Are you thinking about selling on Amazon, but wondering how much money can be made?
Time is precious and you, naturally, will want to make sure that any business venture you invest your valuable resources into has the potential for good returns.
So in this article, I’ll break down exactly how much money you can expect to make with an Amazon FBA business, and how each of the four potential Amazon business models compares.
We’ll also cover what most Amazon sellers see as their biggest earning potential – the lucrative exit.
Let’s get started!
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How much do Amazon sellers make?
In a recent study, Jungle Scout found that most Amazon sellers are making money.
In fact, 70% of Amazon sellers make more than $1,000 per month with one in four (25%) making over $25,000 in monthly sales.
|Monthly Sales||Percent of Sellers|
|$1,001 – $5,000||17%|
|$5,001 – $10,000||12%|
|$10,001 – $25,000||16%|
|$25,001 – $50,000||12%|
|$50,001 – $100,000||8%|
|$100,001 – $250,000||5%|
|$251,000 – $500,000||1%|
Whilst the earning potential is significant, there are many factors that go into the actual Amazon sellers’ profit taken home beyond merely monthly or annual sales figures.
So, if you’re still wondering how much profit the average Amazon seller makes, this article will break down all the factors involved.
How do you make money with Amazon FBA?
Selling on Amazon is a great opportunity for aspiring eCommerce entrepreneurs looking to make money online.
One of the hardest things about starting a business is finding customers, and Amazon solves that challenge for you.
Instead of having to lease offices, hire expensive marketing staff, and run bank-breaking advertising campaigns, you simply need to learn how to get your products visible on Amazon.
Plus, with the Amazon FBA program, you don’t need to store inventory or pick and pack orders when they come in.
You can send all inventory to an Amazon fulfillment center and have them fulfill each order automatically allowing you to focus on researching new products and growing visibility on Amazon.
There are a number of different business models you can leverage to make money with Amazon FBA, each with varying earning potential – so let’s take a quick look at them.
Retail arbitrage is a way to sell products from other companies. Amazon FBA sellers can find discounted products at a store and then sell them on Amazon for a higher price.
You take your cost price and any associated Amazon fees such as referral fees, deduct them from your sales price and you’re left with profit.
This is a great way to dip your toes into the world of Amazon FBA, but is very limited in terms of scaling up due to the amount of time needed to visit stores, buy products in small quantities and continue this process over and over.
Whereas retail arbitrage requires Amazon sellers to visit stores in person, online arbitrage allows the freedom of ordering stock online.
This cuts down your time investment and helps you search for deals much faster.
You’ll also tend to find more units to sell as you aren’t limited to per-location stock.
However, online arbitrage still faces scale limitations as you have to keep finding fresh deals and keep putting in more time to find more products with high enough profit margins to be worthwhile.
As both retail and online arbitrage require relatively low startup costs creating a low barrier to entry you will find the competition for profitable items can be high.
This in turn can squeeze margins and mean you need to be doing more and more volume, and investing more and more time.
So, if a little bit of cash on the side is the goal, these can work great. But if you want something that can be a little more scalable, then the next options may be best for you.
The wholesale business model moves away from interacting with retail stores and instead involves contacting brands and suppliers that offer wholesale partnerships allowing you to buy in bulk.
The key with this business model is to find suppliers you can source from at a good profit margin and with more of a long-term relationship.
Wholesale is a step up from arbitrage because it is a much more scalable business model.
Once you have strong relationships with suppliers you can start to place large, regular orders for the same products to give a sense of consistency to the amount of money you’re making.
However, I would argue it’s still not the best Amazon business model if you’re looking to maximize your earning potential.
For that, we’ve saved the best until last.
Private labeling is having products produced by manufacturers for your own brand.
The process involves finding profitable product opportunities, carrying out market research to find ways to differentiate, then creating your own improved version of a product that meets customer demand.
Selling on Amazon with the private label model has a bigger learning curve and requires a bit more of a startup budget, but it has the biggest earning potential for a number of reasons.
1. Do the work once, get paid over and over
Once you have found a manufacturer, designed your packaging, and created your listing – you never have to do those things again.
Unlike arbitrage, you can just keep selling the same product over and over meaning the time invested upfront continues to produce a return for months and years to come.
All you have to do is maintain healthy ranking on Amazon and stay in stock!
You can even expand the same product into new international marketplaces easier than ever with Amazon FBA launching operations in new countries all the time.
This allows you to grow revenue without having to source any new products. – a key stage in the ‘Law of Least Effort’ brand growth strategy we teach inside Brand Builder University.
2. Achieve higher profit margins
Generally speaking, due to a direct relationship with a manufacturer and not sourcing from a so-called middleman, your profit margins will be greater than if you were selling other brands’ products.
Healthy profit margins for private label products are in the 30% region (after product costs and Amazon fees).
The key is doing a good job of differentiation that allows you to stand out from the crowd and charge premium prices.
Just like our BBU member Kevan, who went from $1k months to $1k days and got the opportunity to pitch his business on Dragon’s Den (Shark Tank for the UK):
3. Secure a bigger exit
What many sellers often fail to realize is that the majority of the money a successful Amazon business will make is when it’s sold.
It’s highly unlikely you’d be able to sell an arbitrage business, and a wholesale business wouldn’t fetch anywhere near the same multiple as a private label business.
But a good private label brand can be sold for 4-5x annual profits or more.
Considering lifetime sales – including a possible exit one day – is crucial to having a good understanding of how much money Amazon sellers actually make.
By starting with the end in mind and building a sellable brand, you go from some simple side hustle cash into the very real possibility of owning a 7-figure asset.
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How long does it take to make money with Amazon FBA?
If the best long-term earning potential with an Amazon business is building a sellable brand, how long should you expect it to take you to earn good money when selling on Amazon?
It depends on a lot of factors, such as:
- Your goals. Are you focused more on low-stress cashflow or a life-changing cash-out?
- Your budget. The more you can invest upfront (within reason) the quicker you may be able to grow.
- Your patience. Similarly, the longer you reinvest profits, the quicker your potential growth curve.
Ideally speaking, you’d have a budget of $3,000+ and are willing to keep reinvesting profits for the first year.
So let’s take that as a quick working example of what a three-year roadmap to building a 7-figure brand could look like.
Year 1: 3 products launched
In your first year, you launch 3 products in a profitable niche.
Each product begins to generate $10,000 sales volume per month – an achievable target given the volume of retail sales on Amazon.
Your gross profit margin is 30%, then with some other expenses, your final net profit margins come in at 20%.
So at the end of year one, you’re generating around $6,000 profit per month.
Ideally, you’d leave as much of this in the business as possible in order to maintain momentum and make more sales, remembering the biggest payday will come when you one day sell the business.
Year 2: 3 products launched
Ok, now your Amazon business is cooking on gas.
You’ve hit some momentum and can continue to launch products around once every quarter.
Your winners from year one should continue to grow in revenue and profitability (as you place larger orders to reduce unit cost, and rank for more keywords on Amazon).
So you might have one or two duds, but by the end of the year, you’re looking at around five solid products with an average of $15,000 per month in revenue.
This puts you at $75,000 per month in revenue, with around $15,000 per month to take home at 20% profit margins.
Now would be a good time to be paying yourself so you can fully focus your time on selling on Amazon.
You can also look to hire help – just be sure to keep your business costs as lean as possible as we build towards year 3 and the overall goal of lifetime profits.
To keep your business lean as you grow, follow our 3-step plan before making expensive hires:
- Eliminate: Ask yourself if time-consuming tasks are really necessary for the growth of your business. If not, eliminate them.
- Automate: Use Amazon seller tools to automate repetitive tasks like requesting reviews, inventory management, and more.
- Delegate: Only when you can’t eliminate or automate, then delegate to hired help so you can focus on growth.
Year 3: 6 products launched
So many Amazon sellers get distracted, but this is where you keep stepping on the gas.
Your monthly sales are growing, your Amazon FBA income is hitting a healthy level and you’re keeping business expenses in check.
This will allow you to keep launching new products to hit $100,000 per month consistently.
This should net your business around $20,000 profit per month.
Sustained over a trailing twelve-month period, and that makes your business worth – all things considered – in the region of $1 million.
Of course, there are a lot of nuances here, and many variables are at play.
But this gives you some idea of how quickly a side hustle startup can turn into something substantial.
And whilst three years may seem like a long time at the outset of your Amazon selling journey, it really will go by in a flash.
Microsoft founder Bill Gates once said:
“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
I’ve always been inspired by this, and often say to our BBU community that as eCommerce business owners we should think less ‘what can I make in three months?’, and more ‘what can I make in three years?’
The beauty of compounding results means the latter far outweighs the former and should be the focus of Amazon FBA sellers that want to make truly life-changing money.
Just like BBU member Emre, who started his journey while driving for Uber, and now generates 6 figures per month. Check out our recent interview with him here:
How to be a profitable Amazon seller
To achieve something similar to our 7-figure brand roadmap, you have to work hard to build an increasingly profitable Amazon business.
The more profitable your business is, the quicker it can grow and the faster it will have the ability to pay you a growing salary.
Many Amazon sellers struggle to make strong profit margins, but here are some actionable tips I’ve learned selling on Amazon over the years that you can implement in your business for healthy profit margins.
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1. Allow data to lead
When exploring the idea of selling on Amazon, many new sellers approach product research all wrong.
They think about what they like, or what they think is a good product.
The problem is, the market doesn’t care what you think. And if you allow emotion to lead such key decisions in your business, you’re already doomed to fail.
You must take a data-driven approach to product research to find opportunities with good demand and high-profit margins.
2. Differentiate or die
Differentiating your product from the competition will help you stand out in a crowded marketplace.
By creating a unique, improved iteration of a popular product, you can make it stand out from the crowd and increase conversions.
You should also consider adding value to your products through things like free bonuses or after-sales support that are difficult for competitors to replicate.
3. Understand FBA economics
An inch in the wrong place can be very costly in many fields, and selling on Amazon is no different.
Given Amazon FBA fees are calculated on the size and weight of your product it’s essential you study the thresholds and keep it in the lowest tier possible to improve your average profit margin.
I learned this lesson the hard way once when selling a bath pillow. My manufacturer told me he had a new design that everybody loved and was slightly bigger for greater comfort.
Unfortunately, I was a new Amazon seller and just went along with it.
Little did I know that extra inch would tip the product into the oversized category and erode all my profit!
Don’t make the same mistake!
4. Always be negotiating
Good investors know that you don’t make money when you sell, you make money when you buy – at the right price.
When starting out as a new seller you may not be able to get rock-bottom unit costs.
However, you can negotiate with your supplier based on future sales.
When initiating your relationship be sure to get an idea of unit costs when you increase your order quantity so you can keep moving them toward these cheaper costs.
5. Launch like you mean it
Another big mistake Amazon sellers make is investing in creating a great product but doing a lousy job of launching it.
New sellers can be fooled into thinking Amazon will just hand them a boatload of traffic from day one, but – surprise, surprise – that’s not how it works.
You need to treat launching on Amazon like launching any online business – it needs investment upfront to get traction and visibility.
6. Stock out at your peril
Amazon sellers that go out of stock for long periods can expect their organic rankings and sales to suffer.
Then, in what becomes a vicious cycle, you’ll need to re-launch in order to recover rankings which will of course negatively impact your Amazon seller profits.
By communicating regularly with your supplier and monitoring your inventory carefully, you can avoid this situation and ensure you grow a healthy Amazon business.
7. Expand sustainably
Finally, as you look to expand – be smart about it.
Don’t overstretch yourself and instead expand sustainably by maximizing revenue from winning products and leveraging variations of existing products such as with new sizes or new colors.
To stay up to date with all the latest strategies we’re deploying in our own brands, and also those our members are using, join us inside Brand Builder University.
Frequently Asked Questions
Wrapping up: How much can you make as an Amazon seller?
Like any business opportunity, the potential earning levels for Amazon sellers vary wildly.
Some will dip their toes in, find it’s not for them and not really make any money. Others will make millions.
The important thing is to understand what you personally are trying to achieve by selling on Amazon and approaching the opportunity accordingly.
If you’re looking for a quick and easy side hustle for some extra cash, retail or online arbitrage is probably the way to go.
But if you want to make serious money and build a saleable asset to maximize total lifetime profits, you really should learn how the most successful Amazon sellers build private-label brands.
Don’t just open an Amazon seller account, start selling on Amazon, and hope for the best.
Instead, set out to build a successful business and make the most of what remains to be an incredible opportunity for committed and driven individuals.
Want to learn the step by step process of becoming a profitable Amazon seller? Check out our free Amazon FBA web class today!
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