HOW TO MAKE MONEY ON AMAZON - Beau Crabill - Online Retail Mastery (Amazon FBA University)
HOW TO MAKE MONEY ON AMAZON. Learn HOW TO MAKE MONEY ON AMAZON: 6 DIFFERENT WAYS
HOW TO MAKE MONEY ON AMAZON
Back in 2015 my wife and I started a side hustle of selling on Amazon. We thought it would be fun to work together on something, and our intent was to spend a few hours per week on the business and hopefully bring in $1,000 — $2,000 per month in profit.
Little did we know that our side hustle would bring in a six-figure profit in our first 12 months.
There are a lot of different approaches to making money with Amazon, and our choice was to sell private label products via FBA (Fulfilled by Amazon).
In this article we’ll take a look at some of the different ways that you can make money with Amazon, as well as a more detailed look at how to have success selling through Amazon’s FBA program.
But first, I’d like to share a little bit about our story since I think it can be motivational if you’re looking for a way to make some extra money.
HOW TO MAKE MONEY ON AMAZON
A SIX-FIGURE AMAZON SIDE HUSTLE
In the summer of 2014, I came across a few blog posts and podcast episodes focused on the topic of selling private label products through Amazon’s FBA program. I was aware of the possibility to sell private label products, and I was aware that third-party sellers could sell their products on Amazon, but I had never thought about the power that exists when these two are combined.
If you’re not familiar with the term “private label”, all that means is that someone else manufactured the products for us, and put our logo and branding on the product.
FBA is a service Amazon offers that is really a game-changer for small businesses. Through the FBA program you can send your inventory in bulk to an Amazon warehouse and when a customer buys your product, Amazon will pack up the item and ship it to the customers.
If you’re selling products via FBA you will not need to fulfill individual orders, handle returns, or deal with customer service on issues related to shipping. You can send in hundreds or thousands of items at once instead of running to the post office every day to ship your orders.
If you’re selling private label products, you are essentially outsourcing all of the manufacturing.
If you’re selling products via Amazon FBA, you are essentially outsourcing all of the order fulfillment and shipping, as well as most of the customer service.
What do you get when you outsource all of these things?
You get the possibility to have a very passive source of income.
As someone who had been working online and blogging for several years, the possibility of making money passively selling on Amazon was very enticing to me. My wife and I had been talking for a long time about starting a business together, so I told her about it and she was in!
Over the next couple of months we learned more about selling on Amazon and tried to come up with an idea for our first product. We had a few ideas, but everything we considered was either too competitive, or the startup costs for inventory were too high.
After a while, we gave up.
A few months later, in the spring of 2015, I came across a course (Amazing Selling Machine) that specializes in teaching people how to sell private label products on Amazon. My wife and I watched a webinar together and decided to invest in the course and commit to giving it a shot.
The course was 8 weeks long. A few weeks into the course we had decided on our first product and ordered samples from a few manufacturers in China. By the end of the 8 weeks we had chosen a manufacturer and had placed our first inventory order.
Our Product is Live!
In August, 2015 our inventory arrived and our first product was live and for sale on Amazon! We figured it would take a while to start making sales, but we actually sold out of our inventory (1,000 units) in about 3 weeks.
Our second order of 1,000 units also sold out in 3 weeks. By this time we had a number of 4 and 5-star reviews on our product and we started looking into possibilities for a second product under the same brand.
In early November we received an order of 5,000 units of our first product, hoping to make a lot of sales from holiday shoppers. We actually sold out of that inventory a few days before Christmas and were out of stock for about a week until our next order came in.
During a 30-day period between Thanksgiving and Christmas we made more than $50,000 in gross sales from a single product that sold for about $16, and we were doing no advertising at that time.
Growing the Business
Throughout 2016 we were focused on adding new products. Originally we had only intended to sell one or two different products. However, we decided to try and grow it more so our business wouldn’t come crashing down if a single product stopped selling
By the end of 2016, we had 7 different products in our brand and each of those had 2–3 different color variations. None of our other products matched the success of our first product, but they were all profitable. Two of them sold quite well, even though they weren’t home runs.
Selling the Business
Although the business had grown nicely and we were making more than $100,000 in profit from a part-time side hustle, we decided to sell the business.
In order to keep growing, we would need to invest more money into inventory for other new products, and we decided we’d rather sell the business to someone who could take it to the next level.
In 2017 we sold the business for a six-figure amount, and our experiment with an Amazon FBA business was complete.
One of the great things about Amazon is that you have several different options for making money. Pick the one that seems like the best fit for you.
Let’s take a look at the options.
# 1 — SELLING PRIVATE LABEL PRODUCTS
My wife and I chose to sell private label products because we liked the idea of having one (or a few) consistent product(s) that you can sell over and over again.
With some of the other options that we’ll look at in a minute, you will constantly need to look for products to sell.
One of the nice perks of selling private label products is that if you’re successful you won’t need to keep looking for products, you just need to make sure you have inventory of your products that already sell
I won’t get into too much detail here, because later in the article I’ll cover how you can have success selling private label products on Amazon.
Pros of Selling Private Label Products:
- Possibility of passive income.
- Potential for high profit margin.
- No need to constantly look for items to sell.
- Build a brand that is a long-term asset (and can be sold).
Cons of Selling Private Label Products:
- The fewer products you have, the more vulnerable you are if sales drop for one of your products.
- Developing new products can take a while.
- Higher inventory costs than the other approaches.
# 2 — RETAIL ARBITRAGE
Retail arbitrage involves buying a product and then reselling it for a profit. With this approach, you won’t be creating a brand or your own products. You’ll be buying and selling products from a variety of different brands.
There are basically two keys to making money with retail arbitrage:
- You need to find great deals on products that people want to buy.
- You need to be able to figure out how much you can sell it for on Amazon (and how much you’ll keep after Amazon’s fees).
You can find items to buy either by finding sales and closeouts in local retail stores or online.
Retail arbitrage can be quite profitable, but you will need to be on a constant quest to find the best deals.
If you want to learn more about how to have success with retail arbitrage, I recommend the course Amazon Bootcamp where you’ll learn from a very successful seller.
Pros of Retail Arbitrage:
- You can get started quickly.
- No need to build a brand of your own.
- You don’t need to worry about things like product reviews.
Cons of Retail Arbitrage
- You need to constantly look for products that you can buy and re-sell.
- Some of the policy changes Amazon has made make retail arbitrage more difficult than it used to be.
# 3 — WHOLESALE
Another option is to buy products wholesale and sell them on Amazon. This approach is somewhat of a cross between private label and retail arbitrage.
Like the retail arbitrage approach, you won’t be creating your own brand or your own products. Instead, you will be selling other existing products.
But like the private label approach, if you find a few successful products you may be able to sell them over and over again for a long period of time.
The key is to find the products that you can buy at the right price to sell on Amazon for a profit.
You can learn more about wholesaling, and hear a success story, on this episode of The Side Hustle Show.
Pros of Selling Wholesale on Amazon
- Make money from products that other sellers are overlooking.
- No need to build your own brand.
- You’re not dependent on the success of any individual product.
- Possibility to scale and grow the business.
Cons of Selling Wholesale on Amazon:
- Low profit margins and (sometimes) high minimum order quantities.
- Many manufacturers are already selling on Amazon themselves.
- Finding the right products can be tricky.
# 4- SELLING USED ITEMS (INCLUDING BOOKS)
Another option is to sell used items. One of the most common approaches is to sell used books, but there are other types of used items you can sell.
For example, used cameras and lenses can maintain good value if they are in decent condition, and there is a large market for used photography gear.
Amazon does have some restrictions on the used items that can be sold (mostly for the safety of Amazon’s customers), so you will want to be sure that you can sell a product before moving forward.
Pros of Selling Used Items:
- Potentially lower competition than the other approaches listed above.
- Possibility for good profit margins if you can buy at the right price.
Cons of Selling Used Items:
- Constant need to find more items to sell.
- If you’re selling low-cost items (like books), you’ll make a small dollar amount on each sale.
- Restrictions from Amazon on certain types of products.
# 5 — WRITING EBOOKS
The last two options are quite a bit different from the options we’ve looked at so far. Neither of these involves physical inventory.
Amazon is a great marketplace for selling books, including ebooks through the Kindle program. There are millions of customers looking for ebooks on Amazon, so there is plenty of opportunity.
Creating your own ebook isn’t as difficult as it may sound. You can use free software to format your writing, or hire someone on a site like Fiverr or Upwork to take a Word document and format it into an ebook that you can sell.
A successful ebook can continue to generate passive income for months or years to come. Some people write one or two ebooks and make a small, passive income every month. Others choose to grow their business by constantly writing more ebooks.
Pros of Writing and Selling Ebooks on Amazon
- No need for inventory.
- Potential for passive income if your ebook continues to sell.
- Option to scale the business by writing more ebooks.
Cons of Writing and Selling Ebooks on Amazon:
- Most ebooks on Amazon sell for low prices.
- Most people that make significant money with this approach are constantly producing new ebooks.
# 6 — AMAZON ASSOCIATES
Amazon calls its affiliate program “Amazon Associates.”
As an affiliate, you can use your website or blog to promote products sold on Amazon, and you’ll make a commission for sales that you refer.
Amazon’s affiliate program is extremely popular for a few reasons:
- Even small websites and blogs can get accepted into the program.
- No matter what topic your website or blog covers, Amazon has products that you can promote.
- Your conversion rates will be high because most people already trust Amazon.
- If someone clicks on your affiliate link, you can earn money even if they buy a different product.
Many internet marketers create niche websites that cover a specific topic, and then monetize the site by linking to products on Amazon.
For example, you could create a website or blog about camping and link to tents, sleeping bags, and camping accessories being sold on Amazon. One of the great things about this niche website approach is the possibility for it to become a source of passive income.
Once you have the website set up and you’re getting traffic from Google searches, there’s not a lot that you need to do to keep the site running. You’ll probably want to continue to add more new content, but that can be outsourced very easily.
For a more detailed look at this approach please see my Complete Guide to Building a Profitable Niche Website.
Pros of Amazon Associates:
- Countless products that you can promote.
- Potential for a passive source of income.
- Create a niche website and build an asset that you can sell.
Cons of Amazon Associates:
- Relatively low commission per sale.
- You’ll only get paid if the visitor makes a purchase within 24 hours of clicking your affiliate link.
HOW TO MAKE MONEY WITH AMAZON FBA
Now that we’ve taken a quick look at some of the different ways you can make money with Amazon, let’s take a deep look specifically at how to sell private label products through Amazon’s FBA program.
STEP 1: DECIDE ON A PRODUCT
The first thing you need to do is choose a product that you want to sell. There are basically two different approaches you can take:
The Standard Approach
Most articles and courses related to selling private label products on Amazon will advise you to use criteria that will help you avoid some headaches and extra expenses.
With the standard approach here are some factors that you want to find in an ideal product:
- Priced between $15 — $50 on Amazon. After the Amazon fees for FBA, it’s hard to make much of a profit with products that sell for less than $15. Purchases under $50 tend to be impulse buys, so the sweet spot is between $15 — $50.
- Small in size. Typically, you’d want to sell a product that could fit inside a shoebox. The storage fees that you will pay to have your products in Amazon’s warehouse will be higher if you’re selling an oversized product. Higher fees obviously cut into your profit.
- Lightweight. If you’re shipping products from China, the cost will be influenced by the weight of the product. My wife and I had our inventory shipped by air express with DHL, UPS, or FedEx. That’s the most expensive shipping option, but our products were very lightweight so it still worked out.
- Nothing with electronics or batteries. These types of products have a great defect rate, and will probably require more customer service. Batteries can also be an issue coming through customs.
- Simple products that people already know how to use. Ideally, you don’t want to have to train customers how to use your product. Simple products require much less customer service.
There are obviously many legitimate and convincing reasons to follow these criteria, and this is the approach my wife and I took when choosing our products.
The Opposite Approach
If there are convincing reasons to follow the standard approach, why would you want to take a different route?
The vast majority of private label sellers are following the same criteria and looking for the same types of products. This leads to heavy competition.
If you go against the common logic you may be able to find a product that you can sell with much less competition.
To take this approach you’ll need to be willing to jump through a few hoops, or maybe invest more money. But the end result might be worth it.
If I were starting a new Amazon FBA business today I would probably look for an unconventional product that most private label sellers don’t want to deal with.
If you choose an oversized product or a heavy product you may need to have it shipped by sea (you can hire a freight forwarder to help). It’s inconvenient and intimidating to most new sellers. If you’re willing to do what other people won’t, you can avoid a lot of competition.
If you choose a product that sells for $100 instead of $15 — $50 you’ll need to invest more money into startup inventory, but since most sellers aren’t willing to do this, you’ll probably have less competition.
When you’re deciding on the first product that you want to create (or have manufactured) and sell, you’re basically looking for an opportunity.
There are a few possibilities:
# 1 — Low Competition
Most sellers look for an existing product that is selling well on Amazon but does not have a ton of direct competition. Then you’ll create your own version of this product.
This is how my wife and I decided on our first product that turned out to be very profitable. Although, I have to be honest, it’s not that easy to find a product like this. There is a lot of competition on Amazon, and we looked at many different products before finding one that we thought was a good opportunity.
You can use Amazon’s best sellers list to find products that are selling well. From that page, you can click through to specific categories and subcategories to see the top sellers in each. Or you can use a free tool like Unicorn Smasher to give you an estimate as to how many units of a product are being sold each month.
To check out the competition, search on Amazon for the main keywords that people would use to find this product. If there’s not much competition, you may have found a good opportunity.
# 2 — Flawed Products
Maybe a product you are considering has a lot of competition, but the competing products all suck. If all of the competitors have bad overall ratings and reviews, there may be some opportunity for you to jump in.
Read through the negative reviews of the competing products and see what people don’t like. This could be things related to the product design, quality or materials, size, colors, smell, or anything else.
Take note of what seems to be the major issues. If you can find a manufacturer who will make a product that addresses these issues, you could have a product that is better than all of your competitors.
Use your listing to point out how your product is well-designed and made from quality materials and you may be able to sell a lot.
# 3 — Poor Listings from Competitors
The quality and price of a product aren’t necessarily what determines how well it sells. Some products on Amazon are presented very well, and others are not.
If you find a product where all of the competitors have bad listings, you may be able to come in and outsell them all with a good listing.
A bad listing will usually have poor quality photos, not enough photos, a lack of information in the bullet points and product description, and it may not be optimized for the right keywords.
Note: Amazon Restricts Some Categories
Amazon does not treat all product categories the same. They have different rules, regulations, and restrictions for selling in some categories.
The main reason for this is the safety of consumers. By restricting sellers they can decrease the odds of irresponsible sellers creating problems for Amazon’s customers.
This can impact sellers in a big way, because you may not be able to sell a particular product just because of the category it’s in.
Sometimes you can sell it, but you’ll need to be approved first. The approval process in some cases is simple, but in other cases it is not.
You can get more information on restricted categories from Amazon Seller Central.
STEP # 2 — FIND A MANUFACTURER
Once you’ve found a product that you think may be a good opportunity, the next step is to find a manufacturer.
The easiest approach is to use Alibaba and search for a manufacturer that creates the product you want to sell, or something similar. Keep in mind, most private label sellers use this approach.
With that in mind, it’s important that you customize the product in some way. Otherwise, it’s too easy for someone else to sell exactly the same product as you.
Most manufacturers that you find will be able and willing to change or customize products. Some will even create a completely custom product just for you.
The reason most private label sellers use Alibaba is because it’s easy. Some sellers actually travel to China and go to the Canton Fair, where supposedly (I haven’t been there) you can find much more than you can find on Alibaba.
When you’ve identified a few potential manufacturers you can contact them through Alibaba to get pricing on the product. Be sure to tell them that you’ll be selling the product on Amazon and you plan to place repeat orders (they want repeat business, so they will be more eager to work with you).
If you’re a new Amazon seller it’s helpful to work with a manufacturer that has experience with other Amazon sellers (most will), so don’t be afraid to ask them if they are familiar with Amazon’s rules and if they can prep the products for FBA (which includes a barcode on the packaging).
The price and minimum order quantity that you get from the manufacturer is negotiable. Some of them will also make a one-time concession to give you a small minimum for your first order. If you need a small quantity, ask if they would be willing to do a “test order” so you can be sure that the product will sell before ordering a larger quantity.
Keep in mind that the smaller quantity you order, the higher price you will pay per unit. As your business grows, one of the best ways to increase your profit margin is to order larger quantities and decrease the cost of each unit.
Be sure to get a sample sent to you before placing an inventory order. I recommend getting samples from several manufacturers so you can compare them. I also like to buy competing products that are selling on Amazon so I can compare them to the samples.
Quality is Critical
When you are deciding on a manufacturer, don’t simply go with the lowest price. In order to have long-term success selling private label products on Amazon you will need to prioritize quality.
Product reviews are extremely important for selling on Amazon. If your product is low-quality you’ll get bad reviews and your sales will dry up.
But if you have positive reviews, the product can continue to make money for a long time.
Manufacturers will often use cheap materials so they can give you the lowest price possible. In most cases they are able to use higher-quality materials if you ask, and a lot of times the price difference will be relatively small.
STEP 3: CREATE THE PRODUCT LISTING
After you decide on a manufacturer and place your order you will probably have at least a few weeks, and possibly a couple of months, until the product is in Amazon’s warehouse and ready to sell.
During this time you should be working on your listing.
# 1 — Photos
The photos for your listing are one of the most critical factors for your success. You might be surprised at how many Amazon customers buy based on the photos alone without even reading the product description.
If you have bad photos, you will have a hard time making sales. And if you have good photos, your product will stand out.
You don’t need to be a professional photographer to get good photos. One of the keys is to take the photos in natural light, and avoid harsh sun and shadows.
I took all of our own photos, and I did most of them outside on overcast days. I’d put the product on a piece of cardboard or something with a solid background.
Afterward, I’d find someone on Fiverr who would remove the background and put the product on a solid white background (I paid $5 for background removal on 10 photos).
Be sure that you take photos of all angles and all sides. Amazon gives you space to add a lot of photos to your listing, so use them all.
You can also take lifestyle photos that show the product in use. Amazon stipulates that your main photo needs to be on a white background, but other photos can be lifestyle.
If you’re not comfortable taking the photos yourself, you can hire an expert to do it for you. My recommendation is to find a photographer that specializes in product photos for ecommerce. I don’t have any specific photographers to recommend because I’ve never used one, but with a simple Google search you can find plenty of them.
# 2 — Keywords in the Product Title
Your product title is extremely important for Amazon SEO. You want the most important keywords to be in your title so potential customers can find you.
Browse through the listings of your competitors and jot down all of the keywords that are in the listing. You can use a tool like Merchant Words to see which keywords get the most search volume.
It’s also important that you use keywords that accurately describe your product. Don’t just choose keywords because you think people will search for them. Amazon will use your conversion rate as a major factor that will determine where you rank in searches, and if you’re ranking for irrelevant keywords your conversion rate will be low.
# 3 — Benefit-Driven Bullet Points
Aside from the photos and the title, the bullet points are the next most important part of the listing. Make sure that your bullet points focus on the benefits of the product and how it will help customers.
Focus on what makes your product unique and better than the competition. The bullet points are the best place to sell your product.
Use all of the bullet points that Amazon gives you.
# 4 — Fill Out as Much Info as Possible
When you are creating a product listing in Amazon Seller Central, there are a ton of different fields. Fill out as many of them as possible. This will give the customer the most information, and it will also give you the best chance to rank in searches.
STEP # 4 — MAKE SALES
Once your product is live, the next step is to make sales. If you were able to choose a product with low competition you may be able to start making sales within a few days just by visitors finding your listing through a search on Amazon.
Getting traction and making the first few sales can be one of the hardest parts of the process. At first you won’t have any customer reviews, which makes it harder to sell if your competitors have a lot of reviews.
Once you’ve proven to Amazon that you can make sales, they’ll rank you higher in the search results. So at first you just need to focus on getting the ball rolling.
Here are a few things you can do.
Pay for Amazon Ads
When you do a search on Amazon you’ll probably notice that the first few listings on the page say “sponsored”. If you’re willing to pay, you can get exposure even for a new product.
You can bid a maximum amount that you are willing to pay per click, and you can set a max daily budget.
Amazon will give you reports to show your average cost per sale, so if you know your profit margin you can work to keep your bids at a level that allows you to break even.
Even if you are not making any profit from your ads, the conversions can help you to rank higher in searches and the result will be more organic (free) sales.
Run Ads on Other Sites
A lot of sellers pay to run ads on other sites like Facebook. Depending on your profit margin and the cost that you have to pay per click, this can be a good way to start making some sales.
Some sellers will use discount codes or special offers to get more sales from these ads.
Use Your Email List
If you have an existing email list, you can use it to help launch your new products or to promote limited-time offers.
Most new sellers won’t have an existing email list, but this is something that you can work to build over a period of time. A quality email list will make it much easier for you to launch new products and get reviews for those products.
Use Discount Sites
There are a number of websites where Amazon sellers can offer discounts on their products in order to make more sales. You may not make much of a profit, but the conversions can help your product to rank better.
Snagshout and Vipon are among the best of these sites, but there are several others.
The hardest part is getting those initial sales. Once you get some sales momentum and some reviews, things can pick up.
CONCLUSION: HOW TO MAKE MONEY ON AMAZON
Amazon is not only a great place to buy products, it also provides plenty of opportunities to make money. In this article we looked at six options, as well as a deeper look at selling private label products.
I’ve personally found Amazon to be a great money-making opportunity, so I encourage you to look at the options and find the one that is the best fit for you.