In the e-commerce jungle, Amazon is king. In the U.S.A., its share of the e-commerce market rose to around 40.4% in 2021 (Source: marketer). If you are someone who is wondering how to make money on Amazon, this is a great opportunity for you. After all, over 300 million people actively use the website as of 2021. Aside from that, Amazon’s website boasts over 213 million unique visitors in the U.S. every month too. (Source: Statista).
Why Is Amazon The Best Place To Sell?
Amazon is one of the best places to sell online. Many people browse and shop on the platform, and their trust in the brand is high. AMZ has been in the e-commerce business since the 1990s, making a lot of money. The website’s annual revenue was $386.06 billion in 2021. This puts them above other online marketplace competitors such as eBay, Etsy, and Walmart.
A large portion of AMZ’s revenue is derived from the e-commerce sales on its platform. And they make a lot of money from the fees collected from third-party sellers. Yeah, third-party sellers are making a lot of money on the platform. Thousands of small businesses had experienced a noticeable increase in their sales and revenue when they started using the platform as a sales channel. Tons of regular individuals have diversified their income stream by selling here, too.
Still, many people often wonder how to make money in 2022. And if you are one of them, reading this article can surely help you learn how to make money in 2022.
According to ZipRecruiter, an average third-party seller can make as much as $45,000 a year (Source: Zip Recruiter). This is just the median range, which means you can still push these numbers higher if you can optimize your sales and revenues. You, too, can have a slice of the pie once you learn to profit on the platform. This is why we’ve written this article to explain how to make money on Amazon through selling products. And if you read until the end, you will discover the software that we recommend to help increase your revenues.
How To Make Money on Amazon: Selling
You can earn on AMZ with or without selling. However, selling is by far the most profitable way to take advantage of the platform’s dominance and wide reach.
When it comes to selling on AMZ, two options are widely available to interested parties. First is selling directly to AMZ. The second one is selling to customers. To understand how to profit better from this platform, let’s take a look at these two options below.
Direct Selling To Amazon
Are you familiar with this saying: “if you can’t beat them, join them.” Well, the same concept applies here too. AMZ is a force to be reckoned with when making money in the e-commerce space. And if you have read the book Art of War by Sun Tzu, you should realize it’s not wise to compete against a behemoth.
Since you’re better off not competing against them, then the opposite rings true. This means that you should partner up with AMZ instead. If you are a large manufacturer or distributor, your best bet to increase your profits is simple. You can sell wholesale as a direct Vendor.
To do this, you must be a direct supplier or manufacturer and sell your goods wholesale to AMZ. They will then resell your goods to customers but under its name brand. There are many advantages to this selling model, such as the following:
Advantages of Direct Selling
1. You won’t have to worry about shipping, delivery, and fulfillment. All you have to do is send your goods to AMZ’s warehouse and collect your payment.
2. No need to worry about customer service too. All the refunds and returns will be handled by AMZ, so you can just sit and relax.
3. AMZ’s trust badge is going to make selling easier. If you sell your goods under your name brand, and you are relatively new to the selling space, it will be hard. You need to build a strong customer base and loyal buyers. By becoming a direct seller, you don’t have to worry about all of this.
This business model is easier, and you are guaranteed more sales because consumers trust AMZ. They are more likely to buy goods sold by AMZ rather than a random, unknown third-party seller.
However, selling to customers would be better if you want control over your pricing. This is especially true if you prefer to build brand awareness and your customer list. If you want to create your own identity and name as a seller, selling directly to AMZ may not be right. Besides, you can only be a direct AMZ Vendor upon invitation too. This leads us to the second option, selling directly to customers.
Selling directly to customers on Amazon
Alternatively, you can sell directly to customers on the marketplace as a third-party seller. This option is your best bet if you want to set up your own identity and brand. People who already run small businesses but want to reach a larger audience can join the marketplace.
The AMZ platform is open to anyone who wants to be a third-party seller. You must complete your registration and choose between an Individual and a Professional seller account. Here are the differences between the two:
Individual Seller Account
With an Individual seller account, you don’t have to pay monthly subscription fees. However, you have limited access to the advanced selling tools offered by the Seller Central platform. Also, selling on restricted categories is not available to you. Aside from that, you are also required to pay $0.99 for every sale you make and other selling fees. If you are testing the waters and not looking to stock up a huge inventory, this could be a good option.
Professional Seller Account
With the professional seller account, you have to pay $39.99 every month. However, you are no longer required to pay $0.99 for every product sold. Furthermore, advanced APIs, third-party tools, and AMZ features are open to a professional seller. You can now use Seller Central for all your e-commerce needs. You can also apply to sell items in restricted categories.
Whatever model you decide to use is completely up to you. All you have to do is create a Seller account, which can be done in just a few minutes. Besides, you can always modify your selling plan at any time.
While you may have to compete against AMZ in some product categories, third-party selling still has greater profit potential. As a seller, you can control your pricing and offer new products. You can also start building your brand name. However, you’ll have to pay AMZ a commission to sell on its platform. And if you decide to use AMZ’s fulfillment service, also known as the FBA, it may incur other additional costs on your end.
Third-party sellers account for more than half of the sales on the website, so this selling strategy is worth looking into. As the more feasible option, let’s discuss how to profit using different third-party business models.
How to Make Money on Amazon: Third-Party Selling Models
Are you a seller with your brand, wondering how to make money on Amazon the best way possible? Then you should think about selling via private label. Independent small businesses with an offline presence can also make their products available on AMZ through this model.
Private labeling essentially offers a generic product under your brand. You can choose to upgrade or improve on existing products. However, the point of doing private labeling is to have your unique brand name, logo, and packaging.
Private label is easily the most profitable way to succeed on AMZ. Because you can control costs during the manufacturing and distribution process, you can also control your profits. Control over costs allows you to set competitive prices that will give you a good profit margin. You can adjust prices as you wish, and you also have control over your inventory. In addition, you can differentiate from competitors since you are the exclusive seller of your private label products.
Do you want to profit as a seller without building a brand or manufacturing your private label products? Then you should be a wholesale seller on AMZ. You simply buy branded products in bulk at a discounted rate and resell them to customers at a markup, to gain a profit.
Selling wholesale allows you to take advantage of the reputation of the established brands you are selling. That way, you don’t have to spend much on marketing and promoting your products since the brands already handle that aspect.
However, selling wholesale means, you’re going to face competition from other sellers offering the same branded products as you. And because you have no control over the brand, you may find it difficult to differentiate yourself other than by lowering your prices. This is an issue which could cut your profits.
Both private labeling and selling wholesale require huge startup capital for product sourcing and shipping. And some prospective sellers may not be able to afford it. This is where retail arbitrage serves as a perfect middle-ground solution.
If you are thinking about how to make money on Amazon without a big upfront capital, retail arbitrage is the way to go. You must buy items at a discount during a sale or clearance in your local retail outlets. Examples of these stores are popular discount spots like Walmart or Costco.
After purchasing the items at a discount, you can start listing the items for sale at a higher price. This is how to make money on Amazon via retail arbitrage. Because this method is cheap and easy to start, many third-party sellers without their products use this model. However, be always prepared to deal with low-profit margins and stiff competition since you don’t have a monopoly on your items.
What Is FBA?
FBA refers to Fulfillment by Amazon. FBA is more of a fulfillment model than a selling model. However, it’s a great way to profit on Amazon, whatever selling model you opt for.
With Amazon FBA, AMZ handles inventory storage, order fulfillment, and customer service for you. You send your products to a designated fulfillment center. Then, when a buyer places an order, they pack and ship the product to the buyer, handling customer support and returns. With Amazon FBA, you can leverage their reputation, advanced logistics infrastructure, and top-notch customer service. And even though you pay FBA fees for their services, it is a more cost-effective option than handling fulfillment yourself.
FBA is best suited for private label and wholesale sellers because of the large inventory involved.
Many aspiring sellers often wonder how to make money on Amazon, especially during the pandemic. Hopefully, this article was able to help you figure out which selling model fits your capabilities and needs.
However, if you seriously want to profit on this platform as a seller, then you need to invest in Amazon seller tools. Using software tools for processes such as product research, listing optimization, and keyword research can give you an edge over your competition. Regardless of the selling model, you choose to adopt, finding winning products will always be your first step. A low-demand product that is very hard to sell will stunt your dreams of making money. However, finding a high-demand product with low competition will shoot your profits through the roof.
Software tools such as Zonbase can provide accurate data that you can use to make informed decisions. Zonbase has over 13+ features and services designed to assist you in finding that home-run product. If you want to learn how to make money on Amazon through data-driven decisions.