By 2023, 3rd party sellers selling on Amazon will account for more than half of Amazon's annual sales.
The main reason for Amazon's rapid growth as a marketplace is that it offers sellers from many countries around the world flexible opportunities to sell on the platform.
There are 6 different business models that Amazon sellers most commonly use to sell products on the platform. According to a survey conducted among a large number of Amazon sellers, the breakdown of business models and sellers is as follows;
Private Label: %67
Wholesale: %26
Retail Arbitrage: %19
Online Arbitrage: %17
Dropshipping: %9
Handmade: %6
Note: Some sellers have increased the total percentage because they sell in more than one business model at the same time.
Let's take a look at the differences between these six different Amazon business models and what you can do to start selling on Amazon using each one;
What is “Private Label” on Amazon?
Private Label is a business model in which a seller analyzes demand and competition in line with market needs and, as a result of this analysis, has a product produced with a registered trademark of its own and offers it to the customer.
Even Amazon has its own Private Label brands with Amazon Essentials and AmazonBasics.
The Private Label business model is currently the most popular Amazon business model in the world and 67% of Amazon sellers say that they do e-commerce with this business model.
How much capital is required to sell with the Private Label business model?
Compared to other Amazon business models, Private Label is usually the most capital-intensive business model.
While it is known that Private Label sellers all over the world start with an average capital of 2,500 USD, a minimum capital of 5,000 USD for someone starting this business model from Turkey will be a factor that increases the chances of success.
How profitable is the Private Label business model?
While 35% of Private Label sellers report making a profit in the first six months after starting to sell on Amazon, 56% of these sellers earn 5,000 USD or more in monthly sales. (Jungle Scout research)
How long does it take to start selling with Private Label?
While there is no Amazon business model as fast as the arbitrage or dropshipping methods described below, 48% of Private Label sellers have their brands ready for sale in three months or less.
How many hours do Private Label sellers work per week?
58% of Private Label sellers spend less than 20 hours a week on the job and 15% spend less than four hours.
Which categories do Private Label sellers sell in on Amazon?
Here are the top 5 most popular categories Private Label sellers choose to sell in:
Home & Kitchen: 40%
Sports and Nature: 21%
Health, Home and Baby: 15%
Beauty and Personal Care: 15%
Kitchen & Dining: 14%
How to sell Private Label on Amazon:
The private label business model requires more knowledge to sell on Amazon than other business models. The main topics of this information are as follows:
Search Amazon's product database for high demand/low competition niches.
Contact a manufacturer to have the product produced.
Create a professional listing to sell the product.
Run your advertising and launch campaigns by putting the product up for sale on Amazon.
To facilitate this process, many use Amazon's Fulfillment by Amazon (FBA) program, which makes it easier for the seller because Amazon handles all product storage, shipping, returns and customer service. The seller can focus only on production and sales.
Learn more about how to sell on Amazon FBA here.
What challenges do Private Label sellers face the most on Amazon?
Like any business, selling Private Label on Amazon has its challenges. Here are the biggest challenges Private Label sellers face:
Optimizing product listings: 65%
Finding products to sell: 62%
Inventory / Stock management: 58%
Managing Amazon Ads (PPC) : 55%
Receiving reviews for products : 50%
You can join the FBAPro training program, where all these processes are explained in detail step by step, and learn how to sell Private Label with many real Amazon sellers;
Learn more
Retail Arbitrage on Amazon
The retail arbitrage business model is a way of finding low-cost or discounted products in brick-and-mortar retail stores to sell online. Profit earned by retail arbitrage sellers on Amazon;
Profit = the difference between the price at which they can sell the product on Amazon - Amazon fees - the purchase cost of the product.
How much capital is required to start a retail arbitrage business model?
49% of retail arbitrage sellers start selling on Amazon with less than $1,000 USD. However, this starting capital will of course vary depending on the prices of the products you find and how many of them you can buy.
How profitable is retail arbitrage?
While Retail arbitrage requires less capital to start selling on Amazon than Private Label, it is also much less profitable. 62% of retail arbitrage sellers earn less than USD 5,000 per month on Amazon, and 25% earn less than USD 500.
In addition, 46% of retail arbitrage sellers said it took them up to six months to turn a profit with their business model, and 48% said their profit margins on their products were below 20%. (Jungle Scout research.)
How long does it take to start selling with retail arbitrage?
41% of retail arbitrage sellers say it takes six weeks or less to start selling.
How much time do retail arbitrage sellers spend on their business each week?
60% of retail arbitrage sellers spend up to 20 hours a week on their business and 25% spend less than four hours each week. This includes searching for products, creating product listings and shipping products to Amazon.
Which categories do retail arbitrage sellers favor more on Amazon?
Here are the top 5 most popular categories that retail arbitrage sellers prefer to sell in:
Home & Kitchen: 47%
Toys and Games : 41%
Books: 34%
Beauty and Personal Care: 33%
Food products: 27%
How to do Retail Arbitrage on Amazon?
Retail arbitrage is perhaps one of the easiest ways to sell products on Amazon.
Because all you need to do is to buy products that already have large sales volumes at discounted prices in physical real stores and open them for sale only on Amazon.
However, you should keep in mind that Amazon has a Buybox system and thousands of sellers can compete to sell the same product and break the price.
What challenges do retail arbitrage sellers face the most on Amazon?
In addition to product sourcing and inventory management, retail arbitrage sellers may face the following challenges;
Tracking and managing expenses, revenue and other financial metrics: 44%
Finding suitable suppliers: 38%
Optimizing product lists: 31%
Online Arbitrage on Amazon
Online arbitrage is a method of selling by finding low-cost or discounted products from one website or online platform to resell on another platform.
As with retail arbitrage, the profit made by online arbitrage sellers on Amazon is
Profit = Price at which they can sell the product on Amazon - Amazon's fees - The cost of purchasing the product.
How much capital is required to start selling with online arbitrage?
58% of online arbitrage sellers say they started selling products on Amazon with less than $2,500 in capital. However, of course, this will vary depending on the cost of the product to be sold and the purchasing quantities, as in Retail Arbitrage.
How profitable is it to sell with online arbitrage?
55% of online arbitrage sellers say they earn less than $5,000 per month selling on Amazon. However, 16% earn at least $1,000 - $5,000.
54% of online arbitrage sellers say they sell with profit margins of 16% or higher.
How long does it take to start selling with an online arbitrage business model?
Online arbitrage sellers can start selling quite quickly. 36% of online arbitrage sellers take less than six weeks to start selling on Amazon.
68% say they launched their store in 3 months or less.
How many hours do online arbitrage sellers work per week?
56% of online arbitrage sellers say they spend less than 20 hours a week on their Amazon business.
What are the categories that online arbitrage sellers prefer to sell in on Amazon?
Here are the top 5 most popular categories that online arbitrage sellers sell in:
Home & Kitchen: 55%
Toys and Games: 50%
Beauty and Personal Care: 38%
Books: 35%
Health, Home and Baby Care: 34%
How to do Online arbitrage on Amazon?
Like Retail arbitrage, selling arbitrage online on Amazon is relatively simple compared to Private Label.
First, you have to find a product on another website (eBay, Etsy, Walmart, etc.) and buy it invoiced. Then, you list the product on Amazon.
But again, you have to keep in mind that you will be competing on price with thousands of sellers within the Buybox system.
What challenges do online arbitrage sellers most often face on Amazon?
Tracking and managing expenses, revenue and other financial metrics: 44%
Finding suitable suppliers: 40%
Optimizing product lists: 34%
Wholesale Business Model on Amazon
Wholesale is the business model of selling by buying low-cost or discounted goods in bulk to sell on a retail platform.
Most of the time, Wholesale products already have product listings on Amazon. You sell from these listings by making a price offer.
How much capital is required to start selling on Amazon with the Wholesale business model?
47% of Wholesale sellers say that they started selling on Amazon with less than 2,500 USD capital. However, in this case, as in Arbitrage business models, it will vary according to the quantity and price of the product to be purchased.
How profitable is the Wholesale business model on Amazon?
61% of Wholesale sellers say they earn more than USD 5,000 per month selling on Amazon, but 58% of these sellers have a profit margin of less than 20%.
How long does it take to start selling on Amazon with a Wholesale business model?
47% of Wholesale sellers say it took them less than 1.5-2 months to start selling on Amazon.
How many hours do Wholesale sellers work per week?
Nearly half (49%) of wholesalers spend over 20 hours in their stores each week, and 18% say they spend over 40 hours each week.
How to Wholesale on Amazon?
Wholesale has a lot in common with arbitrage in many ways. First, to buy wholesale products, you need to find a supplier or source and buy the goods. Once the products are purchased, you can start selling them by putting them up for sale on Amazon. This can be done as FBM or FBA sales.
In which categories do wholesale sellers sell the most on Amazon?
Here are the 5 most popular categories that wholesale sellers sell in:
Home & Kitchen: 47%
Toys and Games: 32%
Sports and Nature: 29%
Beauty and Personal Care: 28%
Health, Home and Baby Care: 27%
What challenges do wholesale sellers most often face on Amazon?
Tracking and managing expenses, revenue and other financial metrics: 50%
Optimizing product lists: 47%
Finding suitable suppliers: 45%
Dropshipping on Amazon
Dropshipping is a business model where an Amazon seller does not keep stock of products in their own inventory, but instead transfers their customers' orders directly to the manufacturer or supplier.
How much capital is required for Dropshipping on Amazon?
50% of Dropshippers say that they started selling on Amazon with less than 2,500 USD capital. Since there is no cost of keeping a stock of products to be sold, Dropshipping is the business model that can be entered with the least capital among business models.
How profitable is Dropshipping on Amazon?
39% of Dropshippers say they earn less than 5,000 USD on Amazon and 48% say their profit margins are around 11%.
How long does it take to start selling on Amazon with the Dropshipping business model?
Dropshippers take longer on average to start working on Amazon, with 56% saying it takes more than six weeks. In addition, 10% said it took more than a year to find the right product and start selling.
How much do dropshippers work per week?
Dropshippers also spend more time on the job than other Amazon sellers. 54% of dropshippers spend more than 20 hours a week on their Amazon business. About 25% of dropshippers say they spend more than 40 hours a week.
Which categories do dropshipping sellers sell the most on Amazon?
Here are the 5 most popular categories that dropshippers sell in:
Home & Kitchen: 50%
Sports and Nature: 35%
Kitchen & Dining: 32%
Appliances and Home Improvement: 32%
Garden and Outdoor: 31%
How to do Dropshipping on Amazon?
Dropshipping requires a bit more setup than some other Amazon business models (though not as extensive as private label). To start a dropshipping business model, you need some basic knowledge.
These basics are the main ones;
Find a product with high demand / low competition to sell on Amazon.
Create a listing or bid on a listing for the product on Amazon.
Each time a sale is made, forward the customer's shipping information to the manufacturer/supplier so they can fulfill the order.
What challenges do dropshipping sellers face most often on Amazon?
Account closure for violating Amazon Policies: 76%
Optimizing product listings: 64%
Monitor and manage expenses, revenue and other financial metrics: 54%
Getting customer reviews: 50%
Selling Handmade Products on Amazon
Amazon's Handmade sellers are people who create their own products (“by hand”) to sell on the Amazon marketplace. Examples include jewelry, accessories, home decor and more.
How much capital is required to start selling Handmade on Amazon?
53% of Amazon Handmade sellers said they spent less than $2,500 USD to start selling on Amazon.
Of all business models, Handmade is one of the least capital-intensive to start.
How profitable is it to sell Handmade products on Amazon?
50% of Amazon Handmade sellers make less than $5,000 USD per month selling products on Amazon. And 30% earn less than $1,000 per month. Selling Handmade products is among the least profitable business models on Amazon after Dropshipping and Arbitrage.
However, there are sellers among Handmade sellers who have better margins on average. Around 52% say that they earn profit margins between 11-25%.
How long does it take to start selling Handmade products on Amazon?
Sellers selling Handmade products say it takes less than three months to start selling, with 43% saying it takes less than six weeks.
However, 40% of Handmade sellers say it takes three months to a year for their Amazon business to become profitable.
How to sell Handmade products on Amazon?
Selling Handmade products on Amazon requires Handmade sellers to create product listings for the products they can produce. Then, once a sale is made, you can sell Handmade products by managing the production and shipping of the Handmade product to the customer.
What are the most common challenges Handmade sellers face on Amazon?
Finding products to sell: 61%
Optimizing product lists: 61%
Finding relevant and high-quality keywords for products: 49%
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