5 Ways To Grow Your 'Fulfillment by Amazon' Business Getting an FBA business up and running is relatively simple. Growing it is where many entrepreneurs fail.

By Thomas Smale

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

REUTERS | Rick Wilking

Many online entrepreneurs are sharing news of their successes with the Fulfillment by Amazon (FBA) business model -- where client companies store their products at Amazon's fulfillment centers, and Amazon picks, packs, ships and provides customer service for those products.

Related: Fulfillment by Amazon Poses a Great Option for Those Looking to Break Into Ecommerce

The entrepreneur success stories circulating out there are one of the many reasons FBA continues to grow in popularity. But, there still isn't much information available about how to grow and scale an FBA business.

In fact, one isn't hard to get up and running: The real challenge lies in rising above the competition and expanding.

Overall, the FBA business model is flexible and convenient. By leaving warehousing and packing and shipping in the hands of the world's largest online retailer, entrepreneurs free up more of their time to focus on sales and marketing. But, the question remains, how do owners go about growing their FBA businesses? If yours is one of those businesses, here are five strategies.

1. Work within your strengths.

Are you passionate about what you're selling? Do you have connections and resources in your industry you can leverage to expand your business? One way to ensure that you continue to build and keep interest in your business over the long haul is to sell a product that you're actually excited about.

Hiring is another factor: When you're hiring, actively look for people that share a similar passion. A qualified team can help you grow your business much faster than you could do on your own.

Third, don't forget to build a relationship with your supplier; check in to see if this company is willing to help you reduce costs or improve the quality of the product. Communicate that you're in it for the long haul. If this company isn't willing to listen to your requests, you may be wise to find a new supplier.

2. Track and record your numbers

As an FBA business owner, you should track and record your financial data from day one. This will allow you to keep a finger on the pulse of the business, and if you're going to sell that online business in the future, this data will prove invaluable. Record more data than you think you're going to need, and set up redundancies for accuracy.

Also keep an eye on the cost efficiency of your business. Are you still profitable after all fees and expenses have been accounted for? In most cases, an FBA business sees an adjusted gross margin of 15 percent to 20 percent. How does your business stack up?

Many business owners don't ask themselves these questions when starting an Amazon FBA business, says Lauren Shepherd of Teikametrics. In order to manage cash flow, she advises tracking key performance indicators such as inventory-to-sales ratios, inventory turns, gross-margin return on investments, cash-to-cash cycle and days of inventory.

Related: Amazon Turns to Robots to Help Fill Holiday Orders

3. Extend your online presence with a website.

Here's the problem with leveraging Amazon as a business platform: You don't own Amazon!

And that means you don't have access to customer data. That's a problem, because if you want to build and scale your business over the long haul, this information is critical to your success.

There are tools you can leverage to gain access to this information, but it would also be wise to develop and establish your own website, to capture customer data. And there are benefits to building your online presence through a website.

First and foremost, you can begin directing some customer traffic to your site while still building awareness for your product. A website is also a great place to start collecting email addresses. By doing so, you can start sending out targeted campaigns, sharing news about promotions and announcing new products to your subscribers.

Also, note that you own the email list you build. This is a valuable asset, especially if you intend to sell your business.

4. Leverage paid advertising.

SEO is a long-term strategy, and since you can't very well start optimizing a site you don't own -- beyond the information you supply about your product -- paid advertising can be an accessible way to promote your product without making lots of small tweaks to your website and building out huge amounts of content. Indeed, it's possible to reduce customer acquisition costs by up to 80 percent by leveraging advertising.

But to be successful in that advertising, be prepared to do a lot of testing. No matter how well you think you know your business, you may not immediately land on a winning strategy. To get the most out of your ad campaigns, then:

  • Consider A/B split testing various images to see what engages your target user most. People see images first and copy second.
  • Split-test your copy. As with images, you may be surprised to discover the kind of copy that resonates with your customer avatar.
  • Gather audience data. Build your email list on your website, and use tools like Amazon MWS Customer/Order Export service to better understand your audience and build look-alike audiences to advertise to.
  • Use retargeting. Capture buyers off-site before they are gone for good.

Josh Shogren of Passion Into Paychecks advises using a combination of Amazon pay-per-click (PPC) ads and email marketing to both collect user contact information and build engagement and brand awareness.

5. Improve your best-seller rank.

There isn't necessarily a step-by-step strategy for optimizing your best-seller rank (BSR). Instead, the common belief is that BSR consists of recent sales in conjunction with historic sales.

Nevertheless, BSR is an important metric, and one that you should be focused on improving. The primary means is to outsell your competition. If this is proving challenging, keep in mind that it is always possible to pivot and change-up your product offering to go into a less-competitive category.

Customer ratings and reviews are also thought to factor into your overall BSR. Make sure to offer your customers the best product and service possible, to avoid negative reviews and ratings.

Final thoughts

Getting an FBA business up and running is relatively simple and inexpensive, but growing that business is where many entrepreneurs fail.

So, leverage the connections and resources available to you. As with any business, if you make the most of your passion and expertise, you'll have a much better chance at success.

Remember to take advantage of the various tools and resources Amazon has to offer, as they can help you make the most of the FBA opportunity before you.

Related: Learn How Same-Day Fulfillment Works (Infographic)

Thomas Smale

Entrepreneur Leadership Network® Contributor

Founder of FE International

Thomas Smale co-founded FE International in 2010. He has been interviewed on podcasts, blogs and also spoken at a number of industry events on online businesses, exit strategy and selling businesses.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics

Thought Leaders

These Age-Old Monk Practices Can Help You Lead a More Focused, Productive and Creative Life

Buddhist and Benedictine monks have some ancient habits that every hard-working entrepreneur should know.

Business News

'These People Didn't Do Anything Wrong,' But Their Standard of Living Might Plummet in Retirement — Here's Why

Most American workers feel behind where they think they should be on their retirement savings.

Business News

'I Want a Free Month': Thousands of Customers Furious at AT&T After Widespread Outages

The carrier has not yet disclosed the root cause of the issue.

Side Hustle

He Started a Side Hustle in His Parents' Basement and Won Big on Richard Branson's TV Show. The Business Saw Over $650 Million in Annual Revenue Last Year.

Shawn Nelson, founder and CEO of furniture manufacturer Lovesac, thought it would be "funny to make a giant beanbag chair."

Business News

Want to Start a Billion-Dollar Business? Look to These Two Industries, Which Have the Most Unicorn Growth

During a tough fundraising year overall last year, the value of cybersecurity and AI unicorns saw double-digit growth.