I recently helped a close friend & client with a project to help generate passive income by selling on Amazon. Through this method he is able to ship his products to an Amazon warehouse and have them handle all the orders and logistics involved with the sale of the item (for a fee). This blog post will cover everything we did, including how we found a profitable niche, sourced a cheap supplier and started generating sales through various channels. To start with, the first thing we had to do was open a Fulfilment by Amazon account.
Once we completed the sign up process and filled in all the information they require of us (quite a lengthy process – about 15 minutes), we find ourselves on our Amazon Seller Central Dashboard. This is where sales, pricing and stock are managed.
The next stage was determining if there is actually a demand for our product within the Amazon platform. The tool that we used for this is called Jungle Scout. Here is their sales video:
If you haven’t decided on your product already, you are going to need to use the Jungle Scout tool to scour Amazon high and low looking for opportunities and weighing up your options. Ideally you want to make sure that the product meets the following criteria:
- It sells well most of the year round (not seasonal).
- No massive international brands dominate the product niche (Don’t try and out sell Nike for football boots).
- It would be best if the top 1-5 ranking products didn’t have that many reviews (Less than 75 ideally).
- The product you are looking to sell is small and light.
Once you have found a product that matches this criteria, the next step is buying your inventory. There are two main websites that you can use to source your stock from:
- Alibaba (Low Cost Per Unit, High Min Order)
- Ali Express (High Cost Per Unit, Low Min Order)
Both of these websites are similar to Amazon, the only difference is that you are able to buy in bulk / have unique products manufactured. The overall plan through this method is that you will be able to find a product for really cheap, order it in bulk, brand it and then send it off to Amazon to sell at a profit. If you are willing to put the time, money and effort in to developing your system then there is no reason you can’t earn a decent income from it.
Just a quick one too regarding the above – normally you want to go through Alibaba as the prices are better; however if you are starting out you may not want to buy your initial stock in such large volumes in case you are unable to shift it – in which case I recommend Ali Express. Before purchasing though, you need to work out your profit margins on your product.
From here on in the tutorial I am going to be speaking hypothetically as to not give away the niches that we work in. Going forward we will be pretending that we are selling scented candles (high monthly search, top results have less than 75 reviews and it is small and light). So first have a look on Amazon at the competition:
We can see that they generally sell anywhere between £5 and £11. This is the price range we should be looking to sell ours at. Notice the branding and type of candles on the front page too. We now need to do the same search on Alibaba, then contact the different manufacturers and weigh up the quality, cost and seller history. For this example let’s say I think that candle below had the potential to stand out on the front page of Amazon and sell.
Including the cost of shipping (VERY IMPORTANT!) and packaging (Find out if manufacturer will do this for you or if you will need to organise this yourself), I should be able to get 5000 units for roughly £5700 ($7000), or £1.14 per candle. We’ll also need to consider cost of shipping from our premises to Amazon. If you develop a strong enough relationship with your supplier, there is no reason they can’t ship directly to Amazon and cut back your costs even further. Anyway, let’s say it works out to £1.90 a candle if we consider all things; selling it for £7.00 is a reasonable return on investment.
Note: In this example I am also using Alibaba as opposed to Ali Express, so the cost per unit is lower – although a higher net spend.
While you wait for things to be manufactured / shipped (normally around 8 weeks), it’s a good idea to ask for 3-5 samples to be sent by express international delivery so you can get product photography, branding etc out the way. It is really important to have good photography on your Amazon product page. In some cases a manufacturer will be able to send you a product sample before you buy in bulk if you communicate your idea across and get to know them before they start. Alibaba is a secure platform anyway (pay with PayPal) – so you should have peace of mind that everyone will walk away from this arrangement happy.
We then look at the Amazon Profitability Calculator. I have also found a product that matches similar criteria to the one the candle I plan on selling (and being sold on Fulfilment by Amazon), and check it out.
So as you can see, including shipping it to Amazon and having them deal with the entire customer care process / delivery / support and all that – it works out to a £2.94 fee per candle sold. Add this to the £0.96 cost of the actual candle – and the entire cost of manufacturing, packaging, sale, delivery and support for each candle comes to exactly £3.90. This leaves us with a profit of £3.10 per candle. If we decide to sell it to the rest of Europe too, it works out to around £2.60 (Bear in mind that this gets less by £0.02 every month the candle stays in storage too).
So it looks like the gross profit will be around £15 000 on each batch of 5000 candles. This is either awful or amazing, depending on how long it takes to sell them all. The next challenge would be working out how to get them sold as cheap as possible. The best place for you to start with is by being found within the Amazon platform. How Amazon ranks products internally for keywords is detailed below:
- The relevancy of the product.
- Candles aren’t going to show up for a search for a bath. But besides being that obvious, we need to make sure that we use as many keywords in the title as we can, while sounding as natural as possible. We are also going to want to use some of the keywords we have identified in our descriptions / answers etc.
- The quality of the product (reviews / returns / refunds)
- Don’t manufacture and sell crappy stuff. It’s not worth haggling down on price trying to save £1 per unit if it’s not going to be done properly. Rather have high turnover than high margins.
- The amount of sales a product has.
- Another obvious one. If it is selling well then Amazon want to show it.
- The amount of reviews it has.
- If the product has loads of people raving about it and leaving reviews then it is probably something their searchers want to see / will buy.
- Whether or not it is being fulfilled by Amazon.
- Amazon rank their own products above normal merchant fulfilled products.
- The conversion rate of the page.
- When people land on this page do they buy from here or someone else? Ways we can make sure that people choose us is to have really high quality pictures, good descriptions and good reviews.
- Reasonable price.
- Are your products in line with what your competitors are charging?
None of the above are mutually exclusive of each other so it can be hard to your store going initially. A good idea while you wait for your product would be to get a web page up about it (HINT: have that put on the packaging too, so get your domain sorted name ASAP. You can also start getting our social media presence and content together if you are going to be relying on search engines for traffic. Another good tip is to give away ~100 candles for free to people / friends and family in exchange for an honest Amazon review.
If you don’t treat this like a get rich quick scheme and are willing to invest time and money in to it – it will be very easy in the future to walk away from it and have the entire process handled automatically. Amazon will also ship all over Europe from UK fulfilment centres, so the sky really is the limit on this one if you apply yourself to it.