Can Amazon Sellers Make a Profitable Living?
In a word, yes, many Amazon sellers make a profitable and rewarding living. Though, of course, many Amazon sellers don’t.
But it’s the same for starting any kind of business, online or brick and mortar. A certain percentage fail. According to the U.S. Bureau of Labor Statistics, as reported by Lending Tree, about 20% of businesses fail within the first year, 50% within five years, and after 10 years only about a third survive.
Maybe that sounds discouraging. Let’s look at it another way. Eighty percent of businesses are still open in the first year, half within five years, and a third still 10 years later. If you are part of that 80%, 50%, and 33%, you’re probably doing all right for yourself.
What are the odds that you’ll be in the surviving percentages as an Amazon seller/? After all, something like 3,700 new sellers joins Amazon every day! Not surprising since Amazon is the leading global eCommerce company.
But the increasing number of third-party Amazon sellers shouldn’t discourage you. The reason so many flocks to the platform are because Amazon sellers make money. Some more than others, of course. If you do your homework, you could be one of them. Here’s what you need to know to get started:
- How Amazon sellers make money
- The costs of Amazon FBA
- How much can Amazon sellers make
- How Amazon sellers make sure they get their FBA reimbursements
How Amazon Sellers Make Money
Amazon sellers make money by finding a niche with few competitors where you can start small, determine profit potential, and grow your business accordingly (or, if you aren’t making money with that particular product, shift to something else without incurring significant losses). Many Amazon sellers source products in bulk from Asia and/or buy discounted overstock for resale.
Equally important to how Amazon sellers make money is to establish your business as a brand. Just reselling merchandise, even though you are reselling merchandise, won’t differentiate you from other resellers. Branding differentiates you. Shoppers are more likely to purchase from a recognized brand they trust. Of course, that also means you need to invest time and effort into establishing your brand. This involves everything encompassing such tasks as creating a logo, writing promotional copy, and marketing your business.
Good branding also means providing outstanding customer service, which is paramount at Amazon. Providing excellent customer service means high product quality, quick and accurate shipments, and satisfactory customer returns. Inventory management and order fulfillment is a big undertaking, best performed by big companies. You don’t need to be a big company, however; many Amazon sellers make money by concentrating on product selection and brand marketing and outsourcing the nuts and bolts of warehousing and logistics.
This is why many sellers are Fulfillment by Amazon (FBA) sellers. The FBA platform makes it easy for an online retailer to set up shop and focus on selling, while Amazon, one of the largest global logistics providers, takes care of handling inventory storage, order picking, packing, shipping, and returns. Plus, there are numerous helpful tools and programs available to help FBA sellers manage and grow their businesses.
Costs of Amazon FBA
Of course, there are a variety of fees Amazon charges to provide FBA services. These include fees for inventory storage, long-term (year or more) storage, order fulfillment, returns processing, item disposal, and charges if inventory arrives without proper preparation.
None of this need discourages you from FBA. Inventory management and order fulfillment are costs of doing business. For solo entrepreneurs with limited budgets, FBA is a cost-effective option that also aligns your brand with the biggest eCommerce brand in the world.
Which brings us back to our original question of how much money can sellers make? As the old saying goes, your mileage may vary. But for many Amazon sellers, the mileage is pretty good.
How Much Do Amazon Sellers Make?
A variety of sources report varying results for how much sellers make, ranging from $1,000 to $25,000 a month. According to The State of the Amazon Seller 2022, more than three-quarters of sellers are profitable, with nearly half reporting increased profitability from 2020 to 2021. Almost all Amazon sellers surveyed have expansion plans for their businesses in 2022.
One word of caution. Just because many Amazon sellers make money and are profitable, doesn’t mean your business is automatically profitable as well. It’s necessary to do your due diligence concerning:
- Product selection that represents high quality
- Market research of competitors and consumer interest
- Amazon rules and regulations, particularly prohibitions against soliciting customer product reviews, that risk suspension, or in some cases, a lifetime ban
- Budget for product acquisition that provides for a reasonable profit margin, minus all costs of doing business
- Business plan stating goals and marketing activities to achieve your goals
It’s also true that to make money, you need to spend money. Fortunately, most sellers make money without needing a lot of start-up capital. Some Amazon sellers make a business launch with as little as $500. And many become profitable within a year of opening.
How Amazon Sellers Make Sure They Get FBA Reimbursements
Amazon sellers make sure they maintain healthy profit margins by keeping their costs to a minimum. Equally important is to ensure FBA reimbursements for mistakes in handling inventory and customer returns are properly credited.
Given the scope of transactions Amazon processes globally, mistakes sometimes happen and FBA reimbursement is warranted. However, Amazon doesn’t always automatically credit you with FBA reimbursement for those mistakes. In which case, it’s up to you to identify when Amazon owes you money and submit a timely claim to get reimbursement.
This takes time and effort to continually review your Amazon Seller Central accounts and reports, particularly if you have a large number of SKUs. Is it worth the trouble?
It could. Amazon FBA reimbursements can average roughly anywhere from 1% to 3% of your annual revenues. Say you made $500,000. That’s anywhere from $5,000 to $15,000 Amazon might owe you. That $5,000 to $15,000 could be the difference in whether some sellers make a profit or not. At the very least, unclaimed $5,000 to $15,000 affects overall profitability.
There’s a relatively quick and easy way to determine if Amazon owes you FBA reimbursements and to submit the appropriate claims. GETIDA (GET Intelligent Data Analytics) combines a powerful software tool with an experienced team of former Amazon employees to file and follow up on your reimbursement claims. There is no charge to use the software or even to file claims. You are only charged a percentage of approved claims when Amazon owes you money.
Just go to the GETIDA website and click the “Free Signup” button. GETIDA software scans the past 18 months of your Seller account for possible FBA reimbursement if Amazon owes you money. You get a report and decide if you want to submit a refund claim. The GETIDA claims team takes it from there.
It’s also free to sign up for GETIDA. Even better, you can get $400 in free FBA Reimbursements to try them out.