Amazon FBA Guide (2025): Steps, Costs, Stats & Effectiveness Over Other Business Models?

What Is Amazon FBA?

Amazon FBA is a fulfillment service where Amazon centers handle the packing, storage, and shipping of goods on behalf of third party sellers. Fulfillment by Amazon (FBA) also refers to as a business model in which this service is used to make money online. FBA sellers pay fees, then source and ship products to Amazon.

There are 3 variations of the Amazon FBA business model: arbitrage, wholesale, and private label. There are 2 types of arbitrage: online and retail.

• Retail arbitrage involves physically entering stores like TJ Maxx or Home Depot and using a repricing app to buy products low and list them high on Amazon.
• Online arbitrage involves doing the same thing but using the internet to resell popular brands like Sony, Fiji, or Nike.
• Amazon FBA wholesale involves purchasing bulk products from a known brand like Huggies and using their customer demand and traffic to get sales.
• Amazon FBA private label involves sourcing your own product and requires a brand name, logo, and niche identity.

How Does Amazon FBA Work (Step-by-Step Overview)?

Amazon FBA works by selling products online and using Amazon’s logistics system for your inventory storage and order fulfillment. Below, this Amazon FBA step by step will clarify each essential part of how to sell on Amazon , from business start-up requirements to eventually scaling and possibly selling your store.

Step 1: Requirements and Business Set Up

To become an Amazon FBA seller, you are required to:

• Hold a valid passport, driver’s license, or other government ID
• Provide a credit or debit card number as payment method, as well as banking and routing info
• Share an email address (business preferably)
• Enter a Social Security Number (SSN) or Employer Identification Number (EIN)
• Be over 18 years old
• Get a reseller’s permit or sales tax certificate, if doing arbitrage or wholesale
• Provide a Unique Tax Reference (UTR) in certain cases
• Have at least $40 and several 1000 in investment saved up

There is no required investment for Amazon FBA. You do have to pay $40 to sell on Amazon, to cover your Amazon Seller Central professional account. With this choice you will be eligible for the Buy Box. You can also choose an individual account at $1 per unit, though this is not advised. The recommended minimum investment for Amazon FBA is $5K - $10K for sourcing inventory, shipping, and listing optimization.

Finally, setting up a Limited Liability Company (LLC) is not required at the start, but recommended as you grow.

To start an Amazon FBA account, you will follow the steps outlined in their full signup form:

1. Go to sell.amazon.com
2. Choose Sign up
3. Select your plan
4. Provide business, contact, and identity information
5. Connect your bank account and credit card

By the end of your Amazon FBA registration, you should choose the type of FBA you wish to follow, and make sure you are ready to start. In some cases, Amazon can flag you and block you from opening another account if you are inactive.

You should start with wholesale over private label, if you are new to Amazon. Though in 2025 and 2026, many beginners are starting with arbitrage instead to warm up their account and build initial cashflow. Wholesale is a bit more complicated. Private label is the most complex, as you are the CEO of your own brand. You don’t need an external website or social media for FBA, but you do need them for your best chance of success at a private label.

Once you have opened your seller account, it takes another 4 to 12 weeks to start selling on Amazon FBA.

Step 2: Choose a Product or Niche

To choose a profitable Amazon product or niche, conduct product research using Keepa, Selleramp, or ScanProfit to find options that:

1. Are small and lightweight to lower shipping and storage expenses. Product measurements should fit within a standard Amazon box and be less than 50 pounds.
2. Solve a problem faced by real customers or appeal to a specific interest
3. Has similar options listed on Amazon, but with less than 500 reviews (this helps avoid saturated products)
4. Are not seasonal; rather, they are needed and wanted yearround
5. Will provide at least 30% - 40% profit margins (Look for a product price point neither too cheap to minimize margin nor too expensive to purchase inventory)
6. Are not gated, if you’re doing wholesale FBA

With FBA, you should start with 1 - 3 products. But be careful of the amount you purchase - you don’t want 500 units of product that no one will buy. The best products to sell on Amazon are items in high demand categories, like Home & Kitchen, Electronics, and Beauty & Personal Care. But, just because these are the best niches in 2025 doesn’t mean every item will perform well. After all, books are the most ordered item on Amazon historically. Clothing, Shoes, & Jewelry also perform well.

As a beginner, you can sell almost any item on Amazon, from kitchen gadgets to pet supplies. But, some products are restricted for new sellers. You cannot sell collectibles, fine jewelry, expensive watches, or fine art on Amazon without authorization. If you sell something consumable, you may need to submit FDA related documentation. For gated products, it can take 7 - 10 attempts to get ungated.

Step 3: Find a Supplier

To find a supplier for your Amazon product:

1. Search SaleHoo, visit tradeshows, or Contact brands and apply to resell their product (wholesale)
2. Search Alibaba, Aliexpress, JungleScout’s Supplier Database, or manufacturer directories like ThomasNet (private label)
3. Review ArbiSource and Go Atlas.io (online arbitrage)
4. Visit brick-and-mortar stores like Walmart and Marshall’s (retail arbitrage)

Amazon sellers buy their products online and in person. When buying locally, Amazon wants products shipped in a particular way. Amazon will reject anything they can’t scan, so you must ensure you follow the rules and have correct labeling, polybags, packaging, and a valid FNSKU number on each product. If Amazon doesn’t like your packaging and labels they will replace them without telling you and without your permission. To avoid warnings and account suspensions from Amazon, some beginners choose Fulfilled By Merchant (FBM) for small parcel delivery over FBA and ship directly from their own warehouse or home. However, Amazon’s recent Climate Pledge Friendly program has also created stricter packaging guidelines.

FBA Prep by Amazon and FNSKU commingling were offered as a part of FBA through 2025, but ends January 1, 2026. After this date, the seller, supplier or a 3PL must handle this step. Some sellers use a 3PL like MyPrepCenter, Titan Logistics, ElitePrep, and McKenzie Services. If you are using a Chinese supplier, many already do this automatically and cheaply.

Step 4: Ship Inventory to Amazon

To ship inventory to Amazon:

1. Start with a small amount of inventory. Don’t oversupply. Get about 2 months worth of inventory into centers. Expect initial slow sales. Amazon FBA does not set a Minimum Order Quantity (MOQ).
2. Watch seasonality. If you’re selling candy canes, they may not sell in April.
3. Use an Amazon-partnered carrier for discounted shipping rates and automated tracking
4. Use Amazon Global Logistics, or AGL, Seller Export & Delivery, and the Partner Carrier program to ship bulk product to Amazon Warehousing and Distribution (AWD)

FBA inventory requirements include:

• Secure packaging with scannable barcodes and suffocation warnings if needed
• The item is assembled and ready to ship
• Boxes should be labeled with an Amazon FBA Box ID label and ship-from address. Standard case sizes for boxes are 25 x 25 x 36 inches and not exceed 50 pounds unless oversized, which must be labeled as “Team” or “Mechanical” lift
• Pallet shipments must not overhang the pallet more than 1 inch, be over 72 inches tall, or over 1,500 pounds.

You must also choose a shipping plan that will navigate the Amazon Global Fulfillment Network. You can ship directly from China to Amazon, and from almost any supplier. Choose between selling in the US only or using Remote Fulfillment with FBA to reach Canada, Mexico, and Brazil.

Once in an Amazon warehouse, you can track your stock and inventory health by using FBA Inventory Breakdown in Seller Central. This will show you your Available vs Reserve. If you have too much inventory sitting for over 365 days, Amazon will destroy that inventory. For some products, this time is even shorter. Amazon will flag units that are damaged, expired, aged as unsellable. Sometimes, SKUs are reclassified as hazmat, leading to an overnight loss of product. To avoid this, make sure you have set your Automated Unfulfillable Settings to “return” and not “dispose”. However, if a return is damaged, it can still be auto-liquidated if Amazon deems it unsellable. FBA liquidations is another option that helps you retain your net recovery value. You can also use reimbursement tools like SellerLocker and RefundSniper to recover money from inventory issues.

You can do Amazon FBA without inventory, though this is an entirely different business model. To do this, you would follow Merch by Amazon or Kindle Direct Publishing.

Step 5: Create Listings and Launch Products

To create listings and launch products on Amazon:

1. Generate 2 - 3 clean, basic images that inform the buyer of your product’s features from multiple angles. Optimize images for mobile using a 4:5 ratio instead of a 1:1.
2. Create listing titles that include a main keyword and benefits.
3. Use backend keywords, which are hidden search terms that Amazon uses to match listings to search results. Do not keyword stuff.
4. Maintain readability throughout your listing.
5. Conduct storefront stalking and reverse sourcing by finding storefronts with 10 - 30 customer reviews with products similar to yours and use their listings as inspiration.
6. Create initial Amazon PPC ads with exact match keywords to start. Choose between a sponsored product, sponsored brand, or sponsored display. Check your Advertising Cost of Sales (ACoS) daily and adjust accordingly. Spend $5 - $20 on ads to start.

You can rank higher on Amazon by:

• pricing competitively
• Using bullet points to highlight product benefits
• Explaining how your product solves a problem
• Give clear dimensions in text and in images
• Increase resolution in your images
• Promote your products on social media or through affiliate blogs

You should use AI for listing copy, but edit it to ensure your brand voice is secure. Boost SEO by following keyword rankings given by various tools, like KeywordsEverywhere. If you are doing Amazon private label, you will be able to have A+ content, which gives you access to a more thoroughly branded and detailed storefront and listing.

You can expect to see a profit and return on investment (ROI) within a few months, though some beginners wait years to make money. The exact time frame depends on the product, its niche, the ads you run, and competition.

Step 6: Monitor Reviews and Optimize

To monitor reviews and optimize:

1. Do early promotions or discounts to get your first reviews
2. Use the “Request a Review” button on new sales
3. Enroll your product in Amazon Vine, where trusted reviewers will have access to it
4. Monitor customer service closely
5. Watch your Buy Box percentage (if doing private label), Order Defect Rate, IPI Score, Return Rate, and Conversion Rate within Seller Central’s Business Reports.
6. Keep your inventory stocked by watching your FBA dashboard for replenishment alerts and using the FBA Restock Inventory tool

Refunds are also a major issue at this point. Amazon’s policy of defective vs buyer - fault returns favors the buyer. Sellers may receive a refund if Amazon damages the product or fumbles the return process. Customer- damaged goods do not automatically return to you, unless you submit a removal order.

Account suspensions, intellectual property violations, and compliance flags are a major 2025 issue for sellers. You must stay on top of your Account Health Rating (AHR), especially at the beginning. If there are policy violations, you must promptly submit a Plan of Action (POA) to avoid further disruption.

Step 7: Reorder, repeat

Beginners in 2025 should start their stores with retail or online arbitrage and scale to wholesale before trying private label. Each phase of this can take months to grow and solidify, and years to fully establish. You must continuously reprice to stay competitive as markets shift multiple times throughout a single year. Once you have 25 active SKUs, use BQool to automate repricing. Bundling multiple products together and/or adding variations of a successful product is another way to scale.

In the future, you may be able to sell your store via Empire Flippers, Flippa, or FBA Aggregators. They will look at valuation factors like Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and brand registry to determine your value.

3. Startup Costs Breakdown

Amazon FBA startup costs range from $2,500–$6,000 to launch their first product in 2025. This range includes inventory sourcing, FBA fulfillment fees, Amazon’s monthly subscription, packaging, and advertising to rank new listings. Here is a cost breakdown:

Wholesale sellers often need $10K+ in capital to meet brand purchase minimums. Retail arbitrage is the cheapest path, often under $1K, but scales slowly. The cheapest way to start is with 5 - 10 units using retail arbitrage.

FBA fees are charged from biweekly payouts. In addition, Amazon deducts multiple fees from every transaction:

• Referral fees: typically 8–15% of the product’s sale price
• Fulfillment cost: per-unit FBA fee based on size and weight
• Storage fees: $0.87–$3.63 per cubic foot, depending on season
• Long-term or aged inventory surcharges if products sit unsold past 365 days
• Returns processing and FBA liquidations for unfillable units

From October 15 to January 15, Amazon applies peak-season surcharges to FBA fulfillment and storage. These fee increases apply across all marketplaces (U.S., CA, MX) and affect sellers using Supply Chain by Amazon (SCA) or Remote Fulfillment (RFN) programs.

Use the free Amazon FBA Revenue Calculator to model costs, including FBA inbound placement service fees and referral rates by category.

To calculate your true profit margin:

• Track COGS + shipping + FBA fees + PPC
• Monitor inventory age via the FBA Inventory Health Report
• Use Sellerboard, A2X, or Helium10 Profits for automated margin tracking

Tax implications to remember:

• FBA fees PPC spend, packaging, and subscriptions are tax deductible
• Marketplace Facilitator Laws: Amazon automatically collects and remits sales tax for most U.S. states
• Federal income reporting: Amazon issues a 1099-K for qualifying sellers
• QuickBooks, A2X, TaxJar, and Sellerboard simplify tracking

4. Is Amazon FBA Still Profitable in 2025?

Amazon FBA is profitable in 2025 , but not for everyone, and not in every product category. Profitability depends on your capital, product strategy, sourcing method, and risk tolerance. According to Jungle Scout, the average small-to-medium Amazon business earned $140,052 in sales in 2024. Other reports (e.g. William Rivera) cite $250K/year in gross revenue for many solo sellers. Net profit margin averages just 10%–20%, depending on category, sourcing, and PPC performance.

Pros and Cons of Amazon FBA

Many sellers find that while FBA is operationally convenient, its risks and disadvantages are unforgiving without careful planning. Every advantage is tied to a platform dependency that Amazon controls.

Best Tools for Amazon FBA Sellers

Product research and validation:

Listing creation and optimization:

Profit tracking and fee analysis:

PPC and automation tools:

Best Amazon FBA Courses

1. Amazing Selling Machine (ASM)

• Pros:
  • One of the oldest and most established programs
  • Strong video production, templates, and support
  • Includes private community and mentorship calls
• Cons:
  • Extremely expensive (~$4,997+)
  • Heavy upselling into other tools
  • Mostly focused on private label

2. Freedom Ticket (by Helium 10)

• Pros:
  • Included with Helium 10 subscription
  • Created by 8-figure seller Kevin King
  • Excellent balance of theory and tactics
• Cons:
  • More intermediate-level than true beginner
  • Tied into Helium 10 ecosystem (bias risk)

3. Private Label Masters (Tim Sanders)

• Pros:
  • Private label focused, advanced supplier tactics
  • Realistic insights into sourcing and logistics
• Cons:
  • Narrow focus (not for wholesale or arbitrage)
  • Pricing on the high side for content depth

4. Kevin David Amazon FBA Masterclass

• Pros:
  • High-energy, beginner-friendly presentation
  • Includes some funnel and automation training
• Cons:
  • Sales-heavy style; mixed student reviews
  • Outdated in some parts

5. Fields of Profit: FBA Roadmap

• Pros:
  • Strong arbitrage and wholesale strategy
  • Community-driven content
  • Good for lower-capital sellers
• Cons:
  • Less applicable for private label sellers
  • Simpler video production

6. Amazon FBA Guide from Zero to Seller (Udemy) by Anton Voroniuk and Yuliiya Hubanova

• Pros:
  • Budget-friendly ($20–$50 range)
  • Covers FBA basics without upsells
• Cons:
  • Entry-level content, lacks depth
  • Udemy reviews are mixed on updates

7. The JasHustles Approach: Complete FBA Guide

• Pros:
  • Emphasizes transparency and realistic results
  • Popular among TikTok/Gen Z audiences
• Cons:
  • Non-traditional structure (casual tone)
  • Better as a supplement, not a standalone

Amazon FBA vs Other Business Models

While Amazon FBA is more scalable than affiliate marketing or dropshipping, it’s also more capital intensive and vulnerable to platform risk. Models like local lead generation offer more control and compounding potential.

If you’re exploring Amazon as a whole, FBA is just one option. Here’s how it compares to other internal models:

• FBM (Fulfilled by Merchant)
  • You handle shipping, returns, and storage
  • Lower fees, more manual work
  • Fewer listing restrictions
  • Better for bulky or custom items
    
• Merch by Amazon / Merch on Demand
  • Print-on-demand apparel and accessories
  • No inventory required, but low margins
  • Great for designers or niche brands
    
• KDP (Kindle Direct Publishing)
  • Create and sell eBooks or print books
  • Minimal startup cost
  • Long-tail passive income if optimized
    
• Amazon Affiliate / Associates Program
  • Earn a cut by recommending Amazon products
  • Best paired with content (blogs, YouTube, TikTok)
  • Extremely low startup, but low per-sale earnings

These models are often complementary. Some sellers combine FBA with Merch, KDP, or affiliate for multi-stream income.

FAQs: Amazon FBA in 2025

What are common mistakes with Amazon FBA?

The most common mistakes with Amazon FBA include underestimating startup costs, choosing oversaturated products, and ignoring Amazon’s strict policies. Many new sellers also fail to budget for PPC advertising and storage fees, which can quickly erode profits.

How are beginners making money on Amazon in 2025?

Beginners are finding success through retail and online arbitrage, where they buy discounted products from stores like Walmart or Target and resell them on Amazon for a profit. Others are starting with wholesale partnerships or low-competition private label products after using research tools like Helium 10 or Jungle Scout.

What is the new Amazon policy for 2025?

Amazon announced updates to its FBA inbound placement service fees and stricter product compliance rules in 2025. Sellers must now take greater responsibility for inventory prep and labeling, as Amazon phases out its FBA Prep Service by January 2026. The goal is to improve warehouse efficiency and reduce returns.

Have Amazon sales dropped in 2025?

Overall Amazon sales have continued to grow, but individual seller margins are shrinking due to higher ad costs and increased competition from direct Chinese sellers. Many independent sellers report needing stronger branding, better listings, and off-Amazon traffic to stay profitable.

Can I sell internationally with FBA?

Yes. Amazon provides tools like Remote Fulfillment, Multi-Channel Fulfillment (MCF) for non-Amazon site sales, and Amazon Global Logistics to expand into other countries. You can also use Amazon Export to reach international buyers directly from your U.S. inventory.

Can anyone become an FBA seller?

Yes — Amazon welcomes new sellers and often provides onboarding incentives, like free storage credits or discounted referral fees for first-time accounts. You’ll need to verify your identity, provide tax information, and link a valid bank account before selling.

Is Amazon FBA passive income?

Not really. While FBA automates fulfillment, the business itself is far from passive. Sellers must actively research products, manage ads, monitor reviews, and restock inventory. It can become semi-passive only after systems and suppliers are established.

What are the risks of Amazon FBA?

Major risks include account suspension, policy violations, cash flow issues, and unsold inventory fees. Amazon’s strict enforcement system can remove listings or freeze funds quickly, so sellers must maintain compliance and monitor account health closely.

A Smarter Alternative to Amazon FBA?

Local lead generation is a smarter alternative to Amazon FBA. Amazon FBA can still work, but based on my experience, it’s a high-risk, high-cost, low-control model for beginners.

1. FBA startup costs have increased dramatically, from inventory to PPC, and most sellers won’t profit for months, if ever.
2. Your entire business is at the mercy of Amazon’s policies, algorithms, and inventory rules. One suspension and you’re out.
3. Rising ad costs and Chinese sellers undercutting prices have made scaling a private label brand harder than ever.
4. Margins shrink fast when you add up returns, storage fees, inbound shipping, and aggressive competition for the Buy Box.
5. Even if you execute perfectly, you’re building on someone else’s platform. You don’t own the customer, the marketplace, or the data.

That’s why I recommend a different model — one where you own your digital assets, control your pricing, and generate passive income with real local demand.

With local lead generation:

• You rank sites for local, low-competition keywords
• You own the website and the leads
• You can sell those leads to real businesses for $30–$150+ each
• There’s no inventory, no paid ads, and no platform risk
• You can get results within 6–8 weeks, not 6–12 months

If you’re tired of learning complex logistics, navigating account bans, or gambling with inventory — you may want to look into the local lead generation program that taught me how to earn over $52,000/month.