Do you want to start selling on Amazon and need to know how much to invest? These are the phases that I recommend so that the investment can be profitable in the medium term.
Maybe in some of these publications about passive income you can see selling on Amazon as a possible way to achieve it. For the record, I do not believe in this concept of making money sleeping.
In the end this is continuous work. If you are looking for something else, don’t read any further.
- 1. Choosing the right product
- 2. Make a launch campaign
- 3. Make sure there is no stock out
- 4. Restart the process
- 1. How much do you have to invest with Amazon FBA business to turn it into passive income?
- The minimum capital investment you need
- 2. How much money can you make on Amazon with little investment?
1. Choosing the right product
With existing products there is a little trick to finding out the sales potential. If you are starting from scratch with your own product, you need to investigate these two things first and foremost.
- How much margin does the product give me? Here I have done a post on what to look out for.
- How much competition does the niche and/or product have? It’s not always the lowest price that wins. Here’s what to keep in mind.
These two questions are the starting point. But if you don’t do the following you will sell very little with your own brand.
2. Make a launch campaign
To position a product among the first positions you have to take steps very similar to those you have to take when launching any new product.
In some cases, you will need, depending on the niche and the level of competition, about 30 sales in a week. With this in some categories may already be enough to reach the first page of Amazon search. This is a very approximate figure that is multiplied by 2-3 if you want to replicate the positioning in other Non-US markets.
3. Make sure there is no stock out
One of the worst things that can happen to you once you have successfully positioned a product is to have a stockout. This is something that Amazon does not easily forgive. Even if it only takes 24 hours to restock, you will not be able to recover the position you had previously. Imagine you were in third place before you ran out of inventory. You may be pushed back to the second page or even further after a stockout without a timely replenishment.
4. Restart the process
The only way to grow on Amazon that I know of is to take it one step at a time. You have to build up a cushion of at least one product that sells on a regular basis. Let’s say e.g. a daily or at least weekly sale (absolute minimum). Then you go on to the next one.
This is one of the mistakes I made a couple of months ago. I have been growing with new products and losing turnover with the existing ones because I didn’t take care of inventory and/or pricing issues. You have to go in parallel.
1. How much do you have to invest with Amazon FBA business to turn it into passive income?
We all love the idea of making money by sleeping. To some extent Amazon can be turned into passive income if you are willing to invest.
I’ve said this on several occasions. The idea about passive income as sold in many courses does not exist. Earning money by sleeping is possible but only if you put in the time before and after. In fact right now in the Christmas weeks I go to bed and when I wake up I have billed between 500-1,000 dollars.
Up to this point Amazon can become a passive income.
If it wasn’t for the fact that I love to mess around this year I could be generating income with Amazon without doing much of anything. I have a small team that takes care of these tasks:
- Buy products that give an attractive ROI.
- Replenish inventory with shipments to the warehouses.
- Update prices to be competitive.
- Resolving incidents with Amazon.
- Customer service when someone contacts us.
This is a buy-sell business. Once you have identified the attractive products (the most complicated part), you can form a team or subcontract a company to take care of this work if you don’t want to take care of it yourself.
The minimum capital investment you need
I have some simplified figures that allow me to make a quick ROI calculation. The selling price including VAT has to be double the purchase price and above 8 dollars.
Even the optimum is a selling price higher than 20 dollars. Then to calculate the net profit by subtracting Amazon commissions and VAT I divide the selling price by four. On average the profit is higher but with these minimums it has to be profitable for a product to make an investment.
With this you get an idea of what you have to invest. With a turnover of 20,000 dollars you have a profit of approximately 5,000 dollars.
To this you have to add the costs of your team and / or the company that manages your shipments. Adding other management costs, you may be left with 3,000 dollars that you can earn.
For a turnover of 20,000 dollars you have to make an investment of 20,000 dollars. My recommendation would be instead of taking the profit of the 3,000 dollars to keep reinvesting it to make the ball bigger.
These are figures for a buy-sell business. That of an own product on Amazon is different although it is not far off. Another small nuance that you must take into account.
you have to have found the product that generates these figures of turnover and profit. It took me 6 years to find them. Doesn’t that sound very passive? I agree but this is as close to passive income as you can get with Amazon.
2. How much money can you make on Amazon with little investment?
Today a topic that is aimed at those who may not yet have much capital but want to start selling on Amazon. This is a guideline without guarantee of being 100% accurate.
With each passing day it is more complicated to sell on Amazon. There is more competition, more products and there are more requirements to be able to sell at the fiscal level.
Is it still possible to earn money by investing e.g. 100 dollars per month in products? Yes, it is certainly still possible but your chances of success are still 50% smaller than 1-2 years ago. It’s not too late but it’s about to be.
There are resale niches on Amazon that allow you to multiply your investment by 3. With 100 dollars you get nowhere if you want to launch a product with your own brand.
With 100 dollars a month of investment you can still make 200-300 dollars of profit. You are not going to get much more because there is a ceiling at the level of demand for these micro-niches (so it does not help you to invest more).
This is the reason why they are not exploited by other bigger sellers. I don’t get into everything either but I see these opportunities frequently.
In the two niches that make me the most money, I have to invest between 3,000 to 6,000 dollars each month in order to invoice about 20,000 dollars. I am not a big seller on Amazon. I would say more like “small-medium”.
There are many Amazon tools out there like Helium 10 that allow you to research and find niches. Many authors have a pretty comprehensive list on their blog. Check it out if you’re interested in digging deeper.
You know I’m not one to give you tutorials on how you can turn 100 dollars into 300 dollars. I simply tell you that you can do it, the rest is up to you, so make a living!