Project 3

spring -2024

Course Code: PW 602

Feasibility Analysis

Submitted To

DR. Md Reyad Hossain

Senior Lecturer
Department of Innovation & Entrepreneurship
Daffodil International University

Submitted By

Md Raiyan Abdulla
0242310004111004
Department of Innovation & Entrepreneurship
Daffodil International University

Date of Submission: 20-05-2024

TREASURE HUTT

Business Name
Letter of Transmittal

June 07, 2023

To,

DR. Md Reyad Hossain

Senior Lecturer,
Department of Innovation & Entrepreneurship ,
Daffodil International University
Subject: Submission of report named “Feasibility Analysis”.

Dear Sir ,

This is my great pleasure to submit the report named “Feasibility Analysis” as a part of
Project 3 of the Department of Innovation & Entrepreneurship for your kind consideration. I
made sincere efforts to analyze my business plan and examined relevant records for the
preparation of the report.

Within a limited time, I have worked to make this report as comprehensive as possible. But
there may be some incompleteness due to various restrictions. For this reason, I beg your kind
consideration in this regard.

Sincerely yours,

Md Raiyan Abdulla (0242310004111004) ,

Department of Innovation & Entrepreneurship ,
Daffodil International University
 Abstract/Summary

An Amazon FBA business thrives by considering external factors through feasibility

analysis— understanding market research(market size, trends, competition, customer
preferences), operational assessment (resource requirement , capabilities, risks , scalabilities )
and financial analysis (revenue projection, cost estimates ,break-even analysis, potential
funding sources) . This analysis aids in navigating market trends, regulatory compliance, and
leveraging technological advancements. Simultaneously, a SWOT analysis uncovers internal
strengths, weaknesses, opportunities, and threats, guiding strategic decisions. Leveraging
strengths like efficient logistics and identifying opportunities in emerging markets, sellers
navigate weaknesses, such as inventory management, to capitalize on market opportunities.
However, threats like intense competition require adaptation and innovation. In sum,
integrating feasibility insights aids in understanding the market landscape, while SWOT
analysis focuses on internal capabilities, shaping strategies for Amazon FBA businesses to
optimize strengths, mitigate weaknesses, capitalize on opportunities, and manage threats,
fostering success in the dynamic e-commerce realm.
Contents

Project 3.................................................................. 1
Abstract/Summary .................................................. 4
Introduction ............................................................ 6
Objective ................................................................ 8
Methodology of the Study ...................................... 9
Limitations of the Study ....................................... 10
Discussion, Feasibility Analysis and Findings ..... 11
Operational assessment ........................................ 16
Financial Analysis ................................................ 21
Swot Analysis....................................................... 25
Recommendations ................................................ 28
Conclusion ........................................................... 29
Reference ............................................................. 30
 Introduction

Treasure Hutt is an Amazon FBA business. Amazon FBA is a fulfilment service that allows
sellers to store their products in Amazon's warehouses and have Amazon handle the shipping
and customer service for them. This can be a great option for sellers who want to focus on
marketing and product development, and who don't want to deal with the hassle of shipping
and customer service.

There are a few things to keep in mind when operating an Amazon FBA business. First, I need
to choose the right products to sell and want to sell products that are in demand and that have
a good profit margin. One also need to make sure that your products are competitively priced.

Once chosen my products, I need to find a supplier. There are many suppliers who sell products
online. So I should be able to find one that meets my needs.

After finding a supplier, I need to create listings for my products. One’s listings should be well-
written and informative, and they should include high-quality photos.

Once my listings are created, I need to ship my products to Amazon. Amazon will then store
my products in their warehouses and fulfil orders for me.

There are a few fees associated with Amazon FBA. There are storage fees, fulfilment fees, and
referral fees. The fees will vary depending on the size and weight of my products, as well as
the volume of sales I generate.
 In this project , I will focus on finding opportunity by feasibility analysis and SWAT analysis
of my business named TREASURE HUTT . Feasibility analysis and SWOT analysis are
powerful tools for identifying opportunities in Amazon FBA business. Here's how they work
together:

Feasibility Analysis:

• Market Research
• Financial Projections
• Operational Considerations

SWOT Analysis:

• Strengths
• Weaknesses
• Opportunities
• Threats

By analysing these factors, you can identify opportunities for your FBA business. Here's how:

• Match Strengths with Opportunities

• Turn Weaknesses into Strengths
• Prepare for Threats

Combining these analyses helps you:

• Identify profitable product niches.

• Develop a competitive advantage.
• Minimize risks and capitalize on market trends.

By utilizing these tools effectively, it can increase the chances of success in the competitive world of
FBA business. Remember, a well-researched and planned approach is crucial for turning opportunity
into a thriving online business.
 Objective

The primary objective of an Amazon FBA business is to leverage the platform's expansive reach
and logistical infrastructure to efficiently sell and deliver products to a global audience,
maximizing sales opportunities, enhancing customer satisfaction through swift and reliable
fulfilment, optimizing profitability, and scaling the business by offering quality products and
exceptional service while navigating and adapting to the dynamic e-commerce
landscape. SWOT (Strengths, Weaknesses, Opportunities, Threats) and Feasibility
analysis empowers Amazon FBA sellers to align their objectives and strategies more
effectively.
 Methodology of
the Study

For this project, we didn’t consult any primary sources. That is, we did not conduct any
research, experiments, or surveys to get the necessary data. Instead, we used secondary sources
such as journals, newspapers, reports, websites to collect any information and statistics that
helped us create this report. While secondary sources can be less reliable than primary sources,
we put much effort into verifying any third-party information cited in the report. If, by any
chance, there is a mistake in any part of the information we provided, it is not due to our fault
but rather the sources we used. There are some main secondary resources for researching about
Amazon FBA business. Such as :

Amazon Seller Central: https://sellercentral.amazon.com/

Fulfillment by Amazon (FBA): https://sell.amazon.com/fulfillment-by-amazon

The Ultimate Guide to Amazon FBA: https://www.helium10.com/guides /

Pros and Cons of Amazon FBA: https://sourceforge.net/software/compare/Fulfillment-by-

Amazon-FBA-vs-ShipMonk/
Jungle Scout: https://www.junglescout.com/

SellerApp: https://www.sellerapp.com/

Helium 10: https://www.helium10.com/

Note: This is just a brief overview of Amazon FBA. There are many other factors to consider,
such as product type, target market, and budget.
 Limitations of the
Study

The time duration of the project 3 is from January 2024 to May 2024. This is our third project
. As our third project, it is quite difficult to research the whole process within this limited time
frame. So it is a new challenge for me to do this project properly. It is a very tough for me
because I don’t have enough experience to do this project. Also, time limitation is another
problem. We have only five months to complete the full project. So, as third-semester student,
it is a very challenging task for all of us to complete the project report properly within a short
period of time. We need more time and experience to do this kind of project. Otherwise, it is a
very hard and tough job to do this kind of project properly within a short time period. So lack
of experience and lack of time are the main two limitations of this project.
 Discussion,
Feasibility
Analysis and
Findings

1. Market Size:

While there isn't a definitive market size specifically for Amazon FBA in 2024, we can look at
related figures to understand its scale:

• Amazon's FBA Marketplace

Growth: Studies suggest that
around 82% of third-party
Amazon sellers utilize FBA for
order fulfillment. There are
over two and a half million third-
party sellers on the platform. In
2023, US-based sellers sold
more than 4.5 billion items—an
average of 8,600 items every
minute and averaged more than $250,000 in annual sales.
• Third-Party Seller Share: More than 60% of products sold on Amazon come from
independent sellers, many of whom likely use FBA for fulfillment [Source].
Amazon Fba sellers marketing strategy

An effective marketing strategy for Amazon FBA sellers combines tactics to optimize product listings
for organic ranking and reach, alongside paid advertising to drive targeted traffic. Here's a breakdown
of key elements:

Organic Optimization:

• Product Listing Optimization:

o Keywords: Conduct thorough keyword research to identify relevant terms customers
use to search for your product. Optimize titles, descriptions, and bullet points with
these keywords while maintaining readability (https://sellercentral.amazon.com/seller-
forums/discussions/t/4202bce5-99b5-4938-9106-a949253c6ef8)
o High-Quality Images: Use professional product photos showcasing the product from
various angles and in use (if applicable).
• Compelling Content: Craft clear, informative, and engaging product descriptions
highlighting features, benefits, and addressing pain points.
• Positive Reviews: Encourage customer reviews by providing a great product and purchase
experience. Respond to reviews promptly and professionally.

Paid Advertising:

• Amazon PPC Ads: Utilize Sponsored Products ads to target relevant keywords and display
your product listing at the top of search results.
• Consider Additional Advertising: Explore options like Sponsored Brands for brand
awareness and Sponsored Display for retargeting website visitors who have shown interest in
your product category.

Additional Strategies:

• Amazon Vine Program: Apply for the Vine program to get early reviews from trusted
reviewers.
• Social Media Marketing: Promote your products on social media platforms where your target
audience is active.
• Deals and Promotions: Run occasional deals and promotions to attract new customers and
boost sales.
Remember:

• Track and Analyse: Regularly monitor your campaign performance and adjust strategies
based on data and insights from Amazon Seller Central.
• Stay Informed: Keep yourself updated on Amazon's ever-evolving algorithms and adjust
your approach accordingly.

By implementing a well-rounded marketing strategy that combines organic optimization and paid
advertising, FBA sellers can increase their product visibility, drive traffic, and achieve their sales
goals on the Amazon marketplace.

2. Trends:

• AI integration will be key:

The integration of Artificial Intelligence (AI) will be a game-changer for Amazon sellers
and Amazon experts in 2024. AI is set to revolutionize every aspect of e-commerce,
providing proactive insights and recommendations to businesses. We believe that AI will
transition from providing basic data to offering sophisticated, personalized insights.
Sellers who embrace AI will gain a significant advantage, from optimizing listings to
improving customer experiences.
• Written content will take center stage:

Sellers will utilize AI’s ability to analyze customer data, allowing them to create tailored
content that caters to individual preferences and needs. This personalized approach will
significantly enhance the shopping experience for customers, making them feel more
engaged and valued.

• Augmented and virtual reality will enhance product experiences :

Sellers and Amazon consulting experts will increasingly harness the power of AR and VR
technologies to provide customers with immersive product experiences like never before.
Customers will have the opportunity to virtually try on clothing, visualize furniture in
their own living spaces, and interact with products in ways that transcend traditional
online shopping. This enhanced product visualization will not only captivate shoppers but
also address one of the longstanding challenges of online retail – reducing the uncertainty
of how a product will look or fit in real life. As a result, businesses that embrace AR and
VR technologies will benefit from increased sales as customers gain confidence in their
purchase decisions. Furthermore, the reduction in returns, thanks to more accurate
product representations, will contribute to more efficient and cost-effective e-commerce
operations.

• AI Chatbots will be used in streamlined customer service:

The year 2024 will bring remarkable enhancements to customer service through the
widespread adoption of AI chatbots. These intelligent chatbots are set to revolutionize the
way businesses interact with their customers by efficiently handling routine inquiries and
providing seamless support throughout the shopping journey. As we move forward, AI
chatbots will play a pivotal role as the first point of contact for customers. Their ability to
swiftly address common queries, offer product information, and assist with basic
problem-solving will not only streamline customer service but also free up human agents
to focus on more complex and personalized interactions .This trend towards AI-powered
customer service is expected to gain momentum rapidly in 2024, as businesses recognize
the efficiency, cost-effectiveness, and 24/7 availability that chatbots bring to the table.
Customers will benefit from quicker responses and assistance, contributing to an overall
improved shopping experience.
• Social media and e-commerce integration will become essential:

Social media platforms will take significant strides towards seamlessly integrating e -
commerce features, creating a dynamic shopping experience for users .This integration
will enable users to effortlessly discover and purchase products directly from their social
media feeds. Whether it’s through interactive posts, shoppable tags, or native shopping
features, the boundary between social media browsing and online shopping will blur. This
development will empower businesses, including Amazon sellers, to reach their target
audiences directly on popular social platforms.

• Video content will take center stage:

Video marketing will emerge as a powerful tool for sellers, transforming the way they
connect with customers and promote their products. Sellers and Amazon sales
consultants will harness the potential of video content to provide engaging product
demonstrations, offering customers an immersive experience that allows them to visualize
the features and benefits of the products they are interested in. These videos will not only
serve as informative guides but also inspire confidence in potential buyers. Customer
testimonials, captured in video format, will become a compelling means of showcasing
the satisfaction of previous customers. These authentic endorsements will build trust
among potential buyers and influence their purchase decisions positively. Live shopping
experiences will take center stage in the world of e-commerce, as sellers conduct
interactive live sessions where customers can explore products in real-time, ask
questions, and receive immediate responses. This dynamic approach will create a sense of
community and engagement, driving both sales and customer loyalty. By embracing
video content, Amazon sellers will effectively humanize their brand and connect with
customers on a deeper level. This personalized and visually stimulating approach will not
only drive sales but also foster long-term relationships with buyers.

• Voice search optimization will be more prevalent:

The prevalence of voice assistants, such as Amazon Alexa and Google Assistant, will
continue to rise, reshaping how customers interact with online platforms.

To stay ahead in the competitive e-commerce landscape, Amazon sellers must proactively
adapt to this evolving trend. Optimizing product listings for voice search will become
paramount, as customers increasingly rely on voice commands to search for and purchase
products.
 The key to effective voice search optimization lies in the integration of long -tail
keywords and natural language within product descriptions and titles. By aligning listings
with the way customers naturally speak and inquire, sellers can enhance their visibility in
voice search results.

• Personalization will become paramount:

The Amazon landscape is evolving, and customer expectations are shifting toward highly
personalized experiences.

To succeed in this dynamic environment, Amazon sellers must embrace the power of data
analytics. By leveraging customer data, sellers can gain valuable insights into individual
preferences and behaviors . This deep understanding will serve as the foundation for
crafting personalized shopping experiences.

Sellers will implement a range of personalized initiatives, including tailored offers,

customized marketing campaigns, and personalized customer service interactions.
Loyalty programs that reward and engage customers on a personal level will become a
standard practice.

The goal of this personalization revolution is to create a stronger bond between sellers
and customers, fostering loyalty and trust. In 2024, Amazon sellers who prioritize and
excel in personalization will not only meet but exceed customer expectations, setting new
standards for the e-commerce industry.

• Sellers will see a rise in quick commerce (q-commerce):

In 2024, Amazon sellers should prepare for the rise of quick commerce, often referred to
as q-commerce. This emerging trend is set to reshape the e-commerce landscape, focusing
on delivering unparalleled convenience and speed to customers.

Quick commerce revolves around ultrafast delivery, promising customers the ability to
receive their orders within minutes or hours. This approach stands in contrast to
traditional e-commerce, where delivery times often span days or even weeks.

The driving force behind the growth of quick commerce is the increasing demand for
convenience, especially in urban areas where consumers are accustomed to immediate
gratification. As customers seek rapid delivery solutions, Amazon sellers must adapt and
incorporate quick commerce into their strategies to meet these evolving expectations.
• Amazon will introduce enhanced security requirements:

In the upcoming year of 2024, Amazon sellers and Amazon marketing agencies should be
prepared for the introduction of enhanced security requirements. As Amazon continues to
evolve, so do the challenges related to cybersecurity and data privacy. To address these
concerns, Amazon is expected to implement stricter security measures to protect
customers and sellers.

By proactively addressing these enhanced security requirements, Amazon sellers can not
only safeguard their customers’ data but also demonstrate their commitment to
maintaining a secure and trustworthy e-commerce environment.
 3. Competition

Amazon FBA Seller Competition: A Porter's Five Forces Analysis

Porter's Five Forces is a framework for analysing the competitive landscape of an industry. Here's a
breakdown of how it applies to Amazon FBA sellers in 2024:

1. Threat of New Entrants (Low-Moderate)

• Low barriers to entry: Anyone can become an FBA seller with minimal investment.
• Established Amazon infrastructure: Amazon's fulfillment network makes it easy to start
selling.
• Moderate challenges: However, competition is fierce, product research is crucial, and
building brand awareness takes time.

2. Bargaining Power of Suppliers (Moderate)

• Many suppliers in some categories: For common products, sellers have choices and can
negotiate pricing.
• Limited options for niche products: For specialized items, suppliers may have more
leverage.
• Potential for private label products: Sellers can develop their own brands to reduce supplier
dependence.

3. Bargaining Power of Buyers (Customers) (Strong)

• High customer expectations: Amazon fosters a culture of fast, free shipping and excellent
customer service.
• Price transparency: Buyers can easily compare prices from different sellers.
• Reviews and ratings heavily influence buying decisions: Building positive reviews is
essential for success.

4. Threat of Substitutes (Low)

• Amazon captures a large share of online shopping: For many products, Amazon is the
primary destination.
• Physical retail remains an option: But, e-commerce continues to grow, especially for
convenience goods.
 • Digital substitutes may exist: For certain products (e.g., software), digital downloads could
be a threat.

5. Competitive Rivalry Among Existing Sellers (Strong)

• High number of sellers: There's intense competition in most product categories.

• Price wars and competition on keywords: Standing out requires differentiation in branding,
marketing, and customer service.
• Amazon's private label brands: Amazon Basics and other private label products add to the
competition.

Overall, competition in the Amazon FBA market is intense. However, with careful planning,
product selection, and a strong understanding of the market dynamics, new sellers can still find
success.

Here are some additional tips for navigating the competitive landscape:

• Focus on a niche market: Find a gap in the market with less competition.
• Build a strong brand: Create a unique brand identity and customer experience.
• Optimize your listings: Use high-quality product photos, compelling descriptions, and
relevant keywords.
• Provide excellent customer service: Respond promptly to inquiries and address issues
effectively.
• Stay up-to-date on Amazon trends: Keep an eye on changes in Amazon's policies and
consumer preferences.

By applying these strategies and leveraging Porter's Five Forces framework, you can develop a
competitive advantage and thrive as an Amazon FBA seller in 2024.
4. Customer preference :

A large majority of consumers (89%) are more likely to buy products from Amazon than
other e-commerce sites. This is a staggering figure. While many brands have carved out a
compelling value proposition that entices customers to shop directly on their sites, most
brands face a serious uphill battle if they view Amazon as a pure competitor.

• Amazon Prime members are wildly loyal:

Feedvisor’s survey found that of all consumers who belong to Amazon Prime,
nearly half (48%) buy products online once a week or more frequently and
nearly three-quarters (74%) shop online at least every few weeks.
The survey found that Prime eligibility informs purchase decisions for the
majority of consumers. More than two-thirds (67%) of consumers cited Prime
eligibility as an important factor when they are selecting a product on Amazon,
meaning that a majority of consumers filter specifically for Prime items when
shopping on the platform.
 Operational
assessment

Amazon sells its products and services to its customers worldwide directly through its websites.
In addition to these direct sales, Amazon gives a platform for its retailers to sell their products
and services. Amazon's retailers sell less popular and fast moving items. They sell highly priced
items, hence gives Amazon the opportunity to stop holding the slow-moving products that could
lag their profits. Amazon upholds a subscription-based model of business, via the Amazon Prime
service, and a small electronics product line as well (Annual Report 2016). In the subscription
line, Amazon customers pay annually a fee that enables them to secure free shipping, either on
the same day or a two day on the eligible items. The subscription also allows them to stream
media online, like the e-reader, e-book, and Kindle. It also offers the Kindle owners mobile
applications to purchase.

1. Resource requirement:
There are two main ways to interpret "resource requirements" in an Amazon
fba business:

• Resources to run the business:

financial-
o startups costs for inventory, packaging, and potential advertising .expand
and more
o ongoing costs like amazon seller fees, Fba fees (storage, fulfillment, pick
& pack), and marketing expenses.
Time:
o product research and selection.
o Listing creation Consider researching further to assess the
statement.
o customer service and communication.
o Inventory management and ordering.
 Tools and software (optional):
o product research tools.
o Keyword research tools.
o Listing optimization software.
o Inventory management software.
Knowledge and skills:
o understanding of amazon's fba program and seller policies.
o Product research and selection skills.
o Listing creation and optimization skills.
o Basic marketing and advertising knowledge.
o Customer service skills.
• Inventory requirements for fba:

product restrictions:
o some products are not eligible for Fba , such as hazardous materials or
perishables expand more
product condition:
o products must be new or like-new.
Packaging and prepping:
o products must meet amazon's specific packaging and prep requirements.
product barcodes:
o products must have a valid upc, ean, or isbn barcode.
Inventory storage limits:
o amazon has storage limits for sellers, so you'll need to manage your inventory
accordingly.
 2. Capabilities

• Fulfillment and Warehousing:

o Amazon stores, picks, packs, ships, and provides customer service for your
products (Amazon Seller Central, 2024).
• Inventory Management:
o Amazon manages your inventory across its fulfillment centers, optimizing storage
space and fulfillment efficiency (Amazon Seller Central, 2024).
• Order Tracking and Visibility:
o Sellers and customers can track orders in real-time through Amazon's platform
(Amazon Seller Central, 2024).
• Multi-Channel Fulfillment (optional):
o FBA can fulfill orders not just from Amazon.com, but also from your own website
or other marketplaces (Amazon Seller Central, 2024).
• Returns Processing:
o Amazon handles product returns and exchanges on your behalf (Amazon Seller
Central, 2024).

Benefits of Using FBA

• Increased Scalability: FBA allows sellers to focus on product sourcing and marketing
while Amazon takes care of fulfillment (Amazon Seller Central, 2024).
• Improved Customer Satisfaction: Fast and reliable fulfillment can lead to higher
customer satisfaction and increased sales (Amazon Seller Central, 2024).
• Access to Amazon Prime Benefits: FBA sellers can offer Prime benefits like free one-
or two-day shipping to Prime members, potentially increasing sales (Amazon Seller
Central, 2024).

Considerations for Using FBA

• FBA Fees: Sellers are subject to storage, fulfillment, and other fees associated with using
FBA (Amazon Seller Central, 2024).
• Product Restrictions: Not all products are eligible for FBA due to size, weight, or
category restrictions (Amazon Seller Central, 2024).
• Inventory Management: Sellers must carefully manage inventory to avoid storage fee
penalties (Amazon Seller Central, 2024).
 3. Risks

There are definitely some potential drawbacks to being an Amazon FBA seller, and it's important
to be aware of them before you dive in. Here are some of the key risks:

• Account Suspension or Deactivation: This is a big one. Amazon has strict policies about
product listings, customer service, and seller behavior. If you violate any of these policies,
your account could be suspended or even deactivated. This can be a major blow to your
business, as it can take a long time and a lot of effort to get your account reinstated .
• Competition: Amazon is a massive marketplace, and competition can be fierce. It can be
tough to stand out from the crowd, especially if you're selling a common product. You'll
need to have a strong marketing strategy and be prepared to offer competitive prices.
• Amazon as a Competitor: Be aware that Amazon itself sells many products directly. So,
in a way, you are competing against the platform you're relying on. There's always a
chance that Amazon will decide to start selling a product that you're already selling, which
could hurt your sales.
• FBA Fees: FBA fees can add up quickly, especially if you have a large inventory or bulky
products. It's important to carefully consider the cost of FBA before you decide to use it.
• Limited Control: When you use FBA, you're essentially handing over control of your
inventory and fulfillment to Amazon. This means that you may have less control over
things like shipping times and product packaging.

4. Scalability:

here's good potential for scalability with an Amazon FBA business, but it requires strategic
planning and execution. Here's a breakdown of key aspects to consider:

Growth Strategies:

• Product Expansion: I’ll not be a one-trick pony and adding new products that
complement my existing line or delve into new categories altogether. This can spread
risk and leverage my brand recognition.
• International Expansion: Amazon marketplaces exist globally. Looking for expanding
my reach to other countries to tap into new customer bases.
 • Marketing and Advertising: Organic ranking is great, but paid advertising on Amazon
and social media can significantly boost my product visibility and sales.

Operational Efficiency:

• Inventory Management: Data analysis is key. I’ll use sales data to forecast demand and
optimize inventory levels to avoid stockouts or overstocking.
• Automation: Repetitive tasks like bookkeeping and order fulfillment can be automated
with tools to free up my time for strategic planning.
• Outsourcing: As my business grows, consider outsourcing tasks like product sourcing
or customer service to free up my resources.

Profitability Focus:

• Cost Control: Negotiating with suppliers for better pricing, and mindful of Amazon's
FBA fees.
• Profit Margin Analysis: Not all sales are equal. Analyzing which products yield the
highest profit margins and prioritize those.

Building a Brand:

• Customer Retention: Focusing on providing excellent customer service to build

brand loyalty and encourage repeat purchases.
• Brand Identity: I’ll Develop a strong brand presence outside of Amazon with a website
and social media channels. This fosters brand recognition and customer trust.

Remember: Scaling isn't just about increasing sales. It's about maintaining healthy profits while
expanding your reach.

By implementing these strategies and focusing on efficiency and profitability, I can achieve
significant growth and scalability.
 Financial Analysis

Financial analysis of an Amazon FBA (Fulfillment by Amazon) seller requires examining

various metrics to assess profitability, efficiency, and overall business health. Here's a
breakdown of key areas to consider, along with references for further exploration:

1. Revenue projection:

Estimate Average Monthly Sales:

o Look at industry benchmarks for similar products

o Consider product's stage in its lifecycle (new launch vs. established product).
o Adjust for seasonality if applicable.

Factor in Average Selling Price (ASP):

o This is your product's price after accounting for Amazon FBA fees.

Calculate Monthly Revenue:

• Multiply estimated monthly sales by ASP.

Example (Hypothetical Numbers):

• Estimated Monthly Sales: 50 units

• Average Selling Price: $20 (after FBA fees)
• Monthly Revenue Projection: 50 units * $20/unit = $1000
 2. Cost estimates:

There are several cost factors to consider for an Amazon FBA seller:

Amazon Seller Fees:

• Selling Plan: There are two main plans: Individual ($0.99 per item sold) and Professional
($39.99 monthly fee). Professional sellers get more features but may not be cost-effective
for low volume sellers. https://sell.amazon.com/pricing
• Referral Fees: These are a percentage of your product's selling price, tiered based on
category (typically 15% for the first $250, then 10% up to $1000, then 6% above $1000).
https://www.junglescout.com/pricing/
Fulfillment by Amazon (FBA) Fees:

• Fulfillment Fees: These cover picking, packing, shipping, and customer service for your
orders. Fees vary based on product size, weight, and destination zone. You can use
Amazon's fee preview tool to estimate these costs for specific products.
https://sell.amazon.com/pricing
• Inventory Storage Fees: Amazon charges monthly fees for storing your products in their
warehouses. Fees depend on product size and storage time. There are also seasonal
fluctuations in storage fees. https://sell.amazon.com/pricing

Other Costs:

• Product Cost: This includes the cost to acquire or manufacture the product.
• Marketing and Advertising: this may want to invest in Amazon Ads or other marketing
to increase product visibility.
• Shipping Costs: FBA (Fulfillment by Amazon).

By considering all these cost factors, you can get a good estimate of the total cost to sell through
Amazon FBA. Remember, the exact costs will vary depending on your specific products and
business model.

3. Break-Even Point Analysis

Break-even point analysis is a crucial tool for any Amazon FBA seller. It helps you determine the
exact number of units you need to sell to cover all your costs and reach zero profit (but also zero
loss).Here's how it works:

Formula:

Break-Even Point (Units) = Total Fixed Costs / (Selling Price per Unit - Variable Costs per Unit)
Example:

Let's say I, an FBA seller, sells handycraft. Here's his breakdown:

• Selling Price per Unit: $20

• Variable Costs per Unit: $10 (includes product cost, shipping to Amazon, and FBA fees)
• Total Fixed Costs: $100 (monthly FBA fees and storage)

Break-Even Point Calculation:

Break-Even Point (Units) = $100 / ($20 - $10) = $100 / $10 = 10 units

This mean I need to sell at least 10 candles to cover all his costs and break even. Any sales above 10
units will translate into profit.

Benefits of Break-Even Point Analysis:

• Pricing Strategy: Helps you set a competitive price that covers your costs and leaves
room for profit.
• Sales Target Setting: Provides a clear sales target to achieve profitability.
• Cost Control: Identifies areas where you can potentially reduce variable costs to improve
your break-even point.
 4. Potential funding sources

Here are some potential funding sources for an Amazon FBA seller, along with examples of how
they might be used:

Bootstrapping (Personal Savings):

• Business Loans:

➢ Term Loan: This provides cash to be repaid over a fixed period with
interest.

• Line of Credit: Provides access to a revolving line of credit to cover ongoing

expenses or short-term needs.

Seller Financing:

• Wholesale Suppliers: Some suppliers might offer extended payment terms, allowing the
seller to pay for inventory after it's sold.

Angel Investors or Venture Capital:

• For high-growth businesses with significant potential, attracting angel investors or venture
capital might be an option. This typically involves giving up some equity in the business.

Remember: The best funding source depends on your specific needs, financial situation, and
business goals. Carefully research each option and consider consulting a financial advisor before
making a decision.
 Total Investment

category cost
1 Inventory (Initial) $10,000

2 Marketing & Advertising $2,000

3 Product Research Tools $500

4 Software (Inventory Management etc.) $200

5 Other Startup Costs (e.g., packaging) $500

6 Total Investment $13,200

Projected income for next five years

Metric Year 1 Year 2 Year 3 Year 4 Year 5

Revenue $100,000 $1,320,000 $1,742,400 $2,308,960 $3,036,646

Refunds -$5,000 -$66,000 -$87,120 -$115,448 -$151,832

Net Sales $95,000 $1,254,000 $1,655,280 $2,193,512 $2,884,814

COGS $57,000 $752,400 $993,168 $1,316,107 $1,730,888

Gross Profit $38,000 $501,600 $662,112 $877,405 $1,153,926

FBA Fees $18,000 $22,500 $27,000 $32,400 $38,880

Other $18,000 $18,000 $18,000 $18,000 $18,000

Expenses
Total $36,000 $40,500 $45,000 $50,400 $56,880

Expenses
Net Profit $2,000 $461,100 $617,112 $827,005 $1,097,046
Calculations of Profitability

• Net Profit Margin (Year 5): ($1,097,046 / $2,884,814) x 100 = 38.02%

• Return on Investment (ROI) after 5 years: ($1,097,046 - $13,200) / $13,200 x 100 =
8333.69%

Based on this example, with a net profit of over $1 million in year 5 and a very high ROI, yes, the net
profit could be considered worth it.
 Swot Analysis

Strengths: In the SWOT analysis model are business competencies, resources, and competitive
advantages that support the technology company’s growth and improvement. Amazon’s
success represents the appropriateness of business strengths to industry and market conditions.
In this SWOT analysis, such strengths are internal strategic factors that minimize the negative
impacts of competitors in the retail, technology products, and online services markets. The
following are Amazon’s strengths:

1. Strong global brand

2. Moderate and increasing business diversification

3. High capability for rapid technological innovation, especially in online services

Amazon has the strongest brand in the online retail market. This internal factor is partly
responsible for the company’s rapid growth, especially when it was still a purely e-commerce
business. In the SWOT analysis model, the strong brand maintains brand recognition and
consumer confidence in the technology business and its products.

Weakness : In the SWOT analysis model, weaknesses are internal factors that relate to difficulty
or inability in achieving the e-commerce company’s business objectives. In this case,Amazon’s
weaknesses are as follows:

1. Imitable business model

2. Limited global market presence (limited penetration in developing markets)

3. Limited brick-and-mortar presence

Amazon has a business model that other organizations can imitate. For example, other firms
can establish their own e-commerce websites. In this SWOT analysis, such imitability is seen
as a weakness that encourages more competition, especially in terms of online services. In
addition, Amazon’s limited international presence, along with limited penetration in
developing markets, weakens the business. This internal strategic factor prevents the
technology company from maximizing profits based on the high economic growth rates of
 these markets. The SWOT analysis views this weakness as a factor that challenges Amazon’s
potential for higher revenues in the global market.

Opportunities: In this SWOT analysis are external factors that represent ways to grow the
technology and online services business organization. These opportunities may require Amazon
to implement new strategies or business operations. In this case, such external factorsare linked
to overcoming the weaknesses described in the previous section of this SWOT analysis of the e-
commerce company. The following are Amazon’s opportunities:

1. Stronger international market presence by increasing penetration in developing markets

2. Expansion of brick-and-mortar business operations

3. New partnerships with other firms, especially in developing markets

Amazon has opportunities for expanded operations, especially in developing markets. In the
SWOT analysis model’s context, addressing this external factor can increase the company’s
profits in retail and Internet-based services. Amazon’s operations management and productivity
approaches influence how the business captures this opportunity to have a strongerinternational
competitive advantage. In relation, the SWOT analysis includes the

opportunity of expanding the company’s limited brick-and-mortar operations. These operations

currently include Amazon Go stores. The business continues to experiment with new strategies
and technologies for more brick-and-mortar operations. A stronger brick-and-mortar presence
can provide additional revenues and strengthen the technology company’s brand image and
popularity.
Threats: The SWOT analysis model identifies threats as external factors that can limit or reduce
the e-commerce company’s performance. The following are threats in Amazon’s industry
environment:

1. Aggressive competition with online and non-online firms

2. Cybercrime

3. Imitation of business model and products

Competition is one of the strongest threats to Amazon. Competitors include retail and e-
commerce firms, like Walmart, Home Depot, Costco, and eBay, as well as technology
companies, like Apple, Google (Alphabet), and Microsoft. In the SWOT analysis model, this
competitive landscape threatens Amazon, as competing firms can reduce the company’s market
share. Cybercrime is another threat relevant to this SWOT analysis of the technology and online
service business. This external strategic factor threatens data security and affects customer
confidence in the e-commerce company.
 Recommendations

Based on Feasibility and SWOT analysis, I recommend diving into Amazon FBA cautiously,
but with optimism! While external threats like inflation and economic slowdown might pose
challenges, your strengths in product-market fit and strong marketing strategy can leverage
FBA's reach and fulfillment advantages. However, keep a close eye on fees and inventory
management, and be prepared to adapt to changing market conditions. Overall, FBA can be a
powerful growth engine, but careful planning and execution are key
 Conclusion

In conclusion, starting an Amazon FBA business involves a comprehensive plan that considers
various aspects of selling online. It's like opening a shop where Amazon helps manage the sales
process. To succeed, understanding the market, selecting the right products, and having a solid
marketing strategy are essential. The plan must include how to manage inventory effectively,
ensuring products are always available but not stored for too long, avoiding extra fees. It's
important to be aware of competition and find ways to stand out by offering unique or better
products. Also, knowing the costs involved, like Amazon's fees, shipping, and marketing
expenses, helps in setting prices and estimating profits. Customer service is key—keeping
buyers happy through quick deliveries and excellent support leads to positive reviews and more
sales. Moreover, following Amazon's policies and rules is crucial to avoid any issues with the
account or product listings. Flexibility is necessary too; being ready to adapt to changes in the
market or Amazon's guidelines helps in staying successful. Lastly, continuous learning from
resources, such as guides, online forums, and industry reports, contributes to refining strategies
and staying ahead. In sum, a well-thought-out business plan, incorporating these factors, lays
the groundwork for a successful Amazon FBA venture, offering opportunities for growth and
profitability in the dynamic world of online selling. Whether an Amazon FBA business is a
good fit for you depends on your resources, product selection, and risk tolerance. By carefully
considering the strengths (low startup costs, scalability, large customer base) and weaknesses
(dependence on Amazon, competition, product damage risk) of the FBA model, along with
the opportunities (growing e-commerce market, new markets, high profits) and threats (policy
changes, economic downturns, foreign competition) identified in a SWOT analysis and
feasibility study, you can make an informed decision.
 Reference

1. Hallam, S. (2017) "Amazon's Business Strategy: 6 examples of the latest trends in e-

commerce" Hallam, Retrieved from: https://www.hallaminternet.com/amazons-
business-strategy-newdevelopments/
2. https://www.junglescout.com/blog/how-to-scale-amazon-fba-business/

3. Amazon.com, Inc. – Awards & Recognition.

4. Amazon.com, Inc. – Economic Growth.

5. Amazon.com, Inc. – Form 10-K.

6. Benzaghta, M. A., Elwalda, A., Mousa, M. M., Erkan, I., & Rahman, M. (2021). SWOT
analysis applications: An integrative literature review. Journal of Global Business
Insights, 6(1), 55-73.
7. U.S. Department of Commerce – International Trade Administration – Retail Trade
Industry.
8. U.S. Department of Commerce – International Trade Administration – Software and
Information Technology Industry.
9. SellerAmp (https://selleramp.com/) provides resources and calculators for Amazon FBA
sellers.
10. AMZ Pathfinder (https://www.amzpathfinder.com/) offers courses and tutorials on Amazon
FBA
11. Amazon FBA Revenue Calculator:
https://sellercentral.amazon.com/hz/fba/profitabilitycalculator/index?lang=en_US