A Guide to Reselling on Amazon
Reselling on Amazon is a way to develop a profitable business, but like any business endeavor, you need to know what you are getting into and plan accordingly. There are a number of factors to keep in mind when reselling on Amazon. These include:
- What is Reselling on Amazon
- Register as an Amazon seller
- Create listing
- Reselling on Amazon FBA
What is Reselling on Amazon?
Reselling on Amazon is, obviously enough, purchasing a product from a manufacturer or merchant (online or brick and mortar) and, well, reselling it. But there are different variations of how you can do this.
There are five types of reselling on Amazon:
- Online arbitrage
- Retail arbitrage
- Wholesale reselling
- Reselling manufacturer-made products
- Reselling used products
Which type of reselling on Amazon is best for your business depends on your interests and overall business goals. Some resellers on Amazon focus on one type, while others employ multiple methods. Let’s take a look at each of these to see which might best fit your needs.
Online arbitrage is the practice of buying products discounted or on sale from an online retailer (even Amazon) and then reselling them on Amazon for a higher price, usually at or near the original retail price. You could buy items individually or in bulk.
For example, an online retailer has a sale on a brand-name single-serve coffee maker for $15 that normally retail for $25. You purchase 20 with the intent of reselling them on Amazon for $20. If you are an Amazon FBA seller, you are charged a fee of about a dollar for each unit. That’s a $4 profit per unit (before calculating shipping costs), or $80 if you sell the entire lot.
You could try to up your profit by reselling on Amazon closer to the retail price, or, a tactic popular during holiday seasons, at or even a little higher than the retail price. The downside of pricing close to or higher than the retail price is that your inventory might not move as quickly since you are not differentiating yourself from other sellers at the same price.
The calculated risk of online arbitrage is you’re betting that 1) There is a market for the products you purchase for reselling on Amazon and 2) You can sell products at a sufficient margin to make a profit after expenses.
Retail arbitrage is essentially buying discounted, clearance, overstock, and/or discontinued items in bulk from major retailers, marking up the price, and reselling on Amazon. The concept is the same as online arbitrage, the difference is that purchases are often made in brick-and-mortar stores of major retailers such as Walmart and Target, and usually in larger quantities. The same risks apply that you need to assess if there is sufficient demand for the item so you don’t get stuck with inventory and you can sell it at a price point that is a good deal that you can still make a profit reselling on Amazon.
Wholesalers buy products in sufficient bulk quantities to receive a substantial discount. the price per unit. The benefit is potentially a higher profit margin than online or retail arbitrage, as well as the confidence you’re purchasing authentic products directly from the brand. Wholesalers generally require more warehousing space because they deal in higher quantities than other resellers.
While there is higher profit potential, there is also greater risk. Buying in high quantities represents a large investment that bets on the ability to sell these items quickly. Failure to do so results in inventory that must be sold at a lower price to move it, sometimes at a loss. Even worse, you might pay storage fees for products that don’t sell at all.
Reselling Manufacturer-Made Products
If you buy direct from a manufacturer, you cut out middleman costs, allowing you to private label products you can sell at a lower price than the retail brand and still make a profit. However, similar to wholesaling, this is more capital-intensive than other approaches to reselling on Amazon. Buying from the manufacturer requires buying in bulk as well as significant storage space and warehousing costs.
Reselling Used Products
You can resell a variety of products, such as books or electronics, that you’ve previously used. However, this is generally not a high-volume business (unless you have a lot of used stuff). You might explore purchasing used items from other auction sites for the purpose of reselling on Amazon, but this always runs the risks of the quality of the merchandise and whether you can actually resell it and make a significant profit to justify the effort. In most cases, however, reselling used products on Amazon is typically a limited side business.
Register on Amazon
Reselling on Amazon requires registering as an Amazon seller. People who are just reselling their own possessions can register as individual sellers; if you’re running a serious business reselling on Amazon with significant inventory and sales, there is a monthly fee of $39.99. Figure this expense into your overhead when calculating pricing and profit margins.
To distinguish whatever you are reselling on Amazon from your competition, and increase potential sales, write product listings that:
- Concisely describe the product using keywords
- Provide easy-to-understand and accurate descriptions
- Include high-quality images
Reselling on Amazon FBA
Unless you also have access to warehouse space and the resources to fulfill orders, the easiest and most convenient way of reselling on Amazon is Fulfillment by Amazon (FBA). As the name implies, Amazon handles all the inventory management and order fulfillment. While you pay FBA fees for this service, you’d pay as much if not more to handle these processes yourself.
The more you resell on Amazon, the more transactions take place, and the more transactions, the greater the likelihood that at some point errors occur. When they do, you are owed FBA reimbursement. Unfortunately, in most cases, it is your responsibility to identify errors and submit claims for reimbursement.
FBA reimbursement can add up to between 1% to 3% of your annual revenues. The more you make reselling on Amazon, the greater the potential loss if you don’t properly identify the errors and file the appropriate claims.
The question is, do you have the time to do this?
GETIDA makes obtaining your FBA reimbursement simple, easy and cost-effective. GETIDA software reviews the previous 18 months of transactions to flag instances that qualify for FBA reimbursement. With your approval, the appropriate claims are filed for reimbursement.
This is all done for free. The only charge is a percentage of approved claims. And the first $400 in FBA reimbursement is free.
It’s easy to sign up with GETIDA and ensure that when reselling on Amazon, you get back your FBA reimbursements.