I’m in awe of Amazon Prime. Two-day shipping has turned Amazon into an indispensable part of my life, and I’m not alone: Amazon has more than 300 million registered users with 80% of registered U.S. customers purchasing at least once per month. 55% of all U.S. online shopping trips start with an Amazon search. It’s true. You could look it up.

There are countless stories of people who find the right niche product, achieve high ranking on Amazon, and generate thousands of dollars in just a few weeks. Sounds pretty good, right? There’s also a support network: dozens of active communities on Facebook and Reddit where Amazon sellers share resources.

This is all thanks to Amazon’s Fulfillment by Amazon (“FBA”). For a fee, Amazon will store your inventory, process payments, manage returns, pick, pack, and ship your product.

Pick, pack, ship.

To be one of Amazon’s Prime-eligible products, Tiny Cables just needs to secure product with packaging that fits their specs, ship it to an Amazon warehouse, and watch the cash roll in.

Easy. With an audience, a fulfillment service, and an active support network, it stood to reason that Amazon was the way to go — so we dug in.

First things first: Amazon’s picky about how your thing is packaged.

Two things were immediately clear after registering for an Amazon Seller account:

Packaging is the most complained-about and difficult to crack piece for first-timers.

Amazon does not make it easy for you to figure out what kind of packaging your product needs.

Amazon offers a useless PDF that promises to clarify all packaging and labeling requirements, from which font to use on the label to how to pack adult products. Don’t bother.

Thanks to Larry and Sergey, I landed on this YouTube video that promised to explain how to prep small products for FBA:

That’s when it all clicked.

Sometimes, you just need to see what people are talking about. This video led to another (Amazon) page that was much clearer about their demands:

Package units in transparent, sealed bags with a suffocation warning label. A poly bag seems to be the weapon of choice.

Place a product label with a scannable barcode.

Do not allow the bag to protrude more than 3 inches past the dimensions of the product.

That’s when I remembered that the useless PDF mentioned which font I should use. I found this list of requirements for the poly bag and label:

Poly bags with a 5" opening or larger are required to have a suffocation warning. This suffocation label needs to be a minimum 10-point font size for small bags.

Bag thickness must be at least 1.5 mils. I know what you’re thinking: “what the hell is a mil?” I’ve got you covered.

The bag must be transparent and completely sealed.

The bag must have a UCC128 barcode. This made me wonder what goes into securing a barcode, which turned out to be far more complicated than I could have imagined. So complicated, it’s going to turn into its own post. Yeah, seriously.

The label must be white and contain a barcode with “appropriate quiet zone areas,” an SKU for fulfillment centers to identify each unique product, a title and description, and the condition of each unit.

Why did Amazon make this so hard to figure out?

After about an hour, I felt comfortable that I had figured it out. I ran the requirements by our potential suppliers and they all indicated that it would be no problem. More on this in the sourcing post.

The True Cost of Fulfillment by Amazon

That’s when my focus shifted to the cost of FBA. Amazon is offering to do a lot, from accepting payment and filling each order to customer support and returns. This had to be kind of pricey.

The first stop was Amazon’s official guide, which seems simple enough. According to the guide, it would cost about $2.40 to have our items picked, packed, shipped, and for Amazon to handle customer service and product returns. ($2.41 from January through September and $2.39 from October through December.) Amazon also charges a monthly inventory storage fee per cubic square foot — this is not a material amount and would add up to fractions of a penny per unit.

But then there was some trouble in paradise: Amazon offers a “Fulfillment by Amazon Revenue Calculator” to help sellers calculate the difference between selling on Amazon via their own fulfillment vs. FBA, and the numbers changed. According to this calculation, it would cost $3.41 thanks to “Selling on Amazon” fees, which were not previously disclosed.

A buck is a big deal when we’re talking about such a low-price item. This fee is apparently used to pay for two things:

Referral fees. There is a whole world where people set up websites/blogs with links to Amazon listings in order to get a 5–10% commission. 5–10% of what we’re charging is more like $0.29-$0.58, not a dollar.

Closing fees, which are not mentioned anywhere else. I have no idea what this means.

Suddenly, our margins were getting tight:

Quick run-down of profitability for our USB-C cable, assuming a $5.99 price-point. $5.99 is what Amazon charges for a single short cable.

While researching Amazon’s mystery closing fee, I stumbled into another problem: FBA Facebook groups seem to be talking about Amazon ads as a means of achieving first-page ranking. A lot. I thought that volume, reviews and a nice, clear listing would be all it took — I had no idea that Amazon was letting companies bid for rank.

This isn’t cheap. Many of the FBA group members talked about targeting a 10% per-sale ad cost — meaning the best-case ad to sale conversion would cost $0.59 per $5.99 transaction.

That 14% margin just went from bad to worse.

Amazon is out.

Dear Amazon…

This sent us into a scramble and made us question whether this could be a viable project. We hit our first real roadblock.