (VA) to accompany me from product search to product launch.

Why did I choose this option? Because the courses I saw were skyrocketing in price, already talking about more than €3,000, and I know those courses. Their creators make them and it requires a lot of effort, but then they just want to start selling and charging, and they rarely update the videos and syllabus, so in such a changing world, within a few months, 30% of the information, sometimes the most valuable, is outdated.

Also, when you see that the same people who sell the course for €3,000 sell you the creation of your LLC company structure for €900, when I created it in a few hours for €150, it’s clear that someone who doesn’t charge a fair and reasonable price for creating an LLC won’t charge you a reasonable price to help you with your Amazon business.

Additionally, when you look for unsuccessful cases of these courses, which there must be many, even if it’s because the user is useless and the course isn’t to blame, you find that there isn’t a single bad reference. And I’ve already found some cases of people receiving contacts from teams of lawyers for the few who decided not to speak well of one of these courses.

I think the most important thing would be to join their student chats, where you can feel supported and advised on problems you don’t know how to solve and that delay and block you, and with how bad Amazon’s customer service is, it can take more than a week to get an answer.

So, the student groups were the key point for me, but I also know how they work, and with 1,000 people writing, sometimes it’s just noise and not very effective for specific problems you may have.

Regarding going totally on my own, I immediately understood that it’s such a complex subject that no matter how many videos you watch, you would have thousands of questions that would take many days to solve.

Therefore, I thought that hiring someone to accompany you from the beginning, for about €450 versus €3,000 for a course, was the best option. You get more personalized treatment, you learn more, better and safer, so I went on Fiverr and hired a guy who seemed knowledgeable and professional.

STARTING THE AMAZON FBA BUSINESS

We started working there at the end of July 2023. While he was looking for the product to sell, I was doing some of the administrative work that needs to be done.

Open the Amazon Seller Central account, open a checking account, since I wanted to sell in the USA, I created an LLC, set up a mailing address, bank account, telephone, apply for a trademark and register it, hire someone to design the company logo, and a long etc. that takes time and… money, so start preparing your wallet!

INVESTING ON AMAZON FBA

Another small criticism of course sellers, whose priority is to sell courses, is that they greatly downplay the time this business takes and especially the money needed to start selling, without considering the price of the course itself. We’re only talking about the costs of Amazon, brand registration, logo creation, listing design, A+ content, administrative and accounting management, computer tools, and of course product price, transportation, customs, and a long etc., which is far from the information that you can start with €3,000 to sell on Amazon FBA.

My VA proposed about 3-4 products where he saw potential. Of course, I already hired the mandatory software Helium 10, which is $80 per month. With Helium 10, you can see how much the selected products sell, how many competitors there are for your product, what sales they make, etc. It’s a very good product, but it’s not cheap, especially if you don’t use it because you haven’t even started selling after more than 10 months since you hired it.

CHOOSING A PRODUCT TO START SELLING ON AMAZON FBA

But let’s move on to product selection. After reviewing the products, which according to my VA with the information presented are adequate and with sufficient margins to make a profit after all the expenses that would come (logistics, advertising, transportation, etc.), everyone recommends that the product should give you a 25% margin to be a good product. I think that’s where most people lie, because without having sold even one product, I think in the end if most people get 10-15%, they’ll be happy… I’ll explain why this assumption later.

Of the 4 products presented, I selected two as the strongest candidates. Then, as recommended, you analyze customer feedback to see how to improve them, because as the gurus say, it’s not enough to launch the same as others, you must differentiate yourself and improve your product.

So I was able to write down the 5-6 main defects that users complained about my ideal product. Then you enter the phase of going on Alibaba and trying to deal with Chinese manufacturers that offer your product (that’s very easy to do).

NEGOTIATIONS WITH MANUFACTURERS

At first I let my VA handle it, and he started contacting manufacturers telling them that we wanted the product with these improvements. That’s when the first reality begins: because of the time difference, you only coincide a few hours with your manufacturer’s working hours, so any question is very easy to answer the next day, and if you ask him another question, he’ll answer you two days later.

And then the days and weeks begin to pass without any progress, and I’ve already started to learn some points. The Chinese are fantastic at selling repetitive products; they have 100,000 bottles in their warehouse, you pay and they send you 500, but if you think you want to make them with a different color and shape, there’s no longer as much interest, since in a distribution chain what matters is manufacturing the same product wholesale, not stopping machines to create adaptations and customizations for millions of demanding customers who write to them every day from all over the world.

The negotiation can easily take more than a month or a month and a half. You ask and they always say yes to everything, and then tell you that they will send you a sample if you want. You ask them to take a picture to see if what you’ve been talking about for days is what they have, and they say that what they have is like that, and then you see that it doesn’t look like anything and you start all over again.

They told me they could make my product with additional protection and with a material, after weeks negotiating prices, squeezing, saying that my boss has to approve it next week at the weekly meeting, etc. So after more than a month, the seller arrives and says that the technicians have said that this material can’t be done, it doesn’t even exist, so he offers me another similar one.

But since it wasn’t very similar, I had to start from scratch again.

And not only that, but when you don’t trust the seller, you start talking to several sellers at the same time, which increases the madness, and I even got directly involved.

You can create a mass request, an RFQ, where you publish your product with its requirements throughout Alibaba and the sellers themselves make you offers.

Then the madness multiplied by 10, and offers started coming in, each with a price, and you had to try to figure out why those differences, which took weeks of exchanging messages in the few hours of matching or getting up at 6 AM European time to try to match more hours with the manufacturer.

Think of a factory with a room with 20 operators answering thousands of questions, budgets, orders, etc., and since thousands of messages don’t end in anything or are simply curious inquiries, they don’t put much interest, and many times you have to insist.

So it was already October, and I still hadn’t been able to get a final price offer for my product. And then the end of the year begins, when manufacturers only think about taking new orders for the Christmas campaign, and then a new customer no longer has priority and you are forgotten.

In October, after talking to the person in charge of my salesman, since he gave me bad information that made me waste a lot of time and then started trying to change prices with unethical behavior, we finally got them to send us the final product, a sample by plane.

Since the price of the product was $12 but the sample cost $200 (sample price is $50 plus express air transport), the manufacturer created a “false” invoice that said there were about 15 products to reach the value of $200.

We waited about 12 days for it to arrive, and upon arrival, customs, which isn’t stupid, sees a small package that was supposed to contain lots of things, so the alarms went off and they started asking for information. We had to explain that there was only a $12 product inside despite the fact that it was indicated otherwise, and that we gave authorization for them to open it and see that we weren’t lying. Another 20 days stuck in customs, and when it finally arrived home, we saw that it was nowhere near the quality or the product we had ordered.

It was by then November, and we had to start again more seriously with 3 other sellers. After more weeks of negotiations to finalize prices, we got two who seemed to have everything clearer, and decided to send two samples, another $80 more per sample by plane, another 12 more days. Upon arrival, one wasn’t the best quality and the other one was fine.

At this point, after the anger of the first deception with the first manufacturer and the weeks lost in customs, the first frustrated and disappointed VA offered to retire and return my money, that he was sorry and that’s it.

Again to find a new VA, explain the product, features, etc. Of course, we were already in the Christmas period and everything slows down a lot.

LISTING AND CONTENT A+

By January, I got a new VA and we started to close the deal with the selected manufacturer with the best product. At the same time, I started looking for an image designer for the listing and for the A+ content.

On Fiverr, I hired up to 5 different people. The first person missed the deadline by a week and sent me very low-quality photos. I had to look for another person. Another week was wasted, and the photos they sent were terrible. I then found someone else and asked them to send me the photos one by one as they finished them, to avoid wasting more time. It took another month until I finally received the photos, which weren’t great but at least acceptable. I spent an additional $150 for these photos.

MANUFACTURING AND INSPECTION

And when I went to make the first payment for the product so they could start manufacturing it, they said that it was Chinese New Year, and that the factories were closed for about 3 weeks and that they wouldn’t start manufacturing until March. Then they started manufacturing, and at the end of April, I have the product in the warehouse.

After paying approximately $180 for the inspection, you discover damaged products and dented boxes. The manufacturer assures you they will replace them, but you won’t know if they were telling the truth until customers start complaining. It’s unclear whether the damage occurred during shipping or if the manufacturer’s replacement promise holds true. Alternatively, you could spend another $180 to conduct another inspection, which typically covers only 10-15% of the total goods and may not catch everything.

SHIPPING PRODUCT TO AMAZON

To secure a good price, I had to purchase 1,000 units at $12.50 each, totaling $12,500 in product costs. This amount is much higher than the $3,000 often suggested by course sellers for starting a business. On top of this $12,500, I needed to arrange transportation from the factory to the port in Shanghai, and then have Amazon transport the products to their warehouses. The shipping cost was $1,000, with an additional $200 for local freight. Customs fees amounted to $350, and I anticipate more customs taxes in the future.

By the beginning of May, the product hadn’t even left the manufacturer for the port in Shanghai. There was a week and a half delay due to issues with the Amazon Global Logistics application, which prevented us from contracting transport. We had to open multiple claim cases with Amazon to get more information, causing further delays.

If everything goes smoothly and the shipment by sea takes a month, I hope to start selling my first product by the end of June, nearly a year after I started this venture in July. So far, I’ve spent over $15,000 and can’t say I’ve sold a single product. It’s not because I’m incapable — I even hired two virtual assistants to help me during this launch year.

NEXT STEPS

Then will come the world of advertising; I’ll tell you about it when the time comes. But what I see reading and reading in forums is that it’s a devilish world where all the possible margins promised and studied on paper for any product disappear.

For starters, you have to give away about 20-30 products for the Vine program that allows you to deliver your product for free to Amazon-selected customers with the commitment that they will rate you and write you a review, which doesn’t have to be positive, but at least you’ll start getting reviews.

If you don’t have reviews, you’re nobody and your product won’t be positioned on the first pages. Nobody searches for a product on page 6 of Amazon, so when you start selling, there’s only one way to gain positions: lowering the price and waiting to gain reviews, and spending money on advertising.

My two virtual assistants have already told me that in the first 6 months, it will be normal to sell at a loss or without losses, but without profits, meaning what I sell will earn me 0 euros. Additionally, advertising in the USA must be crazy, and if you read Facebook groups, that’s where people get more desperate and where they ask for more help hiring the services of experts.

CONCLUSIONS

In other words, to get your keywords ranked, you’ll have to spend a lot of money. This means bidding more than your competitors and constantly adjusting your campaigns. You’ll be playing with different options and strategies, experimenting with trial and error. Many people despair when their 15-day budget is spent in less than a day, and they have to keep putting money in or stop bidding, which could sink your product.

There are many groups on social networks with desperate people looking for advice or seeking to hire experts to manage their ad campaigns. They’re trying to save their desired profit margin and avoid ending up working just to pay the bills or even losing money.

The information on Amazon is scattered, and there isn’t a single screen where you can see your real situation—sales, expenses, income, etc. So, you end up buying other software to extract information from Amazon’s complex systems. This helps you find out if they paid you for goods damaged in their warehouses or during transport, or for returns that customers made, or the amounts spent on advertising.

So, everyone talks about how much they bill, but few say how much they actually earn, which is the primary goal of any business. Only net income matters in the end, and it’s not always easy to determine. I’d like to know the margin that everyone talks about as a goal—25%—but often it’s closer to 10%, as I’ve learned from many sellers.

To achieve a 10% net income, you have to spend a lot of money and deal with headaches, customer returns, and bad reviews (sometimes from your competitors trying to hurt you). These issues can ruin your day and lower your rating, which reduces your sales significantly.

And that’s not all. Hundreds of sellers complain about hijackers reselling their product, accusing them of plagiarism, or undercutting prices. When you complain to Amazon, they often do nothing. Or worse, you wake up to find your listing blocked, and you face a desperate struggle with customer service that responds automatically.

There are people who are doing well, even very well, no doubt. However, after claiming a turnover of 10 million euros, they may not even earn 1 million euros in profit. To achieve that, they’ve had to manage 40 products with numerous problems and have hired several people to handle products, advertising campaigns, data analysis, and more. In other words, their passive income is minimal.

In the past three years, I’ve earned a net income of 12.5% on the money invested, both my own and my clients’. This means that with just one hour a day (although not completely necessary, as one hour a week would possibly yield 12%), I check my investments daily to ensure maximum income. This is in stark contrast to the 1% of the problems that Amazon FBA generates.

It’s clear that the primary beneficiary of this business is Amazon, which employs millions of workers to do the heavy lifting, risking their money and time. When a product performs well, Amazon either sells it themselves or charges you for managing your product and advertising campaigns, making it the largest e-commerce market in the world and reaping the millions in profits.

And finally, let’s talk about selling courses. It’s pretty clear. Many claim to earn millions, but in reality, after covering all expenses, they only end up with around 10% of the total revenue. To make things work, they’re often compelled to create Amazon course products, leveraging their knowledge to generate profit after the sale of these courses. Some of the most well-known Amazon experts, who claim to make millions with hundreds of products, have even admitted that they earn more from selling courses and mentoring than from direct product sales.

It’s great that they provide help and that people are inspired to start, but I hope they’re not misleading those with limited funds into thinking they can start with just 3,000 euros and be selling (not necessarily earning) within two months. The truth is, they don’t always disclose the full picture of this business. It requires a substantial financial cushion to cover initial expenses.

Your first order of 1,000 units won’t bring in much income, and if all goes well, it will take 6-9 months before you start seeing net profits. Even then, you’ll need to reinvest by buying another 1,000 units, paying for more transport, and spending on advertising just to begin earning your first income.

So, I’ll keep trying, and I hope to update you when my product finally goes on sale. I’ll start running advertising campaigns, getting my first customer reviews, and assessing the real margin and net income. If I achieve a 10% income, I’ll be satisfied, as long as it doesn’t take up more than 20% of my time, compared to the 12.5% income and 1% of my time that I generate from passive income by investing in crowdfunding platforms.

I hope you find my reflections useful. I’m not trying to be negative; perhaps I had bad luck with the suppliers I contacted in China. Improving a product, as everyone recommends, complicates the manufacturing process, but at least it creates a small barrier to entry by making it less easy for competitors to copy the same product. I also faced challenges due to Christmas and Chinese New Year, which wasted a lot of time. Additionally, I had bad experiences with image designers, and the time differences between China, Europe, and the US made negotiations and conversations lengthy.

However, what frustrates me is seeing hundreds of course sellers encouraging young people or those with limited resources to quit their jobs and invest their savings of 3,000 euros with promises of earning income in just 2 months. If I can share my experience and make them reconsider, I’ll be happy.

I’m not trying to discourage them from pursuing this path, but I want them to know the truth: they will face many challenges, need to invest a lot of money, will take many months to see results, those results won’t necessarily be profits, and turnover isn’t the same as net income. Many times, they’ll feel like giving up when they can’t see the point anymore.

That’s the reality of Amazon, and once you know the rules, I encourage you to play the game—but without deception, and with the truth upfront.

The same goes for many other passive income opportunities that are sold as magic formulas to achieve financial freedom quickly. However, that will be the subject of future videos.

Thank you very much for making it to the end. I look forward to your comments and reflections. It would be nice if other users shared their real stories of how their beginnings on Amazon went and whether their experience was more akin to my own, as opposed to the idealized stories sold by gurus on social networks. I encourage you to like the video and subscribe to get more of my own videos about the truth behind various passive income streams.

LAST AMAZON LAUNCHING PRODUCT UPDATE

As I mentioned earlier, I began my journey with Amazon FBA in July 2023, and now, as May draws to a close, I want to update you on where things stand.

In just a few days, my product will finally be shipped, but it will take another 40 days to arrive in the US. The last hiccup occurred in early April when the products were already finished. It took another week for the inspection company to uncover some defects—damaged products, boxes, and some issues with product finishing. It then took another 10 days for the manufacturer to repair them, relying on trust rather than another inspection (since acceptance percentages were within the set limits, it was deemed acceptable).

Any damaged product would result in a negative review, which holds more weight than 20 positive ones, so there was little I could do aside from reviewing a thousand products.

Once everything was set for shipping, I asked my VA to arrange the shipping through Amazon Global Logistics AGL, expecting it to be cheaper and more efficient, as Amazon oversees the entire transportation and distribution process through its warehouses. However, I encountered a problem filling in the data—the final click on the acceptance button wasn’t activated.

I spent over three weeks exchanging messages with Amazon Support, who repeatedly requested screenshots of the issue but provided no solution. Frustrated, I finally decided to spend more money and hire an independent carrier.

To add to the challenges, Amazon initially allowed me to ship the entire product to one warehouse, only to suddenly require it to be sent to five different warehouses, significantly increasing costs. Despite these setbacks, I’ve paid and am now waiting for the merchandise to begin its journey to the US. It should arrive around the beginning of July, almost a year after I started, having spent approximately 20,000 euros without even beginning to sell.

And let’s not forget the costs of advertising campaigns, especially PPC, which requires a substantial investment to gain visibility on the American market. On top of that, there’s another 200 euros for the Vine program to acquire the first 20 paid reviews that Amazon allows. The challenges continue…

I’d like to see those self-proclaimed gurus who sell courses explain how they’re making thousands of euros in profit with just 3,000 euros and in 60 days. It’s a harsh reality, and the hurdles are far from over.