Has the ship sailed on making money as an Amazon merchant?
July 24, 2016 9:35 PM   Subscribe

I'm interested in becoming an Amazon merchant that uses order fulfillment processing by Amazon, but I have some questions about how to make it profitable.

I have about $10k to invest and was thinking about becoming an Amazon merchant. I want to use the fulfillment by Amazon service as I have no warehouse space, but I'm having trouble making the numbers work so that it's profitable.

By the time I add up all of the fees for the products that I've pretend sourced from potential wholesalers so far, I always seem to arrive at a sales price that is significantly higher than what competitors are offering the product for on Amazon.

So what are the potential competitors doing differently to be able to offer a lower price for the product? Is it just economies of scale and sourcing directly from the manufacturer instead of the wholesaler? And would it still be possible for a small fish like me to compete successfully in the marketplace if I have just a few products listed for sale? Are there any good online resources available about how this is done in 2016?

Thanks in advance for your insights.
posted by Gosha_Dog to Work & Money (7 answers total) 11 users marked this as a favorite
Sam Cohen's business works like this: He walks into a big retail store and buys a bunch of stuff. Then he sells it on Amazon for more. - NPR's Planet Money ep. 629

You definitely need an edge on pricing or need to be able to offer an item that other sellers can't offer.
posted by GuyZero at 9:51 PM on July 24, 2016 [2 favorites]

I get the impression most professional Amazon merchants make money on the shipping charges. The book's a penny but shipping is 4 dollars fixed, so folks who can make that work at scale do so. They buy books by the pound, sort them, and keep / list anything they think might move at a penny.

I get the impression the Sam Cohen character profiled by NPR above is exploiting retail "loss-leaders," and by finding gaps in Amazon's lineups. Not so great for retailers, okay for Cohen and great for Amazon who gets a larger and cheaper virtual inventory. Same wipes are now listed at $19.56 listed by Baby'R'Us directly.
posted by pwnguin at 11:13 PM on July 24, 2016

Lots of sellers sell counterfeit goods as the real thing, especially things like OEM cell phone batteries.
posted by rockindata at 4:02 AM on July 25, 2016 [1 favorite]

I suspect some of then are importing goods and just not paying import taxes that everybody else has to pay.
posted by miyabo at 5:35 AM on July 25, 2016

A couple of years back I was burned when I ordered a Mint Sweeping Robot from an Amazon Merchant without doing thorough comparison shopping. The Amazon Merchant just ordered it, on my behalf, from Walmart and had them ship it to my address. They made $50 on the deal and I felt like an idiot.

Their entire store was just a bot driven arbitrage operation that caught careless shoppers like me. The problem, of course, is that once someone does it lots of people will do it and the margins vanish (but the costs are so low so they will keep picking up the money left on the table).

An area where Amazon could probably be beat would be imported specialty goods. Stuff like wacky Japanese candy is still wildly overpriced.
posted by srboisvert at 6:33 AM on July 25, 2016 [1 favorite]

Having experience on the vendor side (supplying to people in your situation) in another life you are probably paying too much at the wholesale level. Many had good pricing and special deals (freight programs, new product discounts, etc) that gave them an edge.

Our largest vendors also had established web brands outside of the marketplace and were almost always the best performers. Still, I was always surprised to see several vendors selling much of the same product lines with good results.

I don't think it's too late, but you might have to take a wash and buy at a higher cost until you can prove to your suppliers you are a good customer and can negotiate a better price.
posted by Tevin at 6:34 AM on July 25, 2016

This was posted a few weeks ago on Hacker Newsletter, and may be somewhat relevant: How To Start An Amazon FBA Business. Kind of a long read, but fairly detailed.
posted by ralan at 8:10 AM on July 25, 2016 [2 favorites]

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