Amazon. It’s one of the biggest e-commerce websites out there, a giant in just about every market you can think of, from books to clothing to gadgets. But the platform offers much more than diversity in its product range. It also offers many different ways to earn money, some of which you may not even be familiar with. In this article, we provide a step-by-step guide on how to make money with selling on Amazon.
Table of Contents
What is Amazon FBA Business?
To define what Amazon FBA is, we have to define what its acronym (Fulfillment by Amazon) stands for. This is a program or a system that allows people anywhere in the world to sell items on the corresponding Amazon platform, thanks to its warehouses, infrastructures and qualified personnel distributed throughout the world. The products that users sell from Amazon are stored in the warehouses and the system is responsible for sending them to the respective customers of each person, they handle refunds, returns and are responsible for providing excellent customer service. (Leaving each seller without problems or headaches with: Shipping, unexpected returns, etc…)
Everything is possible through the incredible platform that Amazon manages, however, this does not exclude sellers from responsibility. This only facilitates the paperwork and manages to save a significant amount of time for each person, it also helps other business approaches.
But how does Amazon FBA work? The sellers take care of selling the products and Amazon takes care of the rest. The sales process working with the Amazon FBA service would be:
- The seller ships their products to Amazon warehouses. Sellers decide which products they want to ship to Amazon fulfillment centers. To do this they must complete a process that we will tell you about later.
- Amazon classifies, organizes and stores the products. Once the products are received by Amazon, they will be registered in your inventory and will be fully localized by the time the sales take place.
- The sale of a product occurs. A customer buys one of the seller’s products. At this point the seller will not have to do anything, their inventory in Seller Central will be updated and Amazon will handle the transaction.
- Product delivery. Amazon will take care of packaging, shipping and tracking the shipment to the customer, meeting very competitive delivery times.
- Customer service. In the event of any problem or the customer requesting a return, the Amazon team will handle the communications and manage the return.
- Amazon pays the seller. Amazon credits the money from the sale to the seller’s account after 14 days. This time is taken to cover possible returns and other incidents.
Is Selling on Amazon Still Good in 2022?
The short answer is yes, as long as you do it correctly. The long answer is as follows:
As you probably already know, Amazon is the largest online store and one of the most valuable companies in the world. It is currently worth nearly $800 billion.
It has had an impressive growth of 24% per year for the last 5 years, unlike Walmart which has grown just over 1% per year in the same period. If it manages to keep up that pace, Amazon will outsell Walmart in less than 5 years.
On the other hand, economic studies estimate that online sales represent only 10% of total trade in the United States. This means that there is still a long way to go and that in the next 15 years it will continue to grow by leaps and bounds.
Physical commerce will always exist, of course. This is why Amazon has and will continue to invest in physical stores, for example, the acquisition and renovation of Whole Foods. At the same time, it continues to look for ways to make e-commerce easier for everyone. Proof of this are the tests of home deliveries with autonomous drones and the acquisition of the Ring company.
And that’s just what has been made public, imagine what they are doing that we don’t know yet. Using its logistics network, called FBA, Amazon takes care of taking your product from its warehouse, packing it and sending it to the customer without you are having to intervene at all. A marvel.
How Much Capital is Needed to Start Selling Products on Amazon?
If you are wondering about how to make money with selling on amazon, you should know that you don’t necessarily have to buy lots of items and have a big storage for keeping them. There are financially convenient methods that don’t require you to spend a lot of money. One of these methods is Online Arbitrage.
Online Arbitrage refers to the act of buying products (clothes, shoes, toys, etc.) from online stores and reselling them for more money to make a profit on Amazon. This is completely legal and no special license is required.
Typically, OA sellers can aim for a 30% to 100% ROI on each sale. For example, for every $1,000 invested, $300 to $1,000 in earnings are returned, after Amazon fees.
Here is a simplified version of how Online Arbitration works when combined with Amazon FBA:
- Go to a retail website like Walmart.
- Find items on the website for a low price to resell on Amazon at a higher price.
- Place an order and have them delivered to your home.
- When the inventory arrives, the items need to be unpacked, listed on Amazon, and then shipped to an Amazon FBA Fulfillment Center.
Step-by-Step Guide to Start Selling Products on Amazon
As said before, Online Arbitrage involves buying products and reselling them for profit. This sounds simple on paper, but like any investment business, your success comes down to selecting products that sell quickly and knowing your margins so you can make a profit. Here’s how you can start selling on Amazon:
1. Sign Up for a Seller Central Account
The first step to selling on Amazon is to open a Seller Central account by going to sellercentral.amazon.com.
A Seller Central account will act as the backbone of your online business. Amazon has several different marketplaces depending on the region. The most popular marketplaces include Amazon.com, Amazon.ca, Amazon.co.uk, and Amazon.de.
Opening a Seller Central account costs €39.99 per month, regardless of how much you sell. On top of this, you are charged a 15% commission on any product you sell (this 15% includes all credit card fees, so it’s more like 12%).
When you create your Seller Central account, you will have the option to use your existing Amazon customer account. I highly recommend using a different account and email address for your Seller Central account.
2. Research Products to Sell
Before spending money on your first batch of inventory, spend time researching products that are selling well online. This provides a product knowledge base that you can refer to when shopping for deals in the store.
A useful resource for product research is the Amazon Best Sellers list. This page highlights the best-selling products based on sales volume across dozens of Amazon categories.
As you go through each category, take note of details like:
- Price Points- Many arbitrage retailers stay in the $10 to $40 range for products. This price range allows sellers to buy in bulk. Staying above $10 also means you’re making a significant profit per sale and not selling cheap dollar store goods for $0.25 profit per sale.
- Product Ratings- Always check the Amazon ratings for the products you are considering. Negative reviews and a low rating can turn off potential customers or mean more product returns, all of which hurt revenue.
- Size and Weight- Selling bulky and heavy products means expensive shipping. Shipping costs are a major downward pressure on your profit margin, so check the shipping rates for the platform you sell on.
- Seasonality- Holiday lights may be a best seller during the holidays, but this is a bad retail arbitrage buy unless you capitalize on seasonal demand early. As a general rule, don’t invest too much money in seasonal inventory to avoid having products for a long time.
- Expiration Dates- If you sell products with expiration dates like groceries or personal care products, consider this risk in your purchasing decisions.
- Durability- If your product breaks during shipping, it’s a total loss for your business. Online marketplaces usually side with buyers in the event of damage or disputes, meaning they get a full refund.
3. Source Products from the Right Retailers
Once you have an idea of the best sellers and product buying tips, you are ready to get inventory. Low daily prices and clearance sales are your best bet for finding arbitrage-ready products. Some popular retailers for inventory sourcing include:
- Best Buy
- Bed Bath & Beyond
- CVS
- Kmart
- Kohl’s
- Lowe’s
- Old Navy
- T. J. Maxx
- Walgreen’s
- Walmart
You can also try selling thrift store products, as long as the condition of the product is good enough to sell as used online. Similarly, garage sales can also have gems such as clothing, toys, and books that are great candidates for resale.
4. Create Your Listing on Amazon
Now you need to create your listing on Amazon. To do this, go to your Seller Central account and go to Inventory -> Add Product.
If you are doing retail arbitrage and your product already exists, simply search for the UPC number (the 11-13 digits below the barcode) and enter it in the product search bar. After that, you will need to enter some vital details of your product.
Then, the most important thing is to SELL your listing (convert). To do so, you must complete the following fields:
- Images
- Bullets (key product features)
- Product description
To access these fields, you may need to turn on Advanced View.
Pro Tip: You can use videos in your listings, but you need enhanced branded content.
Images are absolutely the most important thing to really convert your ad. Amazon currently allows up to 9 photos. You must use at least 5 photos if you want to have high converting listings. After product images, the biggest conversion factors for your listing are bullet points and your product description.
5. Sell Your Products!
After you’ve purchased inventory and created your listing, you’re ready to start generating sales.
Many retail arbitrage firms rely on the Fulfillment by Amazon, or Amazon FBA, program to drive sales. This is because, as an FBA seller, you are not responsible for shipping and logistics. Rather, you ship inventory to Amazon warehouses for Amazon to handle order fulfillment when you make sales. This allows you to focus on getting more inventory and managing your listings instead of dealing with endless shipping.
Amazon FBA has various seller fees, warehouse storage costs, shipping costs, and possible long-term storage fees. But to get started, choose one of two plans to sell under:
- Individual Plan – Pays a fee of $0.99 for each sale
- Professional Plan – Pays $39.99 per month regardless of sales volume
Amazon retail arbitrage has a steep learning curve. This is because Amazon has specific packaging requirements, varying fees based on product categories, and numerous seller rules that you must adhere to.
But despite these complexities, Amazon FBA is still one of the best ways to start a retail arbitrage business because it takes logistics off your plate. Amazon also has comprehensive documentation on their Seller University portal to help you start your own Amazon business.
Amazon FBA Infographic
Here you will find one of the most comprehensive infographics prepared by an Amazon lead service company:
Conclusion
With the growth of e-commerce, the business ideas like retail arbitrage and drop shipping have quickly gained popularity. Thanks to technology and changes in shopping habits, new ways to earn money online continue to appear.
However, retail arbitrage is not a get-rich-quick scheme for the faint of heart. Immense competition and tight margins make it a difficult business model. If you don’t have a lot of free time, it’s also difficult to source products and manage your listings each week.
That said, with time and practice, you can make money from retail arbitrage, even while working full time. The key is to learn little by little, use your profits to fund additional inventory, and continually optimize your business.
It can take weeks or months to get your first sale, but investing is a viable business model with high earning potential if you’re willing to put in the effort.
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