Selling on Amazon FBA: My Personal Experience
This post is from reader Jon of Money Smart Guides, a personal finance blog that helps readers get out of debt and start investing for their future. He provides actionable advice to get you to where you want to be financially.
I enjoyed reading through Jackie’s Amazon selling experiment (parts one, two, three and four) and thought it would be helpful to share my own tips, tricks, successes and failures with selling on Amazon.
What makes me qualified to talk about selling on Amazon? I’ve been doing it for almost 2 years now to make extra cash. On average, I earn about 20% return on my money. While this is great, it did take me some time to get a handle on selling on Amazon. You can see a snapshot of my sales in the picture below:
When I first started selling, I tried selling toys. I did this because I read another blogger’s post about going to Target and buying clearance toys to resell on Amazon. I took their advice, downloaded the Amazon app on my phone and headed out to my local Target.
I spent the next hour browsing through the clearance toys, scanning every item I saw. I left empty handed and discouraged. In fact, I had not even thought about selling on Amazon for a few weeks when I had a realization: I had no interest in toys, which made finding deals hard. I didn’t know what was a “hot” toy and I didn’t know at what price made a toy a deal.
I thought about the things I did enjoy and settled on electronics. I went onto a big box electronic retailers website (I won’t mention the name, but it’s colors are blue and yellow). There I found some deals and got to work.
Over the next few weeks, I bought a bunch of items not only from the store down the road from me, but also the one near my work, the one by my parents house, and the one near my sister in another state when I visited her.
All told, I’ve averaged close to 20% return on my money and I’ve made a few thousand dollars. With this said, I want to give you some practical tips that will help you to be successful, should you choose to try selling on Amazon.
Tips for selling on Amazon
I’ve already mentioned the first tip: buy things you know and enjoy. I failed with toys because I have no interest in them. I love electronics, so shopping for electronics is actually fun for me. Here are more selling on Amazon tips:
Learn ways to maximize your return
At the store I buy most of my items from, I signed up for their rewards program. After I spend a certain amount, I earn a $5 rewards certificate. I use this to cut down on my cost when buying future items. In addition, my credit card offers a 5% cash back bonus when I use their online shopping mall to shop as this store. You could do the same thing if you have a Target card and find deals at Target. The key is, anything you can do to lower your purchase price, the better you will be.
Know your margins
I will admit, there are times when I buy an item I shouldn’t have and lost money. It happens. But there is an easy way to minimize your losses: only buy items that you can sell for twice as much or more. For example, if a DVD player is selling on Amazon for $100, the most I can pay for it is $50. This almost guarantees me a profit when I sell.
Furthermore, use the Amazon FBA calculator. With this, you can insert your purchase price, estimate Amazon fees, see what the commission Amazon will take and what you will end up making when the item sells. It is an invaluable tool.
Avoid low cost items
In fact, avoid anything under $10. Even if you follow my tip above about a 50% markup, you will still lose money on low cost items. Case in point, I was cleaning out my DVD collection. I listed a bunch of my DVDs on Amazon for $4-5 each. I sent them to Amazon (without using the calculator). When I started to sell them, I was losing $1 on each sale! I increased the price $1 and sales slowed. When I did sell an item, I ended up making $0.18. Yeah, that is right, less than a quarter. Trust me, low priced items are not worth it. The fee for shipping to Amazon and the commission they take will end up costing you more than you bargained for.
Pick fast moving items
If you want to get your money back quickly, then you need to follow this tip. I wanted my money back as soon as possible since I was using my credit card to earn cash back on the items. In fact, I would argue that you need to follow this tip regardless. Otherwise you could end up frustrated because your items are not selling.
So how do you find fast moving items? The easy way is to look at the item on Amazon. Here is the rundown with an example of a digital camera:
First, look at the number of reviews right under the item title. The more reviews the more popular the item is.
Next, scroll down to the product details. There you will find an Amazon Seller Rank. This tells you how popular an item is and so the lower the number, the better. For toys, anything under 200,000 sells rather quickly. For electronics, the number is 100,000. In the example below, a ranking of 56 means it should sell quickly. Note that not all listings have a seller rank. I don’t know why this is. This is why you need use reviews to your advantage.
Third, scroll further down and look at recent reviews and total reviews. The recent reviews will show you how quickly the item sells. Looking at the information for the camera, I can confidently assume this will sell fast since there are a ton of recent reviews within the past month. I also look at the overall rating of the item. If it sells well, but has a ton of 1 star reviews as opposed to 4 and 5 star, I pass. Chances are it will be returned which is not a fun experience (more on this below).
Over the time I’ve sold, everything goes in waves. I sell nothing for weeks, then sell an item or two a day for a week, followed by no sales. Granted I only have 20-25 items for sale at a time, but it is important to know that sales don’t happen constantly, at least not for me.
Visit various stores. All stores have different clearance items. The one store by my work had a home theater system on clearance for $70. I sold it for $200. I looked for this system at the store by my house, but they didn’t have it.
I also have expanded my shopping to other stores as well. I have a set list I go to now. At first, I would go to any website that sold electronics. After a few searches though, I realized which sites were good and which ones were a waste of my time. I now only concentrate on the sites worth my time, where I typically find deals.
It sounds scary at first, but if you find a great deal, stock up and earn more. I’ve bought a few of the same radar detector and made close to $50 each time. The only thing I do is make sure I run my calculations a few times to make sure I am making money!
Get excited for Christmas
Selling on Amazon during Christmas is a crazy time. I sold out of my inventory within a week the first Christmas season. I wish I had purchased more items but I didn’t know what the holiday season was like. Note that Amazon does take precautions with third party sellers and Christmas. They limit those who can sell to ensure their buyers stay happy. If you sell via FBA though, the restrictions usually do not apply to you.
Be prepared for January
After Christmas, many people return gifts they don’t want. Chances are, items you sold on Amazon are part of this. I have been lucky and I have only had I return as of this writing. Trust me when I say it wasn’t fun. The buyer said the item was defective and sent it back to Amazon. Amazon refunded their money and debited my account. Then Amazon told me the item was in a condition that could not be resold. I paid to have the camera shipped back to me. When I got it back, it seemed to work fine. Fast forward to today and I use it as my personal camera and have had zero issues with it. Remember, selling on Amazon is a retail business and you will have returns.
In all, selling on Amazon has been a fun experience for me. It is this way because I enjoy shopping for electronics. I spend about an hour or two per week finding deals and then shipping them off to Amazon. I don’t always find deals, but I don’t give up because I know they are out there.
I am certain if you follow my tips you can be successful selling on Amazon. Just take your time when starting out until you get a better understanding of how everything works. Also be patient. You won’t sell everything immediately. It will take time. Good luck!