The 5 Most Popular Ways to Start (or Grow) an Amazon Business
Does your head start to spin sometime when you look at all of the ways you can sell on Amazon? Off-course it’s great to have too many choices but sometime they can overwhelm us.
The choice of selling on Amazon depends upon many factors like financial situation, risk and management condition and personal preference. The system may be appealing to one person and not a perfect choice at all to another person.
We laid down 5 Amazon FBA models help you sort through the choices by providing a definition of each selling formats and the pros/cons of each one.
By the end of article you should have better understanding of which business model best fit for you, as well as where you can go to get started.
Retail arbitrage is also referred as “flipping merchandise” is system of purchase items (clearance) at regular price and then sells it for higher price on Amazon. The clearance items or sale is the situation in which vendors intends to get rid of remaining stock and often sell it in bulk at regular or discount price.
This usually happen in 4th quarter of the year when people are in buying frenzies and desperate to find “one hot toy” and will pay any price of it.
The way it works in the normal time of year is you might find hair curler for 25$ at clearance store and sell it on Amazon store for 40$.After Amazon fees and other deductions, you can make a profit of 5-10$.
- No upfront or investment require to get start.
- Easy Business Model to understand.
- Low risk involvement and easy to manage.
- A lot physical activity involve, you have to go from store to store to find clearance stock and restock inventory all of the time.
- Not a passive income model: most profitable at 4th quarter of year.
Online arbitrage is similar to retail arbitrage in sense that instead of local store, you can find clearance items or products on online stores like walmart.com etc. One good thing about this system is that you have hundreds of website available to source from, from large chain stores whose name you may recognize to bunch you may never heard of.
Instead of scanning items like in retail arbitrage, you can compare prices direct with the Amazon website to see if they are going to be profitable.
You can often find items that might not be available in local store. One product is deliver, you can prep those items and get them right back to the door of Amazon FBA Center.
- Less physical activity involve, product is shipped to you so you don’t have to drive from store to store.
- Passive income model: once inventory is setup, all you have is to order continuous supply of items and get them back to Amazon FBA.
- Too many online stores to source from.
- Freedom business model: you can work at anytime and from any place.
- This is a little more difficult to learn at first because there is so much product available and you can spend a lot of time looking in the wrong places
- You cannot inspect clearance items condition online. sometime one can be overwhelm with too many choices and can be more prone to error when purchasing
Due to flexibility of business model and passive income potential, online arbitrage is on the best choice for Amazon FBA sellers.
In wholesale business model, you can get items directly from manufacturer and buy in bulk or large quantity in order to get a lower price than you would at retail store.
With wholesale business model, you would get into “deep” instead of “going wider”. What this mean is that we will recommend you to test 3-5 of an item before buying more of an item.
The research in wholesale is similar to retail and online arbitrage, but you need to be extra careful of your purchasing. It is extremely important to understand concepts like “Sales Rank” and “sale history”.
- Lower front end purchasing price while reasonable margin expected.
- Passive income model: once you find profitable product, you can buy over and over thus increase your product line every time you find a winner.
- It is easy to sell 100 of same item then it does to sell one 100 of different items.
- Precise inventory means more freedom. Once find winning item, rest work is associated with managing and handling of stock.
- Bigger risk is involve then retail business because there is always chance to get stuck with bulk ordered items you can’t sell.
- Require large upfront cost or investment to get start.
With Private Label, you can put your own branding to purchasing items. Many times, sellers purchase products from China and then putting their own branding, marketing, and logo to it.
Often times branded items get restricted due to one reason or other and sellers find themselves suspended for selling those restricted items.
With wholesale, you can pretty much ahead of competition. Means is that you own a brand and don’t have to worry about creating Amazon listing and find other people undercutting your prices!
The risk with private label is that you don’t have sale and ranking history in start to reply upon when make a purchasing decision. Thus require more advance research then wholesale and arbitrage.
- More Passive then other systems: once find winning product and add multiple product lines in one brand.
- Much ahead of competition due to own branding.
- More control over prices and less fear of undercutting prices.
- More professional and thus can build a saleable brand.
- Often more risk is involve in this business then retail and arbitrage because you don’t have sale and ranking history associated with product.
- Marketing upfront is required for branding
- Large investment is require to get start
With drop-shipping, sellers send ordered items directly from retailer to end customer without any physically involvement.
To some sellers it seem time savings for not having to prep and possibly a money saver too but in drop shipping many sellers got suspended for having cancel not to many unfulfillable orders.
It worth mention that there is no physical inspection involve in drop shipping. Due to nature of business, products get shipped to the customer and you don’t pack and ship it yourself, according to your standards.
- Can be good side hustle business.
- No upfront cost or capital required.
- Very less physical involvement, drop ship at anytime and from anywhere.
- Lack of quality control; seller doesn’t have opportunity to inspect element nor ensure standards of handling and packing of product in a way you approve off.
- Often sellers account got suspended due to cancel of fulfillment of orders.
- Not a passive source of income.