We have to admit, Amazon has grown to be a multi-billion company within the pan of the last decade. In 2017 alone, the net sales on Amazon was a whopping 177 Billion USD. You’re smart to want a piece of that fortune, because it will do nothing but increase for the years to come. Here’s my article to show you how you can make money off Amazon this year.
I know that you might know all this stuff, but let me give you some information on Amazon.
Amazon was founded in 1995 by Jeff Bezos. It is a platform, referred to as a marketplace, where all kinds of items can be sold and bought, at lower-than-retail prices.
It’s not only the prices that draw people in, but also the name it has made for itself, its customer service and its innovative additions within the past few years, namely Amazon Prime that allows products to be shipped much faster.
Amazon operates in 15 different countries and is still expanding to make the items more accessible to others parts of the world.
Main ways to earn money on Amazon
The first way that you would think of, would be to sell items directly on the Amazon platform. The other way is to become an affiliate.
There are different requirements to be eligible to sell either way and I will be discussing each one below.
Let’s discuss selling directly first
It is very easy to get started selling on Amazon and it’s free. You only need to sign up with your name, address, phone number, date of birth, and email address. You will also be asked to link your bank account where you will be paid.
You will have to choose between two plans and here are their details.
1) Individual Plan
This plan is best to start out. That’s because there are no monthly fees and you can add as many products as you like. However, be advised that each time you sell an individual item, you will be charged 99cents from what the customer pays.
This is also great if you will be selling less than 40 individual items per month, as you will be saving money in comparison to the Professional Plan.
Also keep in mind that there are separate Amazon fees associated with different categories. Depending on what you are selling, you will be charged between 6 – 20%.
There are certain categories that will not be open to you as an Individual Seller, such as Clothing and Jewelry, so make your choices based on that as well.
2) Professional Plan
Costing $39.99 per month, this plan is recommended if you will be selling 40 or more individual pieces of your items within one month. It will save you money in the long-term as the monthly fee is firm, no matter how many items you want to list or sell.
In that respect, you will not be charged the 99cents per item sold when you sell your items. You will still be charged the fees associated with selling items within the different categories, ranging between 6 – 20%.
As I mentioned before, you will need to upgrade to this plan if ever you want to be able to sell items within the Clothing, Jewelry and Watches section.
Sometimes, this plan may become available on a trial basis for new seller registrations. So keep an eye out for that. You will be able to try it for a month before making a decision on whether you would like to stay with the plan or to downgrade.
There are over 20 categories that you can choose from. Some of them are
2) Baby Products,
4) Beauty Products,
8) Musical Instruments,
9) Kids’ Toys
And many more. I would highly suggest that you choose a specific category. It can be tempting to sell stuff that you like and that categorize differently. If you go too broad, it will be harder for you to make sales.
You need to establish yourself as an authority within a particular niche first to make sales faster and more effective. The reason is, if somebody finds your product, they may be interested to check out what you have to offer.
For example, let’s say a customer searches for “dog winter jacket”, they find your listing. They look through the listing and find out that the item has very good reviews and your store has very good reviews overall.
They are now interested to see what other items you sell that they could buy for their dog. If they go to your store and find listings that are not within the category that they are looking for, chances are, they will not be coming back, even if they buy the one item from your store.
So sticking to one category for your online store with Amazon will be better for the long-term, as statistics show that 80% of the people who have had a good experience with your store, will buy from you again.
Getting your products
Now that you have decided on what you want to sell and within which category your item will fall, you have to find out where to get your products.
There are two ways you can get your products;
1) Buying wholesale
The most common way of getting your products, will be to buy your items from wholesalers, like Alibaba. You have to keep in mind that the more you buy from your wholesaler, the less you will pay for each individual item. You will have much better profit margins.
Also remember that you have to factor in the shipping cost because this will also be an additional expense. The more pieces you buy, the less you pay in shipping per item.
Let’s take an example.
Let’s say that I want to sell dog winter jackets. If I buy between 75 – 100 pieces, the wholesaler will charge me $20 per piece. If I buy 101 – 125 pieces, I will be charged $18 per piece.
And let’s say they will charge me $100 to ship 75 pieces and $125 to ship 125 pieces.
My intention is to sell them for $30 each.
Doing the math;
75 pieces X $20 / piece = $1500
$1500 + $100 shipping = $1600 grand total
Which means that I would pay $21.33 per piece.
Calculating profit (not considering outside fees)
75 pieces X $30 per piece = $2250
Profit = $2250 – $1600 = $650
125 pieces X $18 / piece = $2250
$2250 + $125 shipping = $2375 grand total
Which means that I would pay $19 per piece.
Calculating Profit (not considering outside fees)
125 pieces X $30 per piece = $3750
Profit = $3750 – $2375 = $1375
As you can see, if you have enough money to invest into more items, then you have the potential to earn more per piece.
Pros of buying wholesale
1) You can handpick items
2) You can physically inspect item quality
3) Control over inventory
4) Lower wholesale prices result in larger profit margins
Cons of buying wholesale
1) You need to buy a lot of inventory
2) You need to find space to stock your inventory
3) You need to manage inventory
4) You run the risk of not selling your inventory
5) You need to pick, pack and ship the item to the customer
6) Either you absorb the shipping cost or you make the customer pay for it
7) Cannot offer a wide array of products due to limit in available capital
As you can see, choosing to buy wholesale can be a good or a bad thing, depending on what you see yourself doing. If you have no problem with the cons, then I say go for it.
With buying wholesale, you are able to make use of Amazon’s FBA (Fulfilled by Amazon) program, where you pay for the amount of space that your items need for storage and Amazon will store, pick, pack and ship your products straight to your customers from their warehouse.
The advantage of that is that your items will be eligible for Prime Two-Day shipping that is offered to your customers, that are member of the Amazon Prime family.
The other way that you can sell directly on Amazon is not personally acquire the products at all. Then your next question would be, then how do I sell the items?
There are companies out there who will voluntarily ship the products to your customers directly. The item never has to come in between your hands. This is called dropshipping.
Companies like SaleHoo and Wholesale2B will pick, pack and ship the item to your customers directly. I would not recommend that you use platforms like Aliexpress for dropshipping (although most of the sellers there exercise dropshipping) because of the fact that Amazon expects that the product be shipped within 48 hours of receiving the order.
Sellers on Aliexpress can take up to 7 days to ship out the item to your customers, which will in turn mess up your account with Amazon. This can actually result in you being banned from ever selling on Amazon again.
SaleHoo and Wholesale2B are DESIGNED to allow dropshipping on the Amazon platform, therefore you don’t have to worry about the product not being shipped within the 48-hour window.
Pros of dropshipping
1) No need to buy inventory
2) No need for big space to store inventory
3) No need to manage inventory
4) No need to ship the item to the customer yourself
5) Easier to offer a wide range of products because you are not restrained by capital limits
Cons of Dropshipping
1) No control over product
2) You cannot perform quality inspection yourself, therefore you don’t know the quality of the item being sent to your customer
3) Lower profit margins because you are not buying in bulk
4) Dropshipper can make mistakes, which is entirely out of your control
5) Risk in offering products no longer available by your supplier, resulting in customer service issues
6) One dropshipper may not offer EVERYTHING that you are looking to sell. Therefore, you will find yourself working with different dropshippers and that will end up being more work for you.
A word of caution
Be careful of the products you want to sell because if they are a brand name product, like Nike and Gucci, then you will need to hold a reseller certificate to show Amazon that you are an authorized reseller of these products.
If you don’t hold the certificate, then you could be banned for selling these products.
One thing that you will get used to, is that Amazon is very strict when it comes to following the rules. Even if there are appeals, it can be hard to get your account re-instated, not to mention the amount of documents and proofs that they ask from you.
This also hold true for counterfeit products. I have not had counterfeit products from SaleHoo or Wholesale2B, but if ever you want to buy wholesale from Aliexpress or Alibaba, then you need to be aware that you could also be banned for seling counterfeit products.
Pros of Selling on Amazon Directly
1) Make use of the Amazon brand and already-available traffic of the platform to leverage sales
2) Sales can come quickly, especially if your prices are competitive
3) Low marketing costs
Cons of Selling on Amazon Directly
1) VERY high competition – This happens because there are so many sellers on Amazon, selling the same items as you, specially if you decide to go the dropshipping route.
2) Low profit margins – Because there is so much competition, you are driven to keep lowering your prices. For some items, you might only be earning pennies or making a loss.
3) Higher fees compared to other marketplaces – The monthly / per item fee does add up, on top of the percentage that Amazon cuts from your sales. Amazon’s fee can be anywhere from 6 – 20 %.
4) VERY strict rules – You have to make sure you are following the rules to the letter, else you could easily get banned.
5) Amazon ALWAYS favors the buyer over the seller – Many times, there are unethical buyers – YES, buyers – who will buy the item you sell, use it for a day, and claim that it broke upon receipt or not as described, only to get their money back. Amazon refunds the buyer and takes that money from your pocket.
6) No branding – Your online shop on Amazon, is not really known (remember, you are using the Amazon brand). Which brings us to the next con.
7) Customers are loyal to Amazon, not to you – Customers will go to AMAZON to look for things they need to buy. Most of the time, they won’t come looking for your store directly.
8) You cannot market to your existing buyers – Amazon does not allow you to collect your buyers’ email addresses so you can market to them about promotions or sales. Amazon can ban you for that.
Conclusion – Selling on Amazon
You can already see what my feelings are about selling directly on Amazon; I do not particularly like it. To me, the cons outweigh the pros by a thousand miles!
By selling on Amazon, or on any other marketplace, you become dependent on that marketplace for the people that their brand name can bring you. So if the market becomes so saturated that nobody can make money at all, or they close down one day, there goes your business.
That’s why I suggest not to lean too heavily on the marketplaces. You should use them to bring you some quick money up until the time where you are set up online yourself and where you generate your own traffic and sales – like your very own website!
Anyways, if you do have any questions or concerns about selling on Amazon, feel free to leave them in the comments section below.
If you have had experience selling on Amazon, I would request that you also post a comment about your experiences, to help others make a decision on whether they should get into selling on Amazon directly.
It would be helpful to answer questions such as; how has your experience been so far? What do you find easy with selling on Amazon? What do you find hard? Any suggestion that you can give to a newbie starting out? What are the Pros and Cons in your opinion?
Thank you you for reading this article. I will update the link above to the next article when I upload it.
I wish you all the best in your online business hunting.