Amazon Warehouse Storage:
The Perils Of Fulfillment By Amazon (FBA)

By Joe Waynick

Shipping books to an Amazon warehouse for fulfillment is a genuine money making opportunity for any successful home-based business.

In exchange for an insanely reasonable storage fee you get world-class customer service, a professionally staffed, environmentally controlled facility, and the biggest brand name online retailer in the world to hawk your goods.

As far as easy money making opportunities go, it doesn't get much easier than all the advantages offered by fulfillment by Amazon. But it's not all peaches and cream.

Despite all of the inherent advantages, FBA is not the ideal way of making money online for beginners. There are plenty of pitfalls and you have to be careful if you want to avoid financial disaster.

How The Amazon FBA Program Works

Shipping your books to an Amazon warehouse can solve many problems for a small home based Amazon book dealer.

For example, if you live in a tiny apartment you don't have to sleep on boxes of books because storage space is at a premium. Instead, you simply ship your books to one of Amazon's dozen or so ecommerce order fulfillment centers around the country.

Once your books have been received into Amazon's computer system, they're made available on their website for sale. As you can see, having access to nearly unlimited space is one of the best passive income opportunities available.

Fulfillment by Amazon can help you expand your business to a size you never thought possible.

After a sale is made, Amazon is responsible for packing and shipping the book to the customer and ensuring the entire buying experience is positive. Amazon then deducts the fees associated with the sale and deposits the balance into your checking account.

Low End Profit Margins

In the past, FBA was a great place to unload penny books.

Instead of trying to sell a book for a penny when you sell books on Amazon and shaving a few cents profit from the shipping fee, I would mark up the book from a penny to $3.99 and make a cool $1.40 profit off light weight mass market paperbacks.

At one point I was sending 10,000 mass market paperbacks a month to the Amazon warehouse in Phoenix, AZ and selling 100 to 200 of them per day. Meaning, I'd net $140 to $280 per day in profit.

But all good things eventually come to an end because that deal was truly too good to be true even though it was a legitimate money making idea.

Due to massive fee hikes at the beginning of 2012, right now, penny books listed for $3.99 that weigh 12 ounces or less yield a whopping $0.67 profit. Whoohoo!

Books weighing 13 ounces to 23 ounces yield a mind numbing $0.30 profit. From those figures you still have to deduct Cost of Goods Sold (COGS), labor, and overhead.

Not much left huh? You mean you lost money? Imagine that.

New Strategies

You can still send books to an Amazon warehouse and make a really good profit if you can adjust to a few new rules.

For starters, I advise you not to send books that have a sale price of less than $8.00 per book. If you do, you’ll be cutting your margins too thin and you may not be able to survive the next round of price hikes when you’re that close to the edge.

Leave yourself plenty of margins to allow the necessary time it may take to ring up a sale.

Playing it safe gives you the staying power to survive another year. However, raising your Amazon pricing so you only send highly profitable items will obviously cut into the quantity of inventory you can send to distribution centers.

The next strategy is to lower the maximum sales rank of books you're willing to send to an Amazon warehouse. The lower the rank, the higher your inventory turnover. And higher turnover means higher profits, so long as you're selling profitable merchandise in the first place.

Finally, you may find it helpful to focus on finding profitable niche markets of rare books and move away from the common book market altogether.

Is There A Hidden Agenda?

Some of the 2012 fee increases by Amazon have been described by many as extreme. Profit killing extreme. Cutting sellers off at the knees makes it very difficult to figure out how to promote a small business when the game constantly changes, some would say unnecessarily.

Why would Amazon do that to small business owners already having trouble making money?

It's my assertion that the smaller Amazon book seller is being actively discouraged from shipping lower priced merchandise to FBA distribution centers anymore.

Amazon wants big ticket items and my prediction is that they'll continue to force sellers to only send higher and higher priced merchandise in the future.

They’ll accomplish their goal because Amazon increases FBA fees every year and raises the inventory turnover rate to achieve their target profit margins. So if you want to continue using the Amazon FBA program, you’d better step up your game.

Mind you, I have nothing against Amazon. The last thing I want is to sound like a disgruntled book seller.

After all, Amazon warehouse space is private property and they’re perfectly within their rights to re-write the rules. More power to them. My point is that if you’re going to get into the FBA game then you need to understand the rules so you can participate without losing your shirt.

You also need to understand that the rules are constantly changing.

There are many great books chock full of ideas about how to profit from selling used books online. To find them just click the “GO” link next to the Search box below and you’ll be shown hundreds of titles like the sample books you see pictured:

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