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How Much Money Do I Need To Start Selling on Amazon?

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Buy low, sell high!

As is the case with various other business opportunities today, it’s really important and advantageous to be able to buy a product, service or currency at a lower rate to then, resell at a higher rate.

This applies to Amazon, the stock market, cryptocurrencies, garage selling and many other opportune ventures that exist today.

Though there is always a risk involved when it comes to money; their are ways to mitigate those risks through research, analytics and past performance.

But how much money is really needed to get started?

That’s what I aim to elaborate on in this blog post, and hopefully point you in the right direction to upstart your Amazon journey! We will be discussing 4 different business models you can leverage to start selling on Amazon!

It is important to note that all sellers will have different circumstances, different resources, and different risk allocation ability.

It is also important to note that it really all depends on the business model you choose to start with, as well as have the capability to start with! We will be discussing 4 of them here:

Amazon Business Models:

  • Retail Arbitrage
  • Online Arbitrage
  • Wholesale
  • Private Label

Retail Arbitrage

  • This business model entails the person and/or seller in this case visiting stores, scanning inventory, and finding which items are best to source in order to flip on Amazon. You can visit your local Wal-Mart, Toys-R-US, or Kohls and undoubtedly find products that you can buy cheaper to resell for a profit on Amazon.
  • This is not limited to department stores. You can similarly go to garage sales, good wills, thrift stores, libraries and book shops among others and find profitable items to post on Amazon.
  • You don’t need to only look for new goods. There are plenty of opportunities to source used goods for re-selling as well, just as long as you list them as such, so as not to deceive a potential customer.
  • You can utilize tools like the Amazon Seller App, created by Amazon themselves; or the ScanPower app created by Amazon Arbitrage guru Chris Green, to scan the products. Different tools provide a different level of advanced ability, but some cost more than others.
  • You may scan the UPC of any product and see how much it’s selling for on Amazon. Just make sure to reference the rankings of the listing, as well as whether you’re restricted from selling that product.
    • Pro Tip: Amazon now allows you to take an image of the product, so you’re not limited to taking an image of the bar code/UPC.
  • You may use your smart-phone, an iPad or a scanner for sourcing and all have their own pros and cons.
  • Costs depend on your budget, in terms of how much to spend on an item, and you should account for shipping the item to Amazon if you’re trying to sell through FBA. Remember, the heavier the item; the costlier the shipping.
  • Example: You may visit your local goodwill shop, find a book there for $5, and sell that same book on Amazon for $49.95.
  • Advantages to this business model:
    • It’s a great way to “wet your beak” and get practice selling.
    • Spend less than you would through other business models, as you’re picking up the products directly.
    • Source inventory local to you, and thereby obtain inventory others may not readily have access to.
    • Helps build relationships with local vendors, eventually helping you transition to other business models.
    • Have a network of friends, family, or employees across the country sourcing in their local stores on your behalf.
  • Disadvantages to this business model:
    • Limited in the amount of goods you have access to.
    • Harder to scale quicker
    • Requires you to spend time going from store to store, in search of merchandise.

Here’s a great case study video about a person that was able to leverage the retail arbitrage business model to grow from $0 to $1,000,000 a year on Amazon:

 

 

Online Arbitrage:

  • This business model entails the seller searching websites all over the internet, with the goal of finding products that could be purchased and sold on Amazon for a profit. The main differentiation between this model and retail arbitrage, of course is the fact that you don’t need to go to the actual stores in order to purchase the items.
  • You may visit websites like walmart.com, kmart.com, bedbathandbeyond.com, toysrus.com and thousands of others in search of products to buy cheaper and sell for a profit.
  • With online arbitrage, it’s very useful to utilize convenient chrome extensions (which i’ll be reviewing for you soon), such as:
  • In addition, perhaps the holy grail of online arbitrage is “Tactical Arbitrage” from Alex Moss, which helps tremendously with product sourcing, reverse searching, wholesale searching and a ton more. Do yourself a favor, and purchase it if you’re involved in Online Arbitrage.
  • Simply put, you just need access to a computer with internet access, in order to search for profitable inventory.
  • Costs may be higher for this business model – because, you need to account for shipping costs from the website to wherever you decide for them to ship to. Cost could really be as low as $20 dollars to start in terms of product. Always be mindful of the Amazon fees, shipping fees, and rankings – as that will tell you whether you’ll make a profit, and how fast.
  • Example: You may go to walmart.com; browse the pets category, and see that they’re selling a dog collar for $10, and you can resell that collar on Amazon for $30. 
  • Advantages to this business model:
    • You don’t need to travel to stores to purchase this inventory. Thereby, you save time and money on travel costs.
    • This is for introverts, as you wouldn’t need to communicate much with people, outside of a customer service rep through chat or email.
    • You can have multiple tabs open, sourcing multiple websites at once.
    • You can hire Virtual Assistants to source for you
    • Can work from the comfort of your own home or anywhere in the world.
  • Disadvantages to this business model:
    • Lower margin opportunities, since you’re accounting for shipping costs to Amazon or another specific location.
    • Less relationship-oriented
    • Higher risk of item taking longer to sell or not selling at all, due to the time between receiving the items and shipping them to Amazon.
    • Higher risk of competition on your listings, as more people are able to source from the same websites, and you don’t have the competitive advantage of having stores nearby.

 

Wholesale:

  • This business model entails opening accounts with distributors and/or manufacturers, in order to purchase items in larger quantities for resale.
  • You may go on google and search for different distributors or manufacturers of certain products and work on creating accounts with those manufacturers.
  • With wholesale, its really important to build relationships with the distributors/manufacturers, as you may be eligible for higher discounts, which would give you the advantage over your competition buying from the same places.
  • You must get a Tax ID/Reseller certificate – as those are the standard requirements of almost any manufacturer.
  • Generally, the harder it is to obtain a distributor/manufacturer, the more lucrative it could be for your business.
  • You just need access to a computer and/or phone to get in contact with these vendors, set up accounts, and start selling thousands of products on Amazon.
  • Costs are generally higher than than the online arbitrage/retail arbitrage business models, as the distributors normally have minimum order spends. To spark your business, you should consider having at least $500 to spend, though it may be beneficial to have up between $5,000 – $10,000 in savings in order to invest into certain inventory. This model is not the most recommended if you’re a newbie, but it’s not out of the realm of possibility either.
  • If you have a contact or connection with a distributor or manufacturer, it could be a gamechanger for you and your business. Imagine you know somebody working for a large manufacturer and could get you unbeatable pricing! You would outsell your competition just on price alone!
  • ExampleYou contact a manufacturer that specializes in grocery supplier; they set up an account for you; you can then order from them at any time, having access to their whole product line, rather than just one product at a time. Order soft drinks, food supplies, and almost anything else in the grocery category. Get 5 of those, and you’re even more golden!
  • Advantages to this business model:
    • Access to substantial inventory at all times, thereby allowing you to scale faster.
    • More inventory in one place, not needing to go to multiple places to source.
    • Relationships can give you a huge advantage in the long run.
    • You’re able to learn tons of brands and experiment at faster speeds and at scale.
    • You’re buying from the source directly when you buy from the manufacturer, so less risk when it comes to infringements on Amazon.
    • Can use these same items/accounts to then start selling internationally, on other Amazon marketplaces.
  • Disadvantages to this business model:
    • Larger investment initially, as you need to abide by minimum order quantities.
    • Need to be careful with distributors, as they sell numerous brands, and each brand has their own third party marketplace/pricing policies.
    • Requires storage generally speaking, as it’s really hard to keep all the boxes laying around the house for a long time; particularly, once you start to scale.
    • Not extremely simple to open wholesale accounts.
    • Competition using the same accounts/vendors as you, so harder to differentiate in some respects.

 

Private Label:

  • This business model is really the “not so hidden gem” of Amazon.
  • It entails the seller creating a product of their own, oftentimes adding their brand, logo or other text to the item, and owning the product from start to finish.
  • It requires a manufacturer to brand the item, an investment into inventory, logistics organization and more!
  • You should test your negotiation skills, as you’ll need them!
  • Junglescout should be used in conjunction with the product research you conduct for this business model!
    • Pro Tip: Don’t order large quantities prior to testing the product first. Find a comparable item, or comparable brand. Create a simple listing on Amazon for that product; list it, run PPC ads to that product; collect all the main keywords and see if it’s selling, and only then consider reordering in a large quantity.
  • Costs are normally higher than all the other business models – particularly, because most manufacturers won’t “private label” an item for you, without a minimum order quantity. Depending on the item, it may be 100, 500, 1000 or more. You should expect to invest between $1000-$2000 at least, once you order the products, pay to have photography done, optimize your listings, and of course run PPC. Don’t forget that you’ll then need to re-order if the item is selling, and you’re essentially buying new stock before the original stock runs out, as otherwise the ranking will tank and you’ll lose our competitive advantage on an Amazon page.
  • Advantages to this business model:
    • You own the brand and can diversify it with other products.
    • You set the prices.
    • Helps de-risk possibility of hijackers coming on your listing, as it’s your brand.
    • Innovative products can disrupt certain categories on Amazon and get your product straight to the top.
    • Eliminates competition for you, unless you’re selling your product to other resellers.
    • Builds relationships with manufacturers, allowing you to scale, and get much cheaper pricing down the line.
    • Helps set your brand up as a leader, eventually leading to new opportunities, such as getting your items in big market stores such as Costco.
  • Disadvantages to this business model:
    • Higher cost of entry
    • Need to iron out logistics, and work with prep centers and/or freight forwarders.
    • May require the need to order the items from abroad, since it’s cheaper.
    • If Amazon takes down your listing – you’re potentially stuck with a ton of inventory necessary to sell.
    • Trademark/patent infringement concerns
    • More risk in terms of the product actually selling – as the brand is unknown and product may not be appropriate.

So, there you have it! The 4 very important business models you can build a business with through Amazon! Note – that there are definitely exceptions to each of them, in terms of how much money to put in, and how much money you could make. No one person’s circumstances are totally alike, and as such, no one’s person’s results will generally be the same. 

I hope you found this list useful, and if so, I’d greatly appreciate it, if you could like, share, comment and re-post anywhere and everywhere you deem it could help someone!

Thank you for your attention, and feel free to share, like, & repost!

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