Amazon Business Models
Amazon is the most powerful sales channel in the world. So, as can be expected, there are several types of selling models that you can utilize to make money on Amazon. Some of the ones that we discuss in this episode of the podcast are retail arbitrage, online arbitrage, wholesale & private label.
Retail arbitrage & online arbitrage are the process of buying items from retail stores (such as Walmart, target, Best Buy, etc.) and selling them for a profit on Amazon. They are basically one in the same, except that the first is typically seen as being done in a physical location and the latter online.
Arbitrage is actually the way that all 3 of us started selling on Amazon. It is appealing to many new sellers because you can get started with very low funds and the risk is minimal (even if you don’t really know what you are doing 100%.) Arbitrage can be difficult to scale, however, as you are limited in the number of items you can personally source, or you need to hire a team. In addition, you are typically purchasing small quantities of units. You are also selling other brands without invoices, so if an inauthentic issue comes up, it can be difficult at times to prove authenticity. Also, more and more brands are getting restricted to sellers, so the long-term potential of arbitrage may be limited. All that being said, there are many sellers making great money with arbitrage and it is an awesome way to build capital. If you are interested in Arbitrage selling on Amazon, check out Gaye Lisby’s Million Dollar Edge & List: Earn While You Learn. This group is the best way for you to get started with arbitrage.
Selling wholesale products is another model that many Amazon sellers use to make great money on Amazon. Wholesale allows sellers to scale more easily than arbitrage because of the large quantities that can be bought at a time. If you are able to make relationships with good wholesale suppliers and get exclusive agreements, it can really help your long-term success. However, with wholesale you are selling other brands of products, which means you often don’t have control over what those brands do. They may eventually decide they want to sell their products on Amazon themselves, or that they no longer want third-party sellers to sell on Amazon. Also, without exclusive agreements, you might work to help improve a listing on Amazon only to find other sellers jump on the listing and share the buy box with you.
Private Label is the process of branding a product with your own logo so that you are the owner of the brand. This is the model that we focus on in the Amazon Seller Podcast, the method that we use and that we feel has the most potential for long-term growth. With private label you are the brand owner that makes all the decisions, you are the only seller on the listing (so you don’t need to share the buy box), you can customize your product to meet the needs of customers and you can sell your products on and off Amazon. However, if you don’t know what you are doing with private label, or the formulas for success, it can be difficult to get started. That is why we dedicated this podcast towards helping you to learn how to succeed at this great business model. You can learn more about private label through our free training series here.
Diversifying Your Amazon Business
We discussed the above selling models above in detail, not to say that one is better than another, but to get across the importance of diversifying your business. If you are currently making money selling arbitrage products on Amazon, you shouldn’t necessarily stop. Instead, you should try to start learning wholesale or private label so that you are prepared for change and are able to scale. If you are currently selling wholesale products, you shouldn’t necessarily stop. Instead, you should learn how to private label your own products so that you are the brand owner and have control.
And if you are currently selling your own private label products, you shouldn’t stop there. We are constantly looking for new ways to grow our businesses on and off Amazon. You should look for ways to grow your brand and establish an audience off of Amazon. That way, if you were ever suspended from Amazon, or if the customer base shifted to another platform, your business would be able to survive.
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