Did you know that there are multiple ways for regular people to make money through Amazon.com?
Some are not even aware that you don’t have to be an employee for Amazon to make money from the site.
Beyond that, others are not aware that there’s more ways to make money than selling products.
Indeed, you can sell other company’s products on Amazon, you can sell your own, or you can simply promote products that already exist on the site for money!
In this post, we’ll go over the main ways people make money on Amazon to help you make a decision on which way you want to sell or generate income.
Retail Arbitrage is when a seller purchases bargains for popular products either in brick-and-mortar stores or online, and then lists them on Amazon for a profit.
Sounds simple enough but it’s quite effective if you know how to find deals.
It’s also a very inexpensive way to learn how the Amazon Selling platform works without having to commit to a big first order from an overseas manufacturer.
Typical Process for someone who sells Amazon Retail Arbitrage:
- Learn your local spots for deals (retail shops like Walmart, Target, TJ Maxx, Home Depot, thrift stores, etc.)
- Visit these places frequently, taking special note of their clearance items, overstock, and liquidations.
- Use either the Amazon Seller app or 3rd party you can scan potential deals to see if they are available on Amazon, if the price difference is enough to make a profit, and if 3rd party sellers (like yourself) are allowed to list the product at all on Amazon.
- When you find a hit, buy as many units as you can.
- Send the units to an Amazon FBA warehouse through Amazon Seller Central
- When the unit sells, Amazon will fulfill the order for you and send you the profits!
Sounds like a lot of work? Running a business is a lot of work!
Despite how clunky this process sounds, many people find success doing it, and if you’re the type who already likes to browse retail shops, then this might be a good fit for you.
Benefits of Retail Arbitrage
- Potential for finding “jackpots” that have huge profit margins.
- Zero product development. Don’t need to think of a unique innovative product, you’re just reselling already existing products.
- Low cost to get started.
- Easy way to learn the Amazon platform, how to send units to Amazon FBA, set up a seller account, etc.
- Potential income is quite high, enough to replace a full-time job, if you’re good at it.
Weaknesses of Retail Arbitrage
- Hard to scale. You’re limited to the number of stores and deals you can find yourself, so scaling to 7 or 8 figures is much harder.
- Huge time investment. You can only visit so many stores in a day, and constant store trips can start to be a drag for some.
- Feast or famine. You can find a potential deal, scan it with your app only to see that 3rd party dealers are not allowed to sell that specific product.
- Limit to the amount of money you can make. While seldom few arbitrage sellers can achieve a very high income, it’s a bit of a rarity.
- Zero brand building. The business you’re creating is something no one will ever hear of, so all the benefits that having a brand provide will not apply to you.
Overall, Retail Arbitrage is a great way to get your feet wet in the Amazon selling system, has the potential for a job replacement or high paying “side hustle”, but falls short when it comes to scaling and hitting really high revenue numbers.
Become a Wholesaler
Wholesale selling on Amazon is similar to arbitrage because you’re selling products that already exist on the platform, but instead of hunting for deals in retail stores, you’re setting up deals with the actual brands to sell their products on Amazon.
You might be wondering how can you sell something on Amazon for another company that they couldn’t just sell themselves?
It’s a good question, but we have to remember that different businesses function differently and Amazon may not be something they are adept in or know how to sell well with.
One way wholesalers are effective on Amazon is by getting creative with existing products, either by trying to be the exclusive seller or a product that is popular but not yet on Amazon, or by making unique versions of listings for existing products so that they always have control of the buy box.
Benefits of Wholesaling on Amazon
- Potential for high revenue. You can scale a wholesale business because there will always be products out in the market that can be sold on Amazon, it is just a matter of finding them.
- No product development. Similar to Arbitrage, you’re reselling existing brand’s products so you don’t have to create anything new.
- Focused business. Wholesale has a lot fewer moving parts than other ways to sell on Amazon. A lot of business functions are handled by Amazon or the brands you’re buying from, you mostly focus on getting deals with brands and the logistics of getting products to Amazon.
Weaknesses of Wholesale
- It can be difficult finding products to sell. In today’s world, most brands are aware of Amazon and how to sell on the platform. You’ll have a hard time finding good opportunities.
- Competing f0or the Buy Box can hurt profit margins. A lot of wholesalers have to compete with other wholesalers for control of the “Buy Box” on an Amazon listing, and the way to get the buy box is to have the lowest price.
- No deals = No sales. Similar to arbitrage, if you can’t find a brand to resell, then you don’t make any sales or any money.
Wholesale can be a challenging way to run an Amazon business, and a lot can be out of your control. Still, many people find success selling this way and it should be considered by anyone looking into selling on Amazon.
Private Label Brand on Amazon
Creating a private label brand is what most current sellers on Amazon do, and this is creating products that don’t exist at all on Amazon and selling them under your personal brand.
The difference between private label, a private label brand, or simply a “brand” business can sometimes mean different things depending on who you talk to on the matter, but for the most part they’ve started to meld and all mean the same thing.
Traditionally, private label selling simply meant buying a product directly from a manufacturer, slapping your “private label” on it, and selling it on Amazon.
However, due to the Amazon platform evolving and becoming more competitive, simply flipping products by adding a label isn’t enough, and sellers have had to come up with better branding, more innovation, and unique products to stand out from the competition.
At that point, you’re no longer simply “private labeling”, you’re creating a brand and selling products you designed yourself. While that doesn’t necessarily qualify as a “private label” business, people still mostly refer to running your own brand on Amazon as private label selling.
Regardless, private label selling is a mainstay on Amazon, and confers a lot of benefits if you choose to go this route.
Benefits of having a Private Label Brand on Amazon
- Extremely Scalable. You can always boost sales for your existing lineup or keep coming up with new products within the product categories you sell in.
- Brand potential. If you brand your products well, you can become a leader within your category, and eventually even branch out into your own independent eCommerce store.
- You’re in control. You source your product, you’re in charge of your listings, you set the price. With such a level of control your potential is much higher.
Weaknesses of having a Private Label Brand on Amazon
- Slow to start and run. Product manufacturing can take 30-90 days, oversea shipping 30-60 days, and getting your products into Amazon FBA warehouses can take anywhere from 3 days to 3 weeks (or longer).
- Innovation and branding depend on you. As a wholesaler or doing arbitrage, you’re essentially reselling products from brands that have already done a great job creating a product that the market is interested in. With your own brand you’re starting from 0 and have to earn every customer.
- Wear many hats. Private label makes you a company of one, where you’re the CEO and every single other position within your company. Marketing, sourcing, writing copy, advertising, creating images for products, logistics, customer service, R&D, everything has to be done by you.
Overall private label selling has the most moving parts and can be considered the most “difficult” way to sell on Amazon, but is arguably the most rewarding way to sell with the high potential to earn a lot and provide the world with a useful product that you thought of.
Dropshipping on Amazon
Dropshipping is when you don’t pre-purchase products from a retail store or from a brand before selling them as you would with Arbitrage or Wholesaling, you instead only buy products when they sell to the end customer, and ship the product to them directly from its source.
The advantage here is obvious, you don’t have to risk any cash on stocking products, warehousing them, or procuring them at all, you just make profits off each sale.
Dropshipping is the ultimate “passive income, hands off” business that everyone wishes they could get into, but the reality of it isn’t so glamorous, especially on Amazon.
While dropshipping sounds great and there are many sellers out there doing it successfully, on Amazon it’s not so straightforward as there are certain rules dropshippers must follow and dropshipping in general doesn’t mesh perfectly with how the Amazon platform works, especially when it comes to Prime eligible FBA products.
Amazon allows dropshipping, however they make it clear that you can’t ship something from another retail website and simply put the customers address as the recipient. Products purchased by customers must come from a source that intended to send to that customer, and the packaging must reflect that.
Benefits of Dropshipping
- Lower cost of doing business. Typically, a dropshipper only pays for advertising costs as many dropshipping sellers use ads as their main way to find customers.
- Focused. You don’t have to deal with developing, buying, storing, or solving logistics for your products. Make the listings and sell the products.
Weaknesses of Dropshipping
- Lower pay potential. Dropshipping doesn’t net sellers the same level of revenue that something like a private label brand or being a wholesaler would, due to the fact that you only make a very small amount of profit per product sold.
- Amazon is not a great match for dropshipping. Dropshipped products can’t be sold FBA, so you’re missing out on the Prime advantage. Also, your packaging must be intended for the end customer, so you can’t do something like buy a product on Walmart.com and put the receiving address as the customer who purchased from your listing.
In the end, Dropshipping doesn’t really mesh well enough with Amazon to be worth it, and even still dropshipping is a lot of work for a suboptimal payback. I’d say you’re better off having your own brand, wholesaling, or selling arbitrage before I’d ever recommend dropshipping on Amazon.
Affiliate Marketing for Amazon
Affiliate marketing is when you have content of some form, and that content promotes or mentions specific products, and when your readers/viewers click-through on the links you provide and end up making a purchase of those products, you then receive a small portion of those sales.
Any website you see that talk about products in any way, shape, or form are packed to gills with affiliate links.
Affiliate marketing is great because if you make successful content, your content will “work for you” and net you income while you sleep, and the more content you make that is successful, the more money it will provide.
Benefits of Affiliate Marketing
- Generate money through content creation. Don’t worry about designing and buying products overseas, you can just write and talk about existing products in the market and make money off of sales from your content.
- Can scale well. High performing pages and videos can generate income for years, and if you have a lot of pages, videos, and other forms of content, they will be pillars of income that require little to no maintenance to keep paying you.
- Creativity goes a long way. Figured out a unique way to reach an audience? Something like making TikTok vids of trendy Amazon products in a specific niche? These channels can go a long way into helping you make affiliate dollars.
Weaknesses of Affiliate Marketing
- Intensely competitive. You have some really, really big companies all fighting on the internet for those affiliate bucks. The New York Times’ site Wirecutter is a site that exists purely to make money from affiliate links, so that’s an example of your competition.
- Content creation and SEO knowledge required. If you’re not knowledgeable on how search engines work, what makes great content, or digital marketing in general, you will have a hard time making a site that ranks well and people find useful.
Affiliate marketing is similar to having a private label brand on Amazon in that you can get around the stiff competition by focusing down in your niche and product category. If you’re someone who is more comfortable navigating the digital landscape over dealing with physical products, give affiliate marketing on Amazon a look.
Choosing the Best Way to Sell on Amazon
So that’s most of the ways people sell on Amazon (Vendor Central sellers not included due to the fact that no one seeking to start a business can even go the Vendor Central route, it’s more for established large retail brands).
If you’re deciding which way to sell or make money, at the end of the day, the business type you feel like you can confidently perform in, that seems exciting to work on long-term, and meshes well with your existing skill-set would make a great way to start making money through Amazon.
While the vast majority of sellers on Amazon are private label brands, don’t discount the potential of other ways to sell, as many people see success through all ways to sell.
You’ve got nothing else to do but put in the work and start making some money. Good luck!