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5 Awesome Amazon Business Models, Step by Step

Published at Jul 19, 2017.

Want to make a living selling on Amazon? These five Amazon business models work for thousands of sellers. Just pick the strategy you like most!

1. Reselling

Buy Low, Sell High

Nike Resellers on Amazon

Since they're selling new products and have names distinct from the product's brand, these sellers are most likely traditional resellers.

Perhaps the most common business model used on Amazon, reselling is the same system used by most brick-and-mortar stores. You simply purchase items in large quantities to get low prices, and then sell them individually for higher prices. Follow the steps below to become an Amazon reseller:

A. Buy Low

As a reseller, you’ll need to find someone to buy your products from for rock-bottom prices—a supplier. Typical suppliers include manufacturers and wholesalers.

  • Manufacturers make products themselves and typically sell them in enormous quantities for extremely low prices per unit.
  • Wholesalers generally purchase their products from manufacturers, selling them to resellers like you in smaller quantities.

Small businesses should start with wholesalers. You can make a bigger profit by buying from manufacturers, but they often require five-figure purchases. Most wholesalers will happily sell you a few hundred dollars’ worth of inventory at a time.

Finding Manufacturers and Wholesalers

For a quick overview of finding suppliers, you can start with this article from SBA.gov. But be warned that there are a lot of scammers out there masquerading as suppliers. The best resource I’ve found for sourcing safe suppliers is SaleHoo.

B. Sell High

Suitcase Full of Money

Before buying anything, look at the items suppliers are selling and for what price, then see what price the competition is selling the same items for. Finally, factor in the cost of selling on Amazon to determine what you could sell for a profit. See our article on what to sell on Amazon for tips on research.

Once you find something you could sell for a high profit at a competitive price, your business will be ready for action!

C. Manage Inventory

Your supplier will ship the goods to you, but you have to handle storage and get the items to your customers. Set aside space for inventory and time for packing orders.

If you don’t like dealing with storage and shipping, consider Fulfillment by Amazon. Using FBA means Amazon handles most of your storage, shipping, and customer service—for a price. Read “Is Fulfillment by Amazon (FBA) Worth It?” to see if it would boost your business.

2. Dropshipping

Low Risk, Low Profit

Possible Dropshippers on Amazon

Dropshippers are hard to identify on Amazon—any business that doesn’t explicitly mention making or shipping the items themselves could be one.

Dropshipping is a great choice for sellers low on time or money. Unlike reselling, you don’t need to purchase inventory or do any shipping. You simply add items to Amazon, tell the supplier when one gets sold, and let them take care of the rest.

Here’s what you need to do to become an Amazon dropshipper:

A. Find Suppliers

Some wholesalers and even a few manufacturers offer dropshipping services. Follow the steps from above for finding wholesalers and manufacturers, then narrow down the list to those who will work with dropshippers.

Be sure to find a supplier who will brand all deliveries as coming from your company, as this is one of the most important Amazon requirements for dropshippers.

B. Find Room for Profit

Wallet in a Vice

Determining what to sell on Amazon is especially hard for dropshippers. You will only purchase items from suppliers one at a time—whenever an order comes in from one of your customers. As a result, you don’t get the same bulk discounts as resellers.

Make sure you can sell something without pricing so low you would lose money. Often, your suppliers will only charge you a few dollars less than you can charge your customers, and it’s easy for the cost of selling on Amazon to eat up those dollars and leave you with nothing.

C. Manage Orders

Whenever a customer places an order, you must do the following:

  • Pay your supplier for the item your customer ordered.
  • Tell your supplier where to ship the item.
  • Handle customer service if any problems arise.

Managing all these messages can become time-consuming. If it does, integrating Amazon with a helpdesk will help you keep it under control.

3. Manufacturing

Make It Yourself

Kitchen Towels for Sale by Manufacturer on Amazon

When the name of the seller matches the name of the brand, you know the manufacturer is doing the selling.

Amazon is a great place for manufacturers to sell directly to the public. If you make a product of your own and have already built the infrastructure to get it in stores, then selling it on Amazon can be lucrative.

The biggest advantage over selling to wholesalers or resellers is that you get all the profits normally taken up by middlemen. The biggest disadvantages are the shipping and customer service headaches.

A. Create Product Detail Pages

If you make a product yourself, odds are you’re going to be the first person to list it on Amazon. That means you need to create a product detail page. Essential skills for making sure your product page makes sales include Amazon SEO and product photography.

B. Create a Shipping and Customer Service Strategy

Cargo Ships in Port

As someone responsible for making sure this product gets made, you have a lot of responsibilities already. You’ll want to minimize the time you and your employees need to spend on shipping and customer service.

Take advantage of Fulfillment by Amazon or one of the many ecommerce shipping solutions available. And once you have an efficient shipping system in place, connect Amazon with a helpdesk to minimize the time needed for customer service. Then you can get back to making your product the next fidget spinner!

4. Retail Arbitrage

Professional Bargain Hunting

Possible Retail Arbitrage on Amazon

With so many new and used options available, odds are good someone found one of these dirt cheap and then immediately listed it on Amazon.

Retail arbitrage is one of the most popular eBay business models and perhaps better suited to that platform. However, you can still make it work on Amazon!

Retail arbitrage consists of hunting down extreme bargains one at a time and then reselling what you find. It’s tough to make a consistent living this way, but the profits on each transaction can be huge.

A. Hunt Bargains

Bargain Hunter Looking at Sweaters Outdoors

Find items that are selling for well below retail value. You might find them at yard sales, store closings, pawnshops or storage auctions, on poorly designed Craigslist ads and eBay listings, or in your local newspaper classifieds.

Stay focused on items that already have Amazon listings, as the effort involved in creating a new product page is rarely worth it for a single used item. Target valuable items or lots of copies of the same item to maximize your profits.

B. Sell High

Once you find something, simply list it for the highest competitive price on Amazon and wait for the money to roll in!

Arbitrageurs will do well to use eBay as a backup. If there’s no Amazon page for a unique item, you can always list it on eBay, and you’re also bound to find a few items that demand to be auctioned. See our article on selling on eBay and Amazon at the same time for advice on dealing with the challenges.

5. Liquidation

High Risk, High Reward

Liquidation on Amazon

Although some people use Amazon for liquidation, we recommend getting your supplies offline so you don’t pay Amazon fees twice.

Liquidation works a lot like arbitrage, but instead of going to a dying store for its last-ditch sale, you wait until it actually closes and then buy everything that didn’t sell.

A. Find Liquidation Opportunities and Suppliers

Liquidation opportunities might include store closings, overstocks/clearances, and similar events when businesses or other organizations need to get rid of a lot of stock at once. You may be able to take advantage of these opportunities and buy directly from the organization if you have a large enough budget.

Alternatively, you can buy from clearance houses—suppliers that specialize in buying up massive quantities of unwanted stock. They then sell their stock by the pallet to resellers like you.

B. Choose Your Stock Wisely

Buying Old Records

Often, liquidated stock includes lots of returns and otherwise damaged items. That means you can end up with a lot of unsellable goods if you buy indiscriminately. When dealing with clearance houses, inspect the stock before purchasing it whenever possible.

C. Sell Flexibly

You’ll sometimes end up with goods you can’t sell on Amazon. Branching out into eBay and other channels can keep your less profitable stock moving, but be sure to prepare for the challenges of selling on eBay and Amazon at the same time.

Summary

We may not have covered every Amazon business model in existence, but these five are some of the best. Be bold and give one or more a try! See “How to Sell on Amazon for Beginners: A 4-Step Plan” for the next steps in setting up your operation.


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