Can you really start an Amazon business with little money? Let’s find out!
In this article, I will take you through the ins and outs of starting an Amazon Business with little money.
I have been selling on Amazon since December 2018 and I tried many different strategies that others claim to make zillions from. As much as I want to hype things up, the truth of the matter is that an Amazon business, just like any other worthwhile business isn’t a get rich quick scheme. Starting with this kind of mindset will put you on the right track. Mind you, I’ve lost some money trying strategies fake gurus promote and teach.
The first thing that you have to keep in mind is the fact that you’re technically a retailer, using the Amazon eCommerce platform and as a retailer, there isn’t really much mark-up on a per unit basis but what Amazon offer is scale.
My first successful product only makes $2.74, net profit per item but it sells at least 12 units a day. I think the most it sold for in a single day was around 30 pieces, which netted me $82.20. This is a wholesale product that I buy at $5 apiece with an average price of between $13.99 to $14.99. My initial capital for this item was $300 for 60 pieces how fast it moves in the marketplace.
I know it’s not much to brag about (and I don’t) but if you can consistently earn between $32.88 and $82.22 a day on semi-passive income. That will give you at least $986.40 in extra income from your Amazon side-hustle on a monthly basis.
I have made a lot of mistakes in the past trying to start an Amazon business from scratch. My first attempt was with buying and selling books from local libraries and thrift stores. Some people claim crazy success with this strategy but I quickly find out how daunting this business model could be.
I then mixed it up with buying and selling stuff from local retail stores like Walmart, Toys R Us, Home Depot, Staples, etc. using a retail arbitrage app called Profit Bandit, which helps you scan products using your Smart Phone.
I realized that retail arbitrage takes a lot of effort but truth be told, sometimes you will find really profitable items to flip on Amazon.
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Amazon FBA Business Models
As an Amazon seller, you’re technically in the retail business with a virtual storefront in the Amazon Marketplaces. If you’re based in the US or Canada, your professional seller account will usually give you access to four marketplaces: US, Canada, Mexico, and Brazil.
Though your general business model is retail, there are various ways people source products to sell on Amazon, which equates to the below sub-categorized Amazon business models:
- Retail Arbitrage
- Online Arbitrage
- Wholesale, and
- Private Label
Retail arbitrage is an Amazon product sourcing strategy where you buy products from local retail stores to sell on Amazon.
As a solo part-time operator, retail arbitrage was the first product sourcing strategy I tried, after reading a Kindle book, called “Pocket Profit”.
I barged into library sales and retail stores scanning items that sell low offline but sell high online. There are two factors that determine whether or not you’re going to make money on an item:
- Purchase Price
- Sales Rank
Back then, there was no way to quickly see a product’s sales and price history using retail arbitrage software so I made mistakes where I bought Items that sold profitably and ranks low at the time of purchase but the average price goes down once my inventory hits the shelf. Another mistake I made when starting an Amazon business using the retail arbitrage sourcing strategy was buying slow-moving products.
Products on Amazon are classified by sales rank, the lower the rank, the better. Most of the courses I took taught that products below 600,000 sales rank would sell. Experience taught me otherwise!
Retail arbitrage is one of the ways that you can start an Amazon business with little money and if you don’t mind hopping from store to store in your neighborhood, scouting clearances, and price drops, you could probably start your Amazon business with this strategy as there are a lot of people who claim to be running successful Amazon businesses with retail arbitrage.
Personally, I find this cumbersome and unscalable as there’s no guarantee that you’re going to find the same item again once your inventory sells out.
Online arbitrage is similar to retail arbitrage where you technically flip products from other retail sources to an Amazon marketplace, the only difference is that you don’t necessarily need to leave your home to source and buy products. You do it all online.
You can start an online arbitrage business by manually comparing products from other retail websites to Amazon’s catalog. Doing it manually takes time but allows you to start an Amazon business with little capital.
If you have a little bit of capital, you can start an online arbitrage business by using software like Egrow and Tactical Arbitrage. Egrow, is the most affordable yet reliable Amazon product sourcing software I found.
It isn’t designed as a retail arbitrage software per se but it’s a comprehensive product research software that helps you find profitable products or product ideas, which helps you scan Amazon’s database for potential products based on filters you set as below:
You can then Google the product to see if there are other online stores that sell the products at a price that makes it possible for you to profit when sold on Amazon.
but more of wholesale and product label sourcing but it’s cheap and it’s best for new Amazon sellers.
Tactical Arbitrage, on the other hand, is an online arbitrage software. What it does is find products that sell on Amazon and try to find matching products on sale from other websites. The only problem I see with Tactical Arbitrage is that it presents items that are false positive.
A faster way of sourcing products for retail arbitrage is with the help of software such as Tactical Arbitrage and Egrow. You technically follow the same process, you’re just using software tools to make your work faster.
I find online arbitrage more appealing as compared to retail arbitrage, especially because I have small kids. I once took my kids with me to a thrift shop to do retail arbitrage and we were all over the place. What I learned is to not bring your small kids to an official business call.
Online arbitrage, on the other hand, lets you search products right from your home. Finding product fast-moving products that you can sell at a profit is like finding needles on haystacks. It takes a lot of patience.
If you can pay for a virtual assistant, you can hire someone from the Philippines to source products on your behalf while you work on your main gig or job.
Dropshipping from real wholesale suppliers or manufacturers is allowed in Amazon but opening a retailer account to dropship with most brands can be challenging to new sellers like us.
What the drop shipping gurus of the world suggest is to drop ship products from other retail stores. I was attracted to this business idea because you don’t have to buy products upfront to make money with Amazon and eBay, so I focused on only doing dropshipping!
The result was a disaster. I have lost a lot of money trying to build a dropshipping empire from scratch.
The problem with dropshipping physical products on online marketplaces like Amazon and eBay is that you don’t have control over the sales platform and your inventory.
I’ve ran into situations where a buyer ordered the item then my inventory tracking software messes up. This means that the item ordered is no longer in stock with the website that I’m going to buy it from. I end up fulfilling products at a loss since Amazon or eBay will not look kindly on you if you cancel the ordered products.
Dropshipping is actually easier with Amazon but since they’re pretty strict with shipping times, I decided to focus all my efforts on building my eBay dropshipping store instead. This meant that I have to list a lot of inventory on my eBay store. Unlike Amazon, your eBay listing fees increase with the number of listings you have live.
I ended up paying as much as $500+ on eBay listing fees with meager sales because I was told that eBay dropshipping is a numbers game. If I were to dropship again, I’ll do it with either a Shopify or a woo-commerce store that I own and control because I lost more money doing eBay arbitrage than actually Amazon FBA.
Dropshipping power tip: Don’t dropship on eBay and Amazon if you’re sourcing from other retailers. It’s just simply a bad idea!
One of the best yet not so easy ways of starting a solid Amazon business is wholesale. With a wholesale Amazon business, you technically buy your inventory from your wholesale partners.
It’s not so easy but doable way of building a real Amazon business without actually coming up with your own brand. Mind you, building a brand takes more effort than what the Amazon gurus of the world would make you believe.
Starting an Amazon business means that you’re actually a retailer, and as a retailer, instead of just scouring retail stores around your neighborhood or other online stores, it’s in your best interest to actually build and develop wholesale relationships with real suppliers. Did I tell you that it isn’t that easy?
Out of the hundreds of distributors, manufacturers, and wholesalers you’re going to approach, only a few will allow you to sell their products on Amazon for a bunch of many reasons that I care to know about.
I have trained my wife’s cousin to help me source products and contact manufacturers and wholesalers and it can get frustrating at times, my VA (wife’s cousin) gets frustrated because almost all manufacturers and wholesalers will decline us. Some already have exclusive relationships with other Amazon sellers, some sell directly on Amazon, and some have too many Amazon sellers.
Getting an approved wholesale relationship with a distributor or manufacturer is a numbers game. So it does take time to get up and running.
I find that combining online arbitrage and wholesale sourcing strategies to be more attractive. Online arbitrage would allow you to purchase the inventory right away, while wholesale will allow you to build a more solid and long-term Amazon retail business.
What Products to Sell on Amazon
One of the many questions people looking to build an Amazon business is what products to sell. Amazon selling is a technical business but the great thing about it is you already know that your inventory will sell even before you purchase them, that of course if you take the time to learn the trade before embarking on it.
In the US, products with less than 15,000 best seller rank are usually fast-moving, the lower the rank the better. I’ve made mistakes where I bought books in the 600,000 ranks and it took at least six months for the product to move.
What I’m after about Amazon is “scale”, even if you’re only making $2 or $3 net profit on every item but it sells between 300 – 600 a month. You can easily build a nice side hustle income in your spare time.
Tools to Get You Started
There are a lot of software tools that you can use to start an Amazon business. If you don’t have the capital to pay for these tools, you can always start by manually sourcing for products but be aware that it can take so much of your time to find one product that sells. The most excruciating part of starting an Amazon business is product research and the biggest mistake most new Amazon sellers make is not taking the time to thoroughly research products to sell.
Considering the fact that Amazon isn’t your own eCommerce store, there are other merchants who may already be selling the products you intend to sell or who may go in and out on the same listing; which means, there would be competition. So taking the time to do product research and being patient about it is the best thing you can do for your business.
Egrow is the most affordable Amazon product sourcing tool I’ve found that actually works. It’s similar to Jungle Scout at probable 1/4 the cost. Its main function is to help you find fast-moving items to sell on Amazon.
Of course, there are other more popular Amazon product research tools that you may have heard a lot from such as AmzScout, Helium, and Tactical Arbitrage but as a beginner, paying an average monthly subscription of $100 plus a month while you’re trying to figure out a business will put a lot of dent in your capital and may even put you out of business before you know it.
And unlike most of the more popular product research tools, Egrow has a free subscription tier that doesn’t expire, it lets you run 5 product searches per day which isn’t a lot but it allows you to see how the software actually works and see if it’s something you’ll benefit from before even paying a dime.
Their paid subscriptions aren’t bad either, and as a new Amazon merchant, a standard subscription which is priced at around $20 USD a month, will be sufficient in helping you find fast-moving, profitable products to wholesale.