The Amazon FBA Program is hot stuff at the moment. There’s a lot of money to be made and more and more people are starting to jump on board. The opportunities are huge and it’s still not too late to get involved.
Most people right now are talking about making money using FBA by manufacturing their own products (or private labeling products) and creating their own listings on Amazon. It’s true that there’s a lot of money to be made with this approach, assuming you pick the right products. But private labeling isn’t the only way to make money on Amazon.
Creating your own product on Amazon can be a pricey endeavor. Depending on the type of product, most people recommend having an initial budget of $1000-$5000 to get started with private labeling. Although that isn’t a huge amount of money in the grand scheme of things, it’s too much for a lot of people to risk when there’s no guarantee of a return.
The other way to make money with the Amazon FBA Program is with retail arbitrage. Startup costs are much lower and there’s a lot less risk involved. The limit on potential earnings is lower than private labeling, but it can be a useful way to build enough of a bank to get started with private labeling, while getting familiar with selling on Amazon at the same time.
Retail arbitrage is all about buying products and selling them for more money. There’s no manufacturing, importing or designing here. Most people doing retail arbitrage buy products from superstores like Walmart and Toys’R’Us (in store and online), package them up for Amazon and send them off to a warehouse, which is where the FBA program comes in.
It’s possible, and surprisingly easy, to find products discounted by 75% or more in regular stores. By checking the Amazon Sales Rank (which is shown on most Amazon listing pages) and looking at tools like CamelCamelCamel it’s not too difficult to see which products are selling and how much for. By factoring in all of the costs associated with selling on Amazon, it’s possible to quickly see whether the discounted product on the shelf will give a profit if bought and resold on Amazon. It’s common for people to “flip” items like this and double their money (after fees) within a matter of weeks.
When buying small quantities of products and then later replenishing inventory that’s been sold by visiting the store again if there’s any left, retail arbitrage is a low-risk, low-cost way of selling on Amazon. Although having more money available to buy stock will give more access to opportunities, it’s entirely possible to get started with retail arbitrage with just $100 or so. It doesn’t take very much doubling for that to become a significant pot.
Private labeling is getting a lot more attention than retail arbitrage, and it’s certainly where the big money is. There’s only so much you can make by buying Lego from Toys’R’Us to flip on Amazon. Perhaps the biggest advantage of private labeling though, is that it can become a stable source of income with relatively little input.
The basic idea behind private labeling is that you get a product produced, usually in China, then sell it on Amazon. All of the customer service, product storage and order fulfillment is handled by Amazon via their FBA program. Once the product is up-and-running, the manufacturer can send stock direct to Amazon, who take care of everything else. The thing is, getting that product up and running isn’t necessarily that easy, or cheap.
To get started with private labeling, the main cost will be actually buying stock. Factories have differing minimum order quantities, but an order in the region of $1000 isn’t unusual. Then there’s import tax and duty, shipping, packaging (assuming you’re creating custom packaging for your product), getting set up on Amazon, as well as the Amazon commission and fulfillment fees. Plus, there’s no quick lookup on CamelCamelCamel to see how the product has been selling. This is started a listing from scratch.
While private labeling is undoubtedly the most lucrative way of making money on Amazon, it also carries with it a degree of risk and higher startup costs. Instead of jumping in head-first, it might be wise to dip a toe into selling on Amazon with a little Retail Arbitrage first.