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Friday, May 5, 2017

Amazon FBA - How I generate income selling on Amazon

 

Amazon FBA (Fulfillment by Amazon) is a system that Amazon has in place to allow every day people to sell items without the hassle of shipping. Listing is faster on Amazon vs Ebay because most items already have a listing on Amazon (unless you are bringing a new item to the marketplace which is called "Private Label") so you just need to find your item and enter a price. You list all of the items and put them together in one big box and send them to an Amazon warehouse. Amazon stores them in their warehouse until a customer buys. They ship the item and handle all the order processing including returns if they occur.

Here is the bottom line and what people want to see. I have made over $5,000 of profit since October of 2016 and put in 2-3 hours a week. Here is my ongoing accounting summary:


Yearly SalesUnits SoldCost of GoodsSalesPaymentsFeesProfitEstimated Yearly Profit

20162985,0549,7098,65423192,3358,406.00

20172856,22412,4869,16628333,4299,843.74

TOTAL
11,27922,19517,82151525,764



I changed the title of this post about a million times and finally decided on what you see. I went back and forth from "How I made $5,000 on Amazon" all the way to "You can make $500 a month on Amazon".... but they all felt too salesy which I didn't like. What I wanted to do was provide a quick look into my new business and help out this community with yet another way to build income. If there is interest, I will follow up with more detailed instructions, but those can be found throughout the internet. Here is how it works.

First you create an account with Amazon to sell and download their seller app. Both are free to do. Next you start thinking about what type of products you want to sell or you just start scanning everything to see what is profitable. There are a couple of different ways to get products:

  • Retail Arbitrage (RA) - This is going out to retail stores like Walmart or Target and finding items that are selling for more money on Amazon than locally. You can find items that are being clearanced locally that may sell at a higher price on Amazon. Believe it or not, this actually works and many people do this as their full time job. 
  • Online Arbitrage (OA) - Similar to RA, OA is sourcing your products to sell online instead of at a retail store. This is what I do 75% of the time with a very specific group of products.You order the items online, have them shipped to you, you prep them for Amazon and then send them into the warehouse. 
  • Wholesale - Its possible to find an online or local wholesale company that isnt selling anything on Amazon. You buy the items from a wholesaler and list on Amazon.
  • Private Label - Most of what you see on Amazon is from people that are sourcing products from China and create a brand name that they can sell the item as on Amazon. That is why you see several items that look identical on Amazon but have different names, or slightly different bundles. 





The green star indicates my forecast for the month of May. Its based only on what I have sold already over the past 5 days, so its a bit low. The pink shaded area is profit, and you can see over the past 7 months, my profit has been consistent.

Ok, this all seems too good to be true, what are the barriers to entry and why isn't everyone doing this? Finding a product to sell, whether its Private Label, or RA/OA is not always easy. Some people will look at every product in a store and only see 1 or 2 items that are profitable to sell. Just like any business, it takes time to understand the market and what items sell well and are more profitable. That is why I am not sharing what I sell because I don't need more competition. :)

Amazon charges high fees which scare people away but that is for a couple reasons. First, is that they do all of the storage, order processing, and shipping fees to send items to the customers. Secondly, when you do FBA, customers can order your items and get prime 2 day shipping just like on all the other items Amazon sells. This includes used items. This is a huge selling point for many customers and therefore people are willing to pay a little more for the convenience.

Finally, my profit above is limited by how much time I have to invest (right now only a few hours a week) and as I noted above, finding product to sell. My goal is to turn this into a full time job so I can retire from my day job, but as you can see, I only have projected yearly sales of $9,843 and thats not enough to live off of. It is however paying for our family vacations!

Feel free to ask questions below! I hope I provided a bit more detail but there is so much more that I cannot fit into one post. If you want to hear more about a particular point above, don't hesitate to ask and I can write a future post about it or respond below if its quick.


Disclaimer: These results are mine and mine alone. There is no guarantee of success if you try anything with Amazon or other online retailers and you can lose money.

Monday, May 1, 2017