If you are thinking about starting an amazon fba business you’ll need to decide on one of the amazon business models.
My name is Nick (That’s me above) and i have been selling on amazon for nearly four years now.
I have learnt a lot about the different amazon models along the way.
Today i’m going to walk you through the best amazon fba business models, hopefully this will help you decide which one is best suited to you.
Make sure you read this article all the way through…
Because at the end i’ll be telling you how i’d do things differently, if i was to start again (hopefully this will stop you making any costly mistakes).
The Different Amazon Business Models
I think it’s fair to say that selling on amazon presents one of the biggest opportunities for this generation, get it right and you are laughing.
Before you jump into it i think you’d benefit from learning about the different selling models you can take advantage of…
I’ll start with my personal favorite.
The Private Label Business Model
I have covered this amazon business model in full within another article, you can read it here: Amazon private label
Here is an overview for anyone that doesn’t have time to read that article now.
With the private label business model you own the asset…
As a private label amazon seller you are finding a product that sells well before putting your own spin on it.
For advanced amazon sellers this may mean a redesign of the product itself.
With experience you can change the design of the product to improve the customer experience.
I like to look at my competitors negative reviews and try to build a product solution to solve the existing customer pain points…
Most private label amazon sellers will sell very similar products, a lot of the time there will just be a change in the packaging.
Some sellers will include a colour or quantity variation this will completely depends on your amazon seller strategy.
In the following video i explain the private label business model, step by step.
As a seller once you find a high demand / low competition product, you’ll turn to a site like alibaba to look for a suitable supplier.
It is getting more and more competitive BUT there is still space for new sellers (If done properly).
Anyway, let’s move onto the next model.
The Online Arbitrage Business Model
This is the business model we follow with our second amazon seller account.
We’ve only started using this business model within the last year or so…
About a year ago we decided that we wanted to diversify by trying something slightly different.
Here is how it works…
As a online arbitrage seller you will be looking for product deals online that you can buy to then resell on amazon for a profit.
It really is as simple as that.
However there are very different scales of operation.
Some sellers out there scan stores manually, they may look to find a few products a week to purchase and re-sell on amazon.
Other sellers use sophisticated teams of VA’s (virtual assistants) to source and purchase their products…
If you want to build a serious online arbitrage business using VA’s or an internal purchasing team is the only real way to scale.
There are online arbitrage sellers grossing millions in sales annually, it’s certainly a business model you can scale (with the right expertise).
If you are interested in online arbitrage i’d recommend checking out a friend of mine (Kev Blackburn)..
He has sold over £1,000,000 worth of products via the online arbitrage business model…
In the following interview Kev explains exactly how he’s done it (Thanks Kev).
His brand is called life success engineer…
He has written an article explaining the online arbitrage business model in full.
The next business model is actually very similar to online arbitrage but it’s a little more “hands on”..
The Retail Arbitrage Business Model
So yer this business model is pretty similar to online arbitrage.
If you are a retail arbitrage seller you will be looking for products to purchase and resell on amazon for a profit.
The online difference here is with the actual Sourcing of the products.
A retail arbitrage seller will actively go out to stores to look for products to purchase.
These guys will spend the majority of their time visiting different stores looking for product opportunities.
We have done a very small amount of retail arbitrage but to us online arbitrage / wholesale is a much better fit.
RA sellers still rely on technology to qualify their potential product ideas.
You’ll often find them scanning products down the clearance isle of a retail store.
There are a number of different apps you can use to help you qualify potential product ideas.
Now as i’m not an expert in retail arbitrage i’ll pass you over to the RA power seller that is Reezy resells…
Reezy resells is a good guy to follow if your interested in learning about retail arbitrage, his YouTube channel is entertaining and pretty unique.
Here is a link to Reezys blog: Reezy Resells Blog
So yer, that’s retail arbitrage in a nutshell…
It suits any body that likes to spend time being out and about on their feet looking for items to flip…
Once you find and actually purchase the products, you will still need to prepare them before sending them into amazon fba.
I should mention that you will only be sending your products to amazon fba if you are using amazon fba as your fulfillment network.
Some sellers choose to list the products on amazon and then fulfill each individual order themselves (each to their own).
Your fulfillment choice will completely depend on your set up…
We utilize amazon fba because it allows us to focus our time on growing our business.
Right! onto the next amazon business model..
The Amazon Wholesale Business Model
This is a business model that i’m incredibly interested in.
Mainly because of the potential for scale-ability…
We don’t actually do any wholesale yet but we are definitely planning to in the future.
At the moment we are building our knowledge base whilst feeding our other amazon businesses.
Wholesale is an age old business model…
Sellers usually buy large quantities of a product to then resell with their own profit on top…
Usually an amazon wholesale seller will be purchasing from other wholesalers, distributors or from a brand directly.
Wholesale selling on amazon is BIG BUSINESS…
My favorite amazon wholesale figure is without a doubt… Larry Lubarsky.
Larry grossed over $18m in sales on amazon last year, he runs his amazon business from a warehouse in New York.
He is also very generous with his information…
He went from $100k in debt to $18 million annual revenue on amazon…
He’s been doing so well, even CNBC wanted to cover him – the full article is here: High School Drop Out Brings in $18m a year
The amazon wholesale business model is very simple…
I’ll explain using Larry’s story as an example.
Larry sees a Nerf gun selling for $20 a unit on Amazon…
Larry then buys 100’s or 1000’s of these units @ $10 per unit wholesale.
Then Larry resells each of these units for a $5 per unit profit (after amazon fees) on amazon.
Whatever business model you follow make sure you understand how to calculate the amazon seller fees.
You will also need to factor in any other associated costs like taxes etc.
If you are interested in learning about wholesale, check out Larry Lubarsky’s YouTube channel (also known as @Watchmeamazon).
So yer! There are the main amazon business models and three of my favorite sellers in the game.
My current favorite is amazon private label!
But this is bound to change as the years go on…
So now you know about the different amazon business models, how do you know which model is right for you?
Which Amazon Business Model Is Right For You?
This of course is just my opinion based on what i have experienced as an amazon seller.
If you are starting out with a limited budget i’d recommend that you look at either online arbitrage or retail arbitrage…
I know what you are thinking… WHY?!
Well you can get started with either of these with a smaller amount of money and risk…
Both the amazon private label and wholesale business models require a starting investment of between $4000 – $10,000.
If you have very little business experience you will also have less responsibility on your shoulders.
With the private label business model you are fully responsible for your products.
This means that your products must be fully certificated and compliant to sell in the country/marketplace you wish to sell in.
With wholesale you are going to need a fully registered business and bank account (this will allow you to open trade accounts with wholesalers).
You will also need a fairly decent amount of money to get started.
A lot of people recommend around $7000 – $10,000 just to get started.
My advice to you is to look closely at each of these business models before you make a decision.
Check out all of the people i have recommended throughout this article.
As you may know, we have two separate amazon accounts…
Our private label business and our online arbitrage / future wholesale business.
We started out on our journey about five years ago…
If i was to start over, here is how i’d do things differently.
How I’d Do Things Differently
Personally i don’t like regrets…
I believe that everything we do serves a purpose and any mistake can serve as a useful opportunity to learn something new.
If i was to go back and start over i’d definitely start using software from the very beginning.
If you are a regular ebusiness boss reader you’ll know all about the software i use every day.
If i was to go back i’d make sure every decision was a data driven decision…
Remove any of the guess work where possible.
I like the phrase “data driven decision” i think we’ll have it put up in our office at some point.
Also i’d like to be a bit more patient…
Naturally i am a bit impatient as a person BUT I’m getting better ok!
Sometimes i tend to look about 10 steps ahead rather than what’s right in front of me.
Patience is key, your amazon business will thank you for it in the long term.
I’d argue that a business that has grown organically will be much more stable than one that has grown extremely quickly.
Organic growth allows you to tweak and improve your infrastructure as you go along.
If you grow too quickly you can end up putting the entire business at risk.
Wow i feel like a changed man, that certainly isn’t how i looked at things when i started out.
Anyway, i hope you have enjoyed this article…
Let me know your thoughts below!
More from me soon,