Amazon is the world’s largest retailer, and it is only getting bigger. The good news for anyone looking to make money online is that Amazon allows third-party sellers to reach its massive audience by selling products on their site. That means there are endless possibilities and huge income potential.
Selling on Amazon means many different things to different people:
- You could sell used items that you buy at yard sales and thrift stores.
- You could buy products on sale at retail stores and re-sell them for higher prices on Amazon (known as retail arbitrage).
- You could buy products wholesale and sell them on Amazon.
- You could write and sell e-books for Kindle.
- You could create your own custom products.
- You could find a manufacturer and hire them to create products for your own brand (private label).
Each approach has its own set of pros and cons, and there are people doing very well with each of these business models. My wife and I built a six-figure business selling private label products part-time on Amazon (more on that in a minute), and this article will show how to sell on Amazon.
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What is FBA?
As a third-party seller on Amazon, you can fulfill orders yourself, or you can join their FBA program. FBA stands for Fulfillment by Amazon, and essentially the program allows you to sell your products on Amazon without having all of the headaches associated with order fulfillment. You’ll send your products to one or more of Amazon’s warehouses and they’ll store the product for you. When someone orders your product Amazon will pack it up and ship it to the customer.
Of course, Amazon will take a cut of the sale as a fee for the service, but it’s well worth the cost. You’ll be able to free up your time for more important tasks related to running the business, and customer orders will be fulfilled and shipped quickly.
And possibly the best thing about selling your products FBA is that they will be eligible for free shipping. Amazon Prime members will be able to get free 2-day shipping when they buy your product. Those who aren’t Prime members will be able to get free shipping on your product if the order meets Amazon’s required minimum for free shipping.
Amazon FBA really is a game changer. The number of Prime members keeps growing, and these people (I am one of them) buy more and more on Amazon. FBA also makes it possible to realistically run an Amazon business as a part-time venture. You won’t need to dedicate your time to order fulfillment, and you won’t need to be tied to your home or office.
Not only does Amazon handle order fulfillment, but they also handle customer returns and any customer service issues related to shipping.
Summary Highlights of Selling Through Amazon’s FBA Program:
- All of the order fulfillment and shipping is handled for you.
- All returns and customer service related to shipping is handled for you.
- No need to store inventory in your home or office.
- No need to run to the post office every day to ship orders.
- Your products will be eligible for free shipping (which means more sales for you).
- Makes it possible for sellers to run a legit ecommerce business part-time.
→ Related reading: 100 Amazing Resources for Amazon Sellers
What is Private Labeling?
I really had no interest in selling on Amazon, or selling physical products in general, until I realized the power of combining the FBA program with private labeling. I was aware of both, but never thought about how the two could work together to make such a great business opportunity.
First, let’s talk about private labeling and what it is.
Essentially, private labeling is when you have a manufacturer or supplier put your logo on a product and sell it under your own brand. You don’t need to own a manufacturing facility, you simply have someone else create the product for you.
Exactly what qualifies as private labeling is a matter of opinion. Many people who sell private label products on Amazon buy a standard, stock product from a manufacturer and simply slap their own logo on the product. If you’ve spent much time on Amazon you may have seen a few different companies selling what appears to be the same identical product, aside from the logo. Sometimes they may even be using the same photos.
This is the fastest, easiest approach to selling your own products on Amazon, but it also presents a lot of potential problems. If there are other established brands selling the same exact product as you (or at least, extremely similar), how are you going to get people to buy yours instead of theirs?
And even if you are successful, it’s very easy for someone else to have the same product created and directly compete with yours. On Amazon, this usually leads to price wars that cut profit margins down to the point that you aren’t making any money.
The other approach is to have a manufacturer create a custom product for you based on your design or specs.
Or, you can start with one of their stock products and ask them to make certain changes or customizations that will improve the product and make yours unique. Most manufacturers are very willing to make customizations for you. This is a realistic way for you to differentiate your product from competitors, so you’re not trying to sell the same exact thing as everyone else. This is the approach that we took.
When I refer to private labeling, really I am talking about having a manufacturer create a product for your brand with your logo on it. It could be a product the same as everyone else’s, it could be customized, or it could be completely your own design. Regardless, you’re finding someone else to make the product for you.
Why Private Label?
Despite the challenges that you may face by selling a private label product, there is also a significant upside. Here are some of the main reasons why you might want to consider taking the private label approach:
- You can completely outsource the manufacturing process, which makes it possible to run an e-commerce business with much lower overhead and risk.
- When you combine it with the FBA program, you can outsource two of the biggest aspects of an e-commerce business (manufacturing and fulfillment).
- With both manufacturing and fulfillment outsourced, you have the possibility for passive income.
- It’s easy and (relatively) inexpensive to get started, compared to other types of businesses.
- You can expand your product line quickly and easily.
- You won’t need to constantly source new products, which is a drawback of the retail arbitrage approach.
Of all the different ways you can sell on Amazon, private labeling is my favorite. Some people do very well selling used items or doing retail arbitrage, but that requires you to constantly find products that you can buy and sell at a profit. You’ll be on a never-ending quest to find products, and that sounds pretty miserable to me.
By having your own private label brand you can have a product created, and if you’re successful you can continue to sell that product for years to come. Once the product is selling, your main focus will be on:
- Providing customer service (which is pretty limited if you’re selling FBA)
- Monitoring some ad campaigns
- Making sure that you re-order in time to keep your inventory in stock.
- Researching new products, if you want to expand.
With the combination of essentially outsourcing the manufacturing and the order fulfillment, it is possible to have a fairly passive business. It won’t be completely passive, but it’s possible to run a profitable business with just a minimal time investment.
Of course, this is an ideal scenario and not every product you launch will be a huge money maker. But hopefully, you see why selling private label products on Amazon is a great opportunity.
Because you’re outsourcing the manufacturing and the order fulfillment, adding additional products and scaling your business is very realistic. The table below shows the impact of having just a few simple products that sell.
|# of products||Avg. # of sales per product per day||Avg. profit per sale||Total monthly profit|
As you can see by the numbers from the table, with just 4 products that each make 10 sales per day and $10 in profit per sale, you can make $12,000 of profit per month! Reaching 10 sales per day is very realistic, although it may not be easy. My wife and I averaged more than 10 sales per day per product with our part-time business.
But this is also something that you could do on a small scale. If all you’re looking to do is make an extra $1,000 per month, that’s possible too.
→ Related reading: How to Start a Side Hustle
My wife and I sold products on Amazon through a private label brand from 2015 – 2017. I’ve worked online full-time since 2008, and many times over the years we talked about the possibility of finding a business that we could work on together.
In 2014, I started reading more about people selling private label products through FBA, and I thought it would be a great opportunity for us to finally work together on something. I talked to my wife about it, and she was interested too.
We started doing some research into potential products, but we didn’t find anything that we really thought would work. We put the idea on hold for a while, and then in the spring of 2015, I came across someone promoting Amazing Selling Machine, an 8-week course that takes you through the process of setting up your own private label brand.
The course wasn’t cheap (we paid $5,000), but we felt like it was the right opportunity for us, so we went ahead and purchased it. By the time the 8-week course was over, we had selected a product and a supplier and we had placed our first order for 1,000 units of our product.
When our product went live we expected the sales would grow very slowly, and didn’t anticipate making sales before we had a decent number of positive reviews (at that time Amazon allowed you to give away products in exchange for a review).
But to our surprise, we started making sales almost immediately.
About a week after it went live I remember the two of us were out looking at some houses, and every time I checked my phone we had made another sale! I think we made about 20 sales that day, without any paid advertising.
We wound up running out of our first 1,000 units in less than 4 weeks, and then we were out of stock for several weeks while we waited for more of our products to be made.