The Reality of Selling on Amazon and the Potential Income
Amazon is the largest eCommerce retailer by online revenue in the world. Customers spend more than $250 billion buying products from the Amazon marketplace, and we always hear successful sellers inviting others to join in on the profit and use this lucrative opportunity. The average Amazon FBA seller salary is $1000 to $5000 monthly. But is it as good as they say?
Amazon Is Not a Get-Rich-Quick Scheme
While nearly 3 out of 4 Amazon sellers have profit margins above 10%, knowing you can’t make a fortune out of it overnight is essential. There are many success stories, but they don’t reflect the entire journey, which includes hurdles, learning curves, and a lot of time. Many people start their Amazon business thinking they can earn “easy money” in no time, so they stop selling on Amazon after a while.
Competition is fierce on Amazon, so you must do your due diligence before choosing a product and listing it on the platform. You also need a sizable investment to purchase inventory and tools or pay Amazon fees. You can’t treat this like a hobby or a fun way to earn a little on the side – you must take your Amazon business seriously and make a continuous effort on research, product sourcing, and keeping yourself up to date with the changes in policies or regulations.
Amazon Online Arbitrage: Profits vs. Expenses
Online arbitrage is a popular business model on Amazon that involves buying products from online marketplaces and reselling them on Amazon for a profit. One of the reasons that many people stop selling on Amazon is they don’t consider the expenses and find themselves struggling with credit card debts and keeping the business running. Before starting an online arbitrage business on Amazon, you must consider the expenses below:
- Amazon fees: referral fees, fulfillment costs (for sellers using Amazon FBA), etc.
- Shipping and handling: cost of shipping products to Amazon’s warehouses or directly to customers
- Unsold inventory: not everything you buy will sell immediately. Over time, unsold inventory can lead to extra storage fees or profit loss.
- Returns and refunds: Amazon’s customer-centric policies mean that you will probably have to deal with returns/refunds at some point.
- Operational costs: cost of 3rd party tools or subscriptions, packing materials, and any other overheads related to your business.
However, all things considered, you can start with a capital of $500 and start earning profits after 4-6 months. This is a significant opportunity because if you start a business from scratch, profits can take 3-4 years to start rolling in.
Calculating the Capital Needed for New Amazon Sellers
We mentioned earlier that you can start an Amazon business with $500. But how does it work, and how much investment is required for Amazon online arbitrage?
One of the primary reasons many people stop selling on Amazon is needing more capital. All businesses need some start-up cash, and this is no exception.
While selling on Amazon frees you of some overhead expenses of a typical brick-and-mortar business like warehouse, electricity, etc., there are some costs and fees you need to take care of. You must have enough capital because the first payout from Amazon will come in 4-6 weeks after selling your first product. In the meantime, you must take care of expenses and have enough cash flow to order new inventory.
Your starting capital should be enough to cover Amazon Seller Central Professional account subscription ($39.99/month), Amazon FBA fees (if you decide to go with FBA), boxes and labels, and enough money to invest in products and vital tools like Keepa. Considering these expenses, having $1000 is an excellent place to start.
The Learning Curve: How Steep Is It?
Another reason people stop selling on Amazon is underestimating it. Even with all the guidelines and available resources, selling on Amazon can initially be pretty confusing. After all, there is much to learn: Amazon’s rules and restrictions, handling customer feedback and reviews, sourcing the right products, winning the Buy Box, etc.
However, hundreds of expert sellers on YouTube and other platforms offer free educational content about selling on Amazon. It may be confusing and challenging to keep up initially, but if you put in the time and effort, you can become an expert.
Restricted Categories: How to Get Ungated
Amazon restricts some of the categories to protect its customers. This is mainly due to sellers offering counterfeit or low-quality products in the past. For example, if you want to sell groceries on Amazon, you must get “ungated” first. Many Amazon sellers quit because they can’t sell in the categories they want, not knowing that they can get ungated quickly with perseverance and good standing with Amazon.
To get ungated, it’s better to sell in open categories for a while to prove you are a legitimate seller. Then you can get ungated in your desired categories by finding an authorized product distributor, ordering at least ten units, and getting an invoice. Provide the invoice and other required documentation to Amazon and wait a few weeks to get ungated.
Becoming a Successful Retailer: Strategies to Prevent Early Quitting in Amazon Selling
Now we know why people stop selling on Amazon, but what can be done about them? While running an online arbitrage business is no easy task, it’s worth the time and effort because it’s more convenient and provides results faster than starting a business from scratch.
So, what can you do in those first few months to stop yourself from quitting early? How to become a retailer who doesn’t give up? Let’s find out!
Learning from Mistakes: Key to Succeed in Online Arbitrage
Every Amazon seller, regardless of experience, makes mistakes. How you respond to those mistakes and learn from them makes a difference between you and those that stop selling on Amazon. Here are some of the ways you can learn from your mistakes:
- Feedback as a tool: While negative reviews or feedback can be disheartening, they provide valuable insights into areas of improvement.
- Regular review: Periodically assess your business operations to identify patterns in returns, slow-moving stock, or common customer complaints.
- Continuous education: The eCommerce landscape evolves constantly, so try to keep up with it by attending webinars or joining courses that allow you to learn from your mistakes and others’ experiences.
Managing Finances and Product Selection
Some people stop selling on Amazon because they fail to manage their finances effectively and do bookkeeping. The strategies below can help you manage your finances and make smart product choices:
- Budgeting: set aside a budget for every aspect – inventory, tools, unforeseen expenses, etc. – and remain loyal to it.
- ROI analysis: calculate the potential return on investment and profits before purchasing a product. Don’t forget to consider Amazon fees and other expenses.
- Diversification: avoid investing heavily in a single trending product or category. Diversify your portfolio to reduce risks.
Building a Supportive Network: Reducing Feelings of Isolation
If you ever feel burnt out or like this isn’t working, don’t worry because other people have been in your shoes, and many of them have managed to overcome the challenges and move forward with their businesses. This can be especially hard when friends and family don’t take your business seriously or try to change your mind by constantly giving negative feedback. To reduce the feeling of isolation, you can:
- Join seller forums: platforms like Amazon Seller Central Forum or similar options allow sellers to exchange ideas, provide solutions to common problems, and support each other in times of need.
- Attend local meetups: many cities have local Amazon seller meetups, which can be great for networking, partnership opportunities, or receiving support.
- Find a mentor: you can also hire a mentor in the Amazon selling space. Mentors can offer invaluable advice and educate you about shortcuts to success and pitfalls to avoid.
Addressing Top Problems and Challenges for New Amazon Sellers
Knowing about Amazon seller challenges and how to overcome them can be very helpful for those considering to stop selling on Amazon. Some of the most common challenges include:
- Not having the necessary tools to source products: trying to find profitable, in-demand products to sell on Amazon without the help of research tools and data can be highly time-consuming and challenging. The proper tools and data – such as sales rank, price history, number of competitors, estimated monthly sales, etc. – can reduce errors and the risk of tied-up capital or unsold inventory.
Not being patient enough: many people quit because their business was not generating enough profits or their products were not selling. To avoid this challenge, you must understand all the fees involved with selling on Amazon. You can use Amazon revenue calculators to get an estimation.
- Not keeping a steady cash flow: one of the main challenges of selling on Amazon is paying for inventory long before earning any income from it. You must keep cash on hand to avoid this challenge and be prepared to restock your inventory.
Final Thoughts and Steps Forward: Making Money with OA
Navigating a business on Amazon can sometimes feel like a real pain because challenges and hurdles await you around every corner. However, with these challenges come lots of opportunities to learn and grow and even use your experience to start your own business in the future.
As a new seller, you may encounter many challenges that tempt you to stop selling on Amazon. However, remember that true success is built on patience, persistence, and a thirst for knowledge. Your journey has just begun, and the world of eCommerce is vast and filled with opportunities. So, embrace the challenges, learn from your mistakes, and never lose sight of your goals.