Here is how you can make money selling on Amazon FBA
This is an interview with Jessica of the Selling Family who started a business selling on Amazon FBA (Fulfilled By Amazon) program without any experience and without any followers!
SBH: Please give us a little background on yourself, how you became an Amazon Affiliate and how it’s working for you right now.
Jessica: My journey to becoming an online entrepreneur was one that had been a dream of mine for a few years, I just wasn’t seriously pursuing it when it really took off. At one point I had a blog about saving money as a twenty-something and I talked about couponing.
The couponing actually led to me having a small side income selling on eBay. At that time, I was newly married and in my early twenties. So I was selling simply as a hobby. I liked to coupon and I liked to go to yard sales, so having an outlet for the stuff, that also made money, was a huge bonus. I actually got really good at finding stuff for eBay.
So, when I was let go from my job in 2008 (at 23) I decided to pursue selling online full-time. I had heard of others making a full time income on eBay, so why couldn’t I? That weekend I took my last paycheck and went to yard sales to buy inventory for eBay. I was able to replace my previous income within just a couple of months.
After about a year selling yard sales / thrift store finds on eBay, I really wanted to scale up this business, but the more money I tried to make, the more time I had to spend on the business.
Everything I listed had to be done from scratch and I had to ship each and every order myself. I was in a few Facebook groups with other eBay sellers and started to hear talk of people making money on Amazon and not having to do a lot of the work that comes with eBay.
I tried my hand at selling books on Amazon in the summer of 2010 and quickly realized it wasn’t for me. But later on in the year, I tried “retail arbitrage” (which I will cover in the section) on Amazon and was HOOKED!
I was selling stuff that I bought from a regular store and Amazon FBA was doing all of the individual order processing. It was fabulous.
From that point, I knew that selling on Amazon was what I would be doing for a long time, and could make good money at. So I made it my mission to make enough to replace my husband Cliff’s income so he could be at home with me and our brand new baby! It was almost exactly 1 year to the point that he was able to quit his job (that he hated).
When he left his job, I had replaced the almost $5,000/month that he was making working 40+ hours a week. And I was only working at night and weekends when he was able to be home with our son.
Our first full year of selling together full time, we brought in almost $300,000 in sales. Netting us close to $100,000 in profit. What a life changing year that was for us. We were living the dream (and still are) of working from home, and spending quality time with our son.
It has now been over 5 years for me being full time as an online entrepreneur and I love it more every day. Our Amazon business has definitely transformed over the years as we get into new niches and find new ways to get inventory. But the basis of it all is still pretty much the same.
Buying stuff on discount, and reselling it for a profit. Our goal has never been to be the biggest Amazon sellers out there, so we like to maintain the income of a few thousand dollars a month and then we really go into hustle mode for the fourth quarter where we can usually make $25,000+ in just a couple of months.
This really holds us over the rest of the year so we don’t have to spend too much time on the business.
What exactly is an Amazon FBA business? Can you explain this more for those who have no idea?
You know, it’s funny because even after 5 years of doing this, I have a hard time explaining what it actually is ????
Basically, you have an online store, that is run by Amazon. You are in charge of finding your own products to sell. That is what differentiates you from other sellers.
Once you have inventory to sell. That is sent to an Amazon fulfillment warehouse, where they will store it for you until it sells. Once the product has sold on the Amazon website, the warehouse employees pack that item into a shipping box and send it off to the customer. If the customer needs help with their order, they ask Amazon.
If you are a buyer on Amazon, you may or may not have even noticed that there are multiple sellers on the items you are looking at purchasing. Anytime that an item says sold by anyone other than Amazon, it is a 3rd party seller like me. That’s why there are often multiple prices for each item.
The ones that say “sold by xyz and shipped by Amazon” are sellers who are using the FBA (Fulfillment By Amazon) system. If a seller is using the FBA program, all of our items become available for prime shipping. Meaning anyone with a Prime account gets free 2 day shipping. This is a huge advantage as a seller!
The reason that it is so appealing to sell on the Amazon site, rather than starting your own ecommerce site is you get to use the credibility and advertising that Amazon already has. They spend a lot of money to bring customers to their platform and once buyers buy, they become very loyal!
People with start selling on Amazon FBA can grow a business without having to have employees or warehouses or anything like that, because Amazon does the heavy lifting!
The way we run our FBA business is by doing something called “retail arbitrage”.
We buy products from retail stores and then resell them on Amazon. Filling in the gap of products that Amazon does not have in stock, but people want. There are other ways to source inventory, but that is our focus and what we teach as the best way to get started.
Where do you get your merchandise from?
During the main part of the year, we source (find inventory) in a couple of different ways. The main one is that we buy from local “liquidation stores”. These are discount retailers where we buy products the manufacturers no longer want to sell. So we get them at a discount. So, Big Lots or Grocery Outlet would be examples. The products are discounted and we are able to resell them at or above the old “retail” price, while still making a profit.
We also do some sourcing from retail stores. With retail stores we focus on items on clearance. We love to shop at Drug Stores and buy off of the clearance rack.
If we can buy something for 75% off and then sell it for the retail price, we end up making about 2x our investment in profit. My favorite drug stores are Walgreens and Rite Aid.
How do you choose what to purchase?
The app will then tell us how much it is selling for on Amazon, what the best sellers rank is, how many people are selling it and some other things.
This will let us know if that product is profitable because it will show how much we would receive as a “payout” if the product sold. We can add the cost of our item and it will calculate it including our cost, so we can see the profit on the item as well.
Once we know if a product is profitable, we are able to make a choice if it is something we want to sell or not.
There are times when something is profitable, but Amazon is selling it. We don’t like to compete with them, so we may pass.
Or, an item may be profitable, but have a really high rank, so we don’t get it. There are a lot of little things that go into the decision making process, but those are the basics.
How do you price items to sell?
Since most of the products that we sell are already being sold on Amazon by other people, we try to price competitively with them so we will get sales as well. Amazon has what is called a buy box, which is the seller being featured at the time you look at the item. The seller will rotate with other sellers so that everyone in a price range will be featured and get sales.
So, we don’t want to price so high that we get moved out of the rotation. We also don’t want to come in too low, and price others out of the rotation. If we do, they would have to lower their price and then it just starts a downward price spiral. Good for the customer, bad for the sellers.
The pricing decision really happens when we make the initial purchase. We know from the app that we can make a profit at the current price. If not, we don’t buy. If we can, then we price at that same price.
How much can a new Amazon FBA business owner realistically expect to make when they start out?
This question is a little tricky, because it isn’t like a job where you can set an hourly wage, work a certain amount of hours and then get paid that amount.
With selling on Amazon FBA, the amount of money that you make is going to depend mostly on how many items you are selling. In order to sell items, you have to purchase them with “out of pocket” money.
One way to estimate how much you will make is to take your starting investment amount. If you don’t take a profit out of the business in the first 3 months, and keep reinvesting the money after products sell, you should start to consistently make that much in profit and be able to take it out of the business after the third month.
You would reinvest money from sold items, and have profit. If you need to pull profits out right away, it gets trickier and takes a lot more time because you are pulling out money and waiting for things to sell.
What do you like about selling on Amazon FBA?
My absolute favorite thing about selling on Amazon FBA is that it gives me the freedom to choose when I want to work, and how much money I want to make. If I want to spend a lot of hours and money buying more and more inventory, I can do that. Then I will make more money. If I want to work fewer hours, and only buy certain amounts of inventory. I get more time with my family, or to do other things I enjoy.
We really hustle in the 4th quarter so that we can take a lot of time off in the rest of the year. So we choose when and how we want to grow the business.
There is no one telling me what I have to do or when. As long as I am following the rules Amazon has in place, I am good to go. No boss, or time clock to punch.
This is also something that our whole family can do together. My husband and I source for products together. Our son helps us label them (when he feels like it). I work the computer, and Cliff does the packing. Sometimes even my mom helps us out when we have a lot to do.
How can anyone start their Amazon FBA business?
This is probably one of the easiest businesses to start. In terms of money needed and supplies. There is a video series that is free that will help people understand all of the basics of this business. Help them find some items in their house that could possibly be resold on Amazon and then getting set up with a seller’s account.
If someone wants to test out how it works, they can grab some new in box items from their house and type them into the Amazon website to see what they are selling for on Amazon. It’s always surprising how much new stuff most people have in their homes. It can often be sold for the regular price paid and sometimes even more.
Then you would set up an Amazon seller account and send those products to the warehouse.
If you want to try the process out in a store, you would need to set up a seller account on Amazon and then download the Amazon Seller app.
Check out items in the clearance aisles and see what they are selling for on Amazon by scanning the barcodes into the app.
How much does it cost to start this type of business and how much on a monthly basis to maintain it?
An “ideal” situation would be about $500 to $1,000 to invest. That would get a great training course like ours, some tools to start off with and inventory.
Of course, a training course is optional, it just helps save time and hurdles along the way!
The main expenses you incur are:
- Inventory – you spend as much as you want. What you invest will determine how much you make. The types of products you get and their ROI (return on investment) will affect the speed at which you are seeing profits.
- Scanning App – there is a free app you can use when just getting started and we show how to use it in our course. But, it really isn’t made as a scanning app per se, so I recommend upgrading to a paid app as soon as you can. The speed at which you can scan products, makes up for the price you would pay. $10-$50/month
- Amazon Pro Merchant Account – this is an optional setting on your account. You need to have it in order to use 3rd party services with Amazon, like having a paid scanning app for example. This eliminates one of the fees that Amazon charges on all orders. That fee is $.99, so if you sell more than 40 items a month, it is actually saving money instead of costing money. $40/month
- Shipping Supplies – There are bare necessities like boxes, packing tape, product labels and shipping labels that you have to have in order to send products to Amazon. The recurring need once you had the basics, could be less than $10/month for supplies like this.
There are other services that can be used in the business that are subscription based, but they are not necessities and you can run the business without them. I love using tools to make life easier, so as people start to make more profits I recommend adding in tools to help increase productivity.
Are there any other tips that you have for someone who wants to try starting their own business selling on Amazon FBA?
Amazon is talked about in a way that makes it sound like it could be too good to be true. Even I said here that it is one of the easiest businesses to start. But the thing is, it takes a lot of dedication to make this business be profitable. You don’t need a lot to get started, that’s the easy part.
We get emails from people who decide after just a few days that this is too much work. It’s really important to see this as an actual business. It’s not a make money online type business where you put up a site and are done. Inventory has to be sent to Amazon all the time, in order to be selling all the time.
You can get to the point where you have systems down and don’t have to put in as much effort as you do in the beginning. But it takes time to get there. The outcome is totally up to the seller. If you want to make a few hundred dollars a month, you can do that with just a few shopping trips and sending things in once a week or so. If you want to make thousands of dollars, it’s going to take more hours.
So, just go into this knowing that it is a real WORK from home business!
Also, I mentioned above that there are many ways to run an FBA business and that can often be overwhelming to people as they get started.
If you find yourself spending more time researching different ways to do things, and no time actually doing them, just pick the way that sounds the most appealing to you. If that doesn’t work after a decent amount of time THEN try another way. But, don’t try them all at once.
The reason we teach retail arbitrage is because it has the lowest barrier to entry. It’s how we grew our business and a main way we source today.
There is a training ‘boot camp’ and other products to help others create successful Amazon FBA businesses. Can you tell us about this?
We have one main course that is for people who want the quickest way to start an Amazon business, without any of the guesswork. That is called Jungle Scout.
They take you from point A – the idea of having an Amazon business. To point B – having sales on Amazon. We even take you past that point and cover things that come up after your first sales.
The goal of the course is to make sure you have a solid understanding of the way things work and have a great foundation to build on.
Sellers come to us sometimes after having just tried to figure it all out on their own, and are surprised at the things they just didn’t know. You don’t know what you need to know right?
We cover everything from account set up.
Using scanning apps and knowing how to read the information. Finding the hottest products to sell using 4 different methods. Sending your products to Amazon.
Account management of your seller account. And more.
We have had people from all different backgrounds and skill levels coming in to our course.
One lady we met in person started selling on Amazon simply to be able to pay off all her credit card debt.
She met that goal quickly and is actually making a few thousand dollars a month now.
Another mom wanted to pay her daughter’s college tuition, and didn’t know another way. So she started selling on Amazon FBA and was able to pay that almost $1,000 a month payment just with her Amazon earnings. Then she stopped when her daughter graduated.
We also have students who have been with us over a year now and are making well over $100,000 a year by selling on Amazon FBA.
Now that our course has been around for a couple of years, it is cool to see that people have replaced their old incomes and quit their past jobs. And some of our students make way more than we ever have on Amazon.
Our youngest student was still in high school when he started selling on Amazon FBA, and the oldest I know of is a man in his late 70’s. So, it is really awesome how this has impacted people from so many different walks of life.
Once someone is established and making money on Amazon, we have courses that will help them expand into many different niches and ways of doing business.
I hope all of you enjoyed this interview! Click to learn more about building your million dollar brand today!