I've been selling on Amazon since late 2014 and over the years I hear the following frustrations from people fairly consistently.
Here they are, in no particular order:
- "Every time I source for things to sell I find I'm restricted!"
- "I can't sell any of the best selling products!"
- "There's too much competition on my listings"
- "The prices tank after I send things in and I'm losing money!"
- "There are no sales worthwhile in stores near where I live"
- "I don't have time to source for products with my job"
- "Amazon aren't sharing the buy box with me"
- "I'm losing money after Amazon charge me for all of their fees!"
- "Wholesalers won't sell to me as an Amazon seller!"
- "There's nothing profitable in any of the wholesale accounts I've signed up with!"
Do any of these resonate with you? I'm sure we've all felt some of these frustrations at one point.
FACT: Making money by selling on Amazon is IS difficult.
Granted, they make it really easy to sign up for a seller account and start sending things in to their warehouses. And for Canadians, it's easier than ever to ship products from Canada to the US to sell on Amazon.com. But that doesn't mean that by just pressing a few buttons, or sourcing once a week that the money will start flowing in.
Reality check: It takes a lot of research, hustle (putting in the time every day and testing strategies/sourcing for products) to succeed on Amazon.
And there are no guarantees either. You could end up losing money. Amazon could suspend your account (though in most cases you can be reinstated if that happens). But for those willing to work at it, selling on Amazon can be a rewarding alternative to working in a traditional 9-5 job.
FACT: It takes money to make money on Amazon!
You can't make any profit if you don't have products to sell! This requires you spending your own money to invest into inventory. It sounds simple, but I'm always surprised when people answer "I've not sent much in lately....", when they tell me that their sales have slowed and I ask the question "how much have you spent on inventory recently?"
FACT: If your shelves are bare you can't make any sales!
Because selling on Amazon is online and we don't see our physical "shelves", we often overlook this. And playing catch-up to re-stock is about a two month cycle by the time you source, have items prepared for sale, ship, wait for them to go live on Amazon, sell to the final customer and finally get your payout. So it's essential you send stuff in as frequently as possible. We call this feeding the Amazon beast! It's always hungry.
FACT: While many products are restricted to new sellers, there are literally thousands that new sellers can sell.
For some reason, most newbies gravitate to the toys category. They get giddy looking at major brand names and see that they're selling for a decent profit, only to find they can't sell them (restricted). So they invariably vent their frustration and complain about it.
NEWS FLASH: There's a lot more that you can sell on Amazon outside of toys!
Product categories like arts and crafts, home and kitchen, and outdoors offer many things that are new seller friendly. But it requires a lot of hunting and digging deep into websites or the shelves in store. Toys have taken a beating over the last few years. Kids don't purchase as many toys as they once did, preferring video games and experiences instead. So the margins in toys have shrunk quite a bit as competition increases for the popular products. There are many better categories to sell in.
SCAN EVERYTHING and SCAN OFTEN
To avoid prices tanking, you really need to understand how Keepa charts work. Sales rank is only a snapshot in time, and relying only on this will lead to misery and a lack of profits.
Amazon takes away the most difficult part of business: The marketing.
Anyone can build a website, but attracting customers requires advertising and SEO. It also takes time and money to do it right. By using Amazon's platform, you get access to all of their traffic and customers instantly. This makes it possible for anyone to sign up for an account and put their products in front of customers.
There are multiple strategies that people use to sell on Amazon. I'll outline them below, and list some of the pros and cons for each.
Retail arbitrage is where most sellers start out. Simply put, it's where you go into local stores and buy products from them that you then turn around and sell on Amazon for a profit. It's a low barrier to entry, and Amazon even provide an application where you can scan products using your smart phone and see how much money you can make on items in store.
Used books are a great way to make some fantastic profits without spending a lot up front. If you're low on funds, I suggest hitting up local thrift shops in your area and scanning books. Textbooks and non-fiction are where you'll make the most profit potentially. You can often purchased these sorts of books for less than $10 and sell them for $50 to over $100 on Amazon. I did a fair bit of book sourcing when I started out and often found deals like this.
- Easy to do - Just walk into a store and start scanning
- Instant gratification: You can buy immediately and quickly send to Amazon without waiting
- Local stores offer better sales sometimes than those nationally advertised
- You can negotiate better discounts sometimes with store managers
- You learn a lot about the process of sourcing and how things are packaged
- You can find wholesale distributors from the information on product packaging
- Takes a lot of time to drive to stores, then wander around scanning items in person
- Some stores don't like or even ban sellers from buying products for resale (Not a huge issue in Canada though)
- Very difficult to scale this business
- Not a real business - you're just creating a job for yourself really
- Requires a lot of work scraping price tags off of packages
- You need to purchase boxes and shipping supplies to send your items in to Amazon
- It's a treasure hunt: No guarantee you can find the same products twice - Requires constant hunting
- Many major brands are restricted so you can't sell them on Amazon (especially true for new sellers)
Online Arbitrage, is basically the same concept as retail arbitrage except you're sourcing online at the websites of major retailers. With tools available like OA X-ray, it's easier than ever to source online for products to sell. And you can do it all from the comfort of your home.
- Easy to do. Just visit the websites of retailers and start sourcing
- Can be semi-automated using software
- Scaleable: You can hire people to source online for you (virtual assistants)
- Work from home in your PJ's
- No boxes or shipping supplies needed - The retailer ships in boxes for you and you save money
- Don't have to see or touch inventory - You can ship directly to a prep and ship company
- You can source internationally and never have to ship products over the border
- Access to far more data while sourcing with tools like Keepa, Jungle Scout etc.
- It's easy to do so most people ARE doing it = More competition
- Nationally advertised sales on major retailer's websites will likely attract more competition
- Many websites limit the quantity of items you can purchase (ie. limit 2 per customer)
- Some websites won't ship to prep and ship companies
- You have to wait for products to ship from the retailer
- Many retailers don't package products very well meaning higher likelihood of damaged products
- It's a treasure hunt: No guarantees you can find the same products twice - Requires constant hunting
- Many major brands are restricted so you can't sell them on Amazon (especially true for new sellers)
Wholesale is where you purchase products directly from a manufacturer or authorized distributor. This is probably the safest way to sell on Amazon as you have actual invoices from a supplier (proving authenticity) if Amazon ever inquire. You can also use wholesale accounts to get un-gated in many categories too. I scaled my own Amazon business via Wholesale.
- You're purchasing legitimate products with invoices and authorization (less chance of getting suspended by Amazon)
- Scaleable: You can purchase large quantities of items allowing you to grow your business
- Consistency: every month you can re-order the same products and rinse/repeat
- Exclusive selling agreements possible: Little to no competition and higher profit potential
- A real business: The relationships and accounts you develop with suppliers create equity and value in your business
- Cost savings: Shipping larger quantities to Amazon at a time can save you significant inbound shipping fees vs sending a few boxes at a time
- Long term rewards: Hard work up front can lead to a steady income stream
- Requires applying for an account: Can be intimidating for new sellers
- Many distributors sell to anyone, meaning little to no profits in selling their products (not discounted enough/competition)
- Long tail: It takes a lot of time and energy up front to find, contact, sign up for and find products with profit
- Often requires new sellers to get creative and create Bundles to make a profit (more time consuming but longer term rewarding)
- Many brands are already selling on Amazon or won't sell to Amazon sellers
- Several wholesalers require you to have a physical retail store to sign up with them
- Longer cycle and takes time to plan to be successful
- Requires capital to scale your business
Private Label is where you create your own brand name product. It can be as simple as taking a generic product made by someone else and putting your own brand and logo on the product. But that strategy is getting more difficult to succeed with due to increased competition. Ideally, you have a product idea of your own and have the item manufactured and trademarked. It requires a lot of research, time, and money to succeed at this though. I call this the graduate level of selling on Amazon.
- Create a brand that builds recognition and equity: A business beyond just yourself
- higher profit potential
- Limited competition if your product is unique
- Can be distributed via multiple retail channels
- Easier than ever to research products and promote them
- Very complex process. Failure rate is high
- Competition: Someone can copy your product after all of your hard work
- High cost: Research, development, shipping, certifications, legal costs and product liability insurance aren't cheap
- Liability: If something goes wrong, the buck stops with you as the brand owner. You need to keep current on laws and regulations and structure your business to reduce your exposure as much as possible.
I hope this has been a helpful article that gives you some ideas of what to expect from selling on Amazon.
Selling on Amazon is a legitimate way to create an income stream or full blown business. It's all dependent on your effort, experience, financial situation and ability to adapt. There are no guarantees though. In fact, many people don't make any money at all with their Amazon business, or even end up losing money. This is similar to any new business venture. But for those willing to work hard it can be rather lucrative.