Finding Your Amazon Selling Business Plan
As a new seller, choosing the right business plan is a critical step before diving into the Amazon marketplace. A solid business plan can help you set clear goals, manage money effectively, and navigate the competitive Amazon marketplace.
There are different business models available on Amazon, each with its own features and requirements:
- Online Arbitrage: This model involves buying items online at a discount and selling them on Amazon for a higher price. It’s appealing because it has low barriers to entry, flexibility, and a wide variety of products for resale.
- Retail Arbitrage: Similar to online arbitrage, but it involves purchasing discounted products from physical retail stores rather than online sources.
- Wholesale: This model involves buying products in bulk directly from manufacturers or distributors at discounted rates and selling them on Amazon.
- Private Label: Sellers source products from manufacturers but sell them under their unique brand. This model offers more control over pricing, branding, and customer loyalty.
- Handmade: Amazon Handmade allows artisans to sell their handmade products directly to customers, perfect for those who are creative and craft-oriented.
To choose the right business plan, consider your strengths, resources, and the type of products you want to sell. Each model has its pros and cons, so picking the one that aligns with your skills and goals is crucial for your success as an Amazon seller.
Diving Deeper into Online Arbitrage
Online arbitrage (OA) is a popular business model on Amazon where products are purchased from online retailers at a lower price and then resold at a higher price on marketplaces like Amazon. The online arbitrage process involves a few main steps:
- Research and Sourcing: Finding products available at a lower price online compared to what they’re sold for on Amazon.
- Purchase and Logistics: Buying these products and managing their delivery to Amazon’s warehouses or directly to customers if not using Amazon’s fulfillment service (FBA).
- Listing and Selling: Listing the products on Amazon at a price that’s competitive but still profitable.
- Making a Profit: Making a profit after considering the purchase cost, Amazon fees, and any other expenses.
Why is OA Popular Among New Sellers?
- Low Initial Investment: It doesn’t require buying large quantities. You can start small, testing the waters with less financial risk.
- Flexibility: It allows for remote operation and can fit different lifestyles and schedules easily.
- Accessibility: No need for complex negotiations with suppliers or manufacturers; anyone with internet access can start.
- Educational Value: It provides a practical learning curve for understanding Amazon’s market dynamics, customer demand, and pricing strategies.
Tips for Success in Online Arbitrage
- Use Tools Efficiently: Leverage tools for sourcing, price tracking, and other time-consuming tasks. Don’t underestimate the power of sourcing lists, and use them to your advantage by combining them with sourcing software.
- Keep Updated About Amazon’s Fees and Regulations: Familiarize yourself with and keep yourself updated about Amazon’s fee structure, shipping costs, and selling policies to avoid surprises and account issues.
- Monitor the Numbers: Regularly review sales, income/expenses, and other important details to improve strategies and recognize potential problems early.
- Manage Cash Flow Effectively: Understand the costs associated with an OA business and use tools like Amazon Revenue Calculator to estimate fees and profitability of products. Manage your cash flow by accurately forecasting sales and expenses and smart investment in new inventory.
- Keep on Top of Your Inventory: Stay on top of your inventory by using tools like InventoryLab to always meet customer demand, avoid stockouts, and prevent excess inventory from tying up your resources.
- Take Seller Feedback and Reviews Seriously: Actively monitor customer feedback and promptly address any issues or negative reviews to build a strong reputation and show Amazon that you are a valuable seller on the platform.
- Analyze Competition and Adjust Prices: Keep an eye on competitors to understand their pricing strategies and identify opportunities to adjust your prices accordingly. Repricer tools like BQool and RepricerExpress can automate this task for you.
- Review Performance Metrics Regularly: Dedicate time to assess your performance metrics at least once a month. Key metrics to keep an eye on include order defect rate, late shipment rate, and conversion rate. Identify issues and address problems before they escalate to prevent the loss of potential sales.
Essential Steps After Choosing Online Arbitrage as Your Business Plan
After choosing online arbitrage as your Amazon selling plan, there are essential steps to follow for establishing and growing your business. Here are the key steps:
- Market Research: Get to know the online arbitrage world by researching the market, analyzing products, reading reviews, and discovering trendy items.
- Setting Up Your Amazon Seller Account: Choose between a Professional or Individual account based on expected sales and features needed. Understand Amazon’s policies and fees.
- Sourcing Products: This is the most important step in online arbitrage. There are many ways to source products, including manual sourcing (which is very time-consuming and inefficient), using sourcing software, purchasing sourcing lists, or hiring a virtual assistant to do it for you. For beginners, it’s best to use sourcing lists and check the leads with software to analyze them further and ensure profitability.
- Choosing Your Fulfillment Method and Shipping the Products: Choose between FBM (fulfillment by merchant) and FBA (fulfillment by Amazon). FBA is a better option because it allows you to focus on more important tasks while Amazon takes care of picking, packing and shipping the products. Order your products and send them to Amazon warehouses or ship the orders yourself (if you choose FBM).
- Managing Inventory: Your inventory needs constant monitoring due to varying supply sources, unlike wholesale or private label models. Ensure to restock products on time and avoid overstocking by estimating monthly sales and analyzing historical sales data.
- Analyzing and Making Adjustments: Continuously monitor sales, profits, and customer feedback and analyze this data to identify areas for improvement and make necessary adjustments.
Sourcing Products, the Most Crucial Step in OA
Product sourcing in online arbitrage is the process of finding products at lower prices from various sources to resell them on Amazon. Key sourcing methods include:
- Clearance Sales: Buying items at significantly reduced prices to clear inventory.
- Discounted Products: Purchasing products at reduced prices due to sales or promotions.
- OA Sourcing Lists: Using curated lists of profitable products suitable for OA. These lists are the best method for new sellers because they allow them to get familiar with the sourcing process and what counts as a good OA deal. You can check out OABeans’ sourcing list plans to find out more about this method.
- Retail Websites: Scanning retail sites for deals and price differentials.
- Wholesale Websites: Buying products in bulk from wholesalers or distributors.
- Seasonal or Promotional Sales: Leveraging discounts during events like Black Friday or holiday seasons.
Common OA Challenges and How to Overcome Them
Online arbitrage on Amazon offers lucrative opportunities, but it also presents various challenges that sellers must navigate. Understanding and addressing these challenges is crucial for success. Here are some common challenges and strategies to overcome them:
- Category Restrictions: Some product categories require approval from Amazon. To address this challenge, apply for approval early and meet Amazon’s requirements with proper documentation.
- Amazon Fees & Costs: Fees can impact profit margins significantly. Stay informed about fee structures, use profit calculators, and choose products with better returns to counterbalance costs.
- Inventory Control: Managing inventory efficiently to avoid overstock or stockouts is another common challenge in OA. Use inventory management tools, monitor sales trends, and consider using Amazon’s FBA program to free yourself of the logistics.
- Packaging Restrictions: Adhering to Amazon’s specific packaging guidelines can be challenging. Understand and meet Amazon’s packaging requirements to prevent damage and negative seller ratings.
- Amazon Feedback & Reviews: Negative feedback can affect sales. Prioritize customer service, promptly address concerns, and seek positive feedback to prevent your sales from being affected by negative reviews.
- Cashflow: A common OA challenge is ensuring sufficient funds for inventory and business sustenance. Control finances, reinvest profits, and consider short-term financing options if necessary.
These are just some of the challenges you will face as a new Amazon seller. Make sure you know all the new seller challenges and how to address them before making any big decisions.
Tools and Resources for Amazon Online Arbitrage Sellers
For Amazon online arbitrage sellers, having the right tools and resources is vital for informed decision-making and streamlining the selling process. There are some free online arbitrage tools available, such as Keepa, Swag Button, Honey, Amazon Seller App, etc. These tools are great for new sellers, but as your business grows, investing in more advanced tools for deeper insights and automation becomes valuable.
Here are some of the best paid tools you can invest in:
- Tactical Arbitrage: Scans multiple retail sites to find profitable deals for Amazon resale.
- BQool: Offers a suite of tools including a repricer that dynamically adjusts product prices based on various factors.
- Inventory Lab: An all-in-one solution for inventory management, accounting, and analytics, aiding in efficient inventory control and financial management for OA sellers.
- OABeans: OABeans provides curated sourcing lists ideal for OA, reducing risk and saving time, particularly beneficial for newcomers.
Starting as a new Amazon seller, especially in online arbitrage, is both thrilling and challenging. Success on Amazon involves making a good business plan, doing careful market research, using smart buying strategies, managing inventory and money wisely, and keeping customers happy while following Amazon’s rules and guidelines. With patience, hard work, and the right plan, you can create your success story on one of the biggest online stores!