How to make money on Amazon
Everyone knows about Amazon and its owner Jeff Bezos, the richest man in the world. At this platform, you can buy almost everything without even leaving your home. 300 million people use Amazon, and 80% of American users buy something on this website at least once a month. In order to maintain all of that, 45 000 robots work in the company’s warehouses (DMR data for December 2017). Amazon is planning to set a new headquarter and 50 000 new jobs and the mayors of 238 US cities are competing to offer Amazon better conditions and more tax reliefs.
There are more than 2 million sellers on Amazon. “You can sell the same product differently, there are millions of goods, everyone can get a place in the sun,” says Isabella Ritz, an Amazon sales coach.
In order to sell on Amazon, you shouldn’t even be located in the USA or be a manufacturer, you can simply resell. Amazon provides all the conditions, including storage for goods in their warehouses and delivery. Therefore, almost everyone can make money on Amazon, the main thing is to thoroughly prepare and approach this venture wisely, says Isabella Ritz. She explains all the subtleties of product selection, pricing, work with suppliers and promotion strategies at her seminars and in the Facebook group “Business on Amazon for Russian speakers”. Rubic editors are not responsible for the content and reliability of the seminars and information in this group.
“This is a closed group, an affinity party, I am always glad to see newcomers who are striving to learn something new. Thanks to me and the project, someone has improved the English level, someone has found new friends, someone has just got underway, and this is also the result. About 30% of my members achieve solid earnings on Amazon,” says Isabella.
From the reviews to your personal brand – an overview of ways to make money
Earnings options on Amazon largely depend on what kind of start-up capital you can operate. And they are not limited to trading.
If you don’t have any start-up capital at all, you can start with writing reviews for the products in order to understand how Amazon works a bit better.
If you have about $500 you can buy several units of goods or a small batch in the store and try to resell it on Amazon for a higher price.
If you have a popular blog, an online store, or a website with a large number of visitors, you can earn money by posting links to products or categories of products on Amazon (you will have a small percentage of each purchase from your link).
If you have a few thousand dollars you can try drop shipping (selling a product that you don’t physically have, without having it in stock and placing an order to another seller after the product has been paid up by the final buyer).
Drop shipping isn’t prohibited by Amazon rules, but Isabella considers this method to be illegal and unfair competition.
It is better to build a proper and efficient business on Amazon with about $5,000 of start-up capital developing your private label, Isabella advises. The process involves purchases from manufacturers in China, advertising, demand researches, and other additional steps.
What to start with and how much money you need
From a legal point of view, starting up a business on Amazon requires almost nothing, you need a bank account in the country you are going to trade, the brand name that you will mark your products, and later register, and the real address.
Amazon doesn’t require to register a legal entity from their sellers.
“You can sell both as a private person and as a legal entity, with or without a trademark,” Isabella explains.
During the registration, the sellers have to specify their Social Security Number (SSN) if they are private individuals; or employer identification number (EIN) if they are a legal entity. When registering, foreigners need to sign the W-8BEN form, where they simply state that they are not the subject of the American tax system.
“In Ukraine, Russia, Kazakhstan and so on, you can get the money earned on Amazon through a Payoneer card,” recommends Isabella.
When registering an account, you need to choose a plan, there are two of them. Professional sells more than 40 products per month, and you need to pay a subscription fee of $39.99 (the first month is free). Individual (private individual) is up to 40 units of goods per month, and you need to pay $0.99 per unit sold. The functionality for a “private individual” is limited in many ways, so it’s better to choose Professional.
You will also need a company name or your name, address, phone number, credit card details and a valid bank account, and information about your taxes.
Your expenses, of course, are not limited by the monthly fee. There will be more of them: a fee for sending the goods (shipping fee), storage fee, service fee (fulfillment, storage and optional services), and the Amazon’s percentage (Referral Fee, depends on the category of goods, from 8% to 45%, the full list is here). You will also need contextual advertising so that people find your product (it’s called Amazon Pay Per Click or PPC, so your product is higher than others and you pay per click). It is also a good idea to distribute a certain amount of products for free to get first reviews.
Here is an example of calculating the cost to launch a product (skipping ropes) for US buyers:
- Order samples from China (3 jump ropes) – $300
- Order a minimum batch of 500 pieces for $4 each – $2000
- Distribute samples to people – $30 (a special service finds people)
- The subscription fee for a Professional account – $39.99
- Getting UPC product code – $10
- PPC advertisement for 30 days for $10 each – $300
- Trademark registration – $350
- Professional product photos – $300
- Logo design, packaging, graphics – $200
You can do without points 7-9. So the absolutely necessary expenses are $2 340 in total, and it is highly recommended to spend $1 150 more. Therefore, prudently estimated, launching such a simple product like a jump rope will cost $3 490.
If you have a specific product and price on your mind, use Amazon Revenue Calculator.
A pig in a poke or Amazon seller account
Don’t believe people when they offer you a well-promoted seller account with the stock on hand on top of that. No one sells a successful business – it is a fundamental truth that works with real offline businesses and with accounts on Amazon. “Buying someone else’s account means changing all the data, auditing its status, and checking the authenticity of new data. There’s no point for newbies on Amazon to go into that. Even if you think that you are buying an account with bestseller listings (such accounts cost a lot, by the way), no one can guarantee that this best seller won’t be at the bottom of the list tomorrow,” says Isabella.
What to sell
Sellers can choose from more than 40 categories of goods – watches, books, furniture, toys, etc. Not all categories are available for private individuals – for example, only “professionals” can sell similar clothes. There are additional requirements for some categories of products, and you need an “approval” from Amazon (Jewelry category). Some categories are closed to new sellers at all (for example, Collectibles, and Music).
It’s highly recommended for the newbies not to invent or promote something of their own, trusting their personal needs.
“You shouldn’t invent something which hasn’t got a demand in the market yet. This is a very time-consuming, costly and rarely cost-effective plan,” says Isabella.
Bogdan Haiduk from Kyiv has been working on Amazon for more than a year and a half, he began with the resale of children’s toys, and now he is engaged in the promotion of handmade Ukrainian lamps.
“The first choice of a high-quality product takes weeks, it’s real science. You should get an idea of the logistics costs, production and delivery timeframes, sales trends, seasonal prevalence,” says Bogdan.
He recommends starting with light, unbreakable, small-sized and popular products, the counterparts of which already exist on Amazon and which are sold well. “It can be something for the home, for kitchen or garden, many people start with pet products or kitchenware,” he says.
Isabella Ritz started with household goods and electronics. “It’s better for newbies on Amazon to come out with proven products that are a bit different from the others in their category – for example, high-quality finger toys, useful and nice kitchenware,” says Isabella.
To select a category, Haiduk recommends using special programs.
Where to get the goods
Here are some tips from the old-timers:
– Conduct negotiations with several potential suppliers simultaneously
– Do not trust. Control and verify. There will be the waste, you need to keep it amount to a minimum
– Request certificates of quality at the very beginning of the negotiations (for some categories of goods you must have them in accordance with Amazon rules)
– Keep in mind the supplier’s capacity and production time to avoid problems with the lack of goods in stock
– Discuss the cost of delivery with the supplier and other people involved in the delivery and transportation in advance
– Get a sample order (sampling)
How to find buyers
Product promotion means a smart listing or its description. It includes photos, product description, reviews, customization, keywords selection.
If you have ever bought something on Amazon, you have already paid attention to the wacky names of goods.
They usually sell not a “hat”, but “a warm woolen winter hat for skis and snow and cold weather with a fleece lining and a bob”.
This is an example of the name created to ensure that the product is easier to find when searching on Amazon. Amazon needs keywords to index the product correctly so that the buyer is more likely to see your product.
Correctly optimized listing (here you need to solve the problem of how to place keywords in the text correctly while maintaining readability) is the key to a successful sale.
Listing work starts with an analysis of competitors, their disadvantages can be turned into your advantages.
Isabella recommends to make a photo and selection of keywords by yourself, and the rest of the work should be outsourced to trusted freelancers who know Amazon’s content requirements. Bogdan also delegates the work with listing and advertising to contractors.
“It’s a pity to waste precious time,” he explains. Then you can buy PPC ads from Amazon, where you pay for clicking on your banner.
You can customize the audience – show baby strollers to young women, and droppers to people over 70.
The prices range from $0.05 to $5 per click, depending on the product category, price, and the number of competitors. The main task is to get to the first page in your category because people don’t look further, Isabella explains.
Earnings on reviews
People don’t like to buy goods without reviews, so when you start to sell a product, of course, you buy some reviews. Or else, they are written for free in exchange for the goods. Real “unpaid” buyers leave feedback on sellers or goods extremely rarely, in 2-5% of cases.
“Usually, the guys from Ukraine and Russia write reviews for $5-$8 dollars, and they get the goods themselves in addition. I want to note that this is not a permanent salary. Bulk purchases of similar products from the same IP addresses and massive reviews of these products look very suspicious. Amazon considers this as inappropriate customer behavior and blocks them over time. Writing reviews for money isn’t legal,” explains Isabella.
Amazon spares no effort even to sue the most arrogant companies that offer writing fake reviews for money.
As a result, websites like PaidBookReviews.org, AmazonVerifiedReviews.com, AmazonReviewStar.com, BuyAmazonReviews.info, and ReviewConnections.com have already been closed. Sometimes reviewers pursue non-monetary goals. For example, Kansas mayor Sly James has recently given five-star rates of 1 000 random positions on the website as an attempt to draw attention to the application of his city for being a location of the new Amazon headquarter.
The mathematics of earnings on reviews is as follows: to receive $100 per day, you need to buy 20 units of goods. If you work on reviews from Monday to Friday eight hours a day, you will earn $2 000 – $2 500 and get 400-500 units of unnecessary goods in the house. Plus unpaid taxes. Even if you will manage to sell or return these products somehow, sooner or later Amazon will block the account of such a buyer.
Reviews of customers who probably bought this product are marked on Amazon as verified. “A product with the bought reviews has more “unverified” of them. Recently, Amazon has withdrawn such reviews from the seller and doesn’t count them now,” says Isabella.
If you have an online store, an informational website or a blog with high traffic, Amazon gives you the opportunity to earn money by posting links to products or product categories (Affiliate program). If users from your website switch to Amazon and make a purchase you get up to 10% of the price of the goods.
Whichever way you make money on Amazon, remember common sense and tell about the problems. “Amazon is addicting, especially for newbies who often feel the gold rush effect in their first months. You have to take balanced steps, otherwise, you can get absorbed in playing and lose everything,” warns Isabella.