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 isn'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.
Making money by selling on Amazon is difficult.
Granted, they make it easy to sign up for a seller account, but that alone doesn't make the money start flowing in.
Reality: It takes research, and putting aside time every day to succeed on Amazon.
It takes (some) money to make money
You can't make money on Amazon without having products to sell.
This requires you to spend (some) money on inventory.
It sounds simple, but I'm always surprised when people tell me they're not making any sales. I then ask "how much have you spent on inventory recently?" and they sometimes answer "I've not anything in lately...." Duh! I think I've found your problem.....
If your shelves are bare you can't make money
Because selling on Amazon is online and you don't see your physical "shelves", many overlook how much inventory they have on hand.
Playing catch-up to re-stock and make money is about a two-month cycle on average. By the time you source products, prepare and ship them in, then wait for Amazon to receive them, sell them 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.
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 the store. Toys have taken a beating over the last few years. Kids don't purchase as many toys as they once did and prefer 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: Marketing.
Anyone can build a website, but attracting customers and getting found requires advertising and SEO. It also takes a lot of time and money and expertise to do it right. By using Amazon's FBA 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 right away.
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
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 provides an application where you can scan products using your smartphone 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 upfront. 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 potential. You can often purchase 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.
PROS
Easy to do - Just walk into a store and start scanning
Instant gratification: You can buy immediately and quickly send it 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
CONS
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
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.
PROS
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 PJs
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.
CONS
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 number 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 a 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
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.
PROS
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 upfront can lead to a steady income stream
CONS
Requires applying for an account: This 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 upfront 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
Private Label
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.
PROS
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
CONS
Very complex process. The 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.
Very high shipping costs right now
Supply chain shortages and delays
High advertising costs
I hope this has been a helpful article that gives you some ideas of what to expect from selling on Amazon.
Ready to learn step-by-step how to build a massively successful Amazon business of your own? I cover it all in The Seller Academy Masterclass.