Done For You Amazon FBA
Best Investment for Passive Income in 2023?
Done For You Amazon stores as a service seem to be all the rage lately. Let's dive deeply into the business model and see what this is all about.
If you’re a beginner at selling on Amazon or have no knowledge at all about selling on Amazon, one thing is for sure (unless you’ve been living under a rock for the last 10 years) You know that Amazon is the leader in the Ecommerce space.
In 2022 alone, Amazon’s total net sales surpassed the half-trillion-dollar mark. That is a TRILLION Dollars with a “T”.
Let that sink in for a minute!
So now we’ve established that E-commerce and Amazon are here to stay. Let's talk about the different ways that people are selling on Amazon.
There is not just one way to sell on Amazon, there are 2 ways to sell on Amazon, along with a plethora of business models within the 2 main ways to sell on Amazon.
All these equate to opportunities for investors and inspiring entrepreneurs alike.
Different Ways to Sell on Amazon
1. Amazon FBA = Fulfillment by Amazon
Fulfillment by Amazon is when you ship your products for sale into Amazon's warehouses. Amazon will handle all the customer service, allowing you (Or the company or person running your Amazon store) to concentrate on building and scaling the business rather than spending countless hours dealing with customers and other menial tasks.
2. Amazon FBM = Fulfillment by Merchant
Fulfillment by Merchant is when you sell your products on Amazon and ship from your own warehouse OR a 3PL service that ships to your customers for you. Selling on Amazon as an FBM store you will be responsible for handling all your customer service, returns, customer communications, shipping, etc.
Amazon Business Models
3. Private Label – Private Label is a business model on Amazon where you find your own product ideas, design the products, find your own manufacturers (usually in China), design your packaging, arrange shipping and customs requirements, ship your products into Amazon utilizing Fulfillment by Amazon
4. Dropshipping - Dropshipping is an FBM method where you don’t have to purchase inventory and the product ships to the customer after a sale is made (Usually from the supplier directly), which is attractive to a lot of folks because of the scalability. However, there are several ways to dropship, and if you choose the wrong way you will lose your Amazon account in a hurry and never be allowed to sell on Amazon again.
5. Retail Arbitrage - Retail arbitrage is a hybrid Fulfillment by Amazon method where sellers buy from Big Box retailers like Walmart, Bed Bath and Beyond, etc. The sellers find products at the retailers that they can buy in the store for a cheaper price than they can sell the product for on Amazon. Selling for a higher price and making a profit on the difference. (Hence the “Arbitrage” Name).
6. Online Arbitrage - Online arbitrage is a hybrid Fulfillment by Amazon business model where the sellers buy directly from the big box retailers online from their websites, and have the products shipped directly to their homes. Once the sellers receive the products at their homes they then package and prep the products to ship into Amazon warehouses.
7. Wholesale - Wholesale is a fulfillment by Amazon business model where the sellers develop accounts with wholesale distributors of big and small brands alike, purchasing products at wholesale prices, then shipping into Amazon warehouses and selling at a profit.
Pros & Cons of Each Business Model
1. Private Label Pros - You’re incomplete control of your brand and supply chain. ROIs are higher.
2. Private Label Cons - Competition is stiff. Dealing with customs. Have to invest a lot of money in inventory. Takes a rather large investment to get off the ground.
3. Dropshipping Pros - Scalability. Doesn’t take a large investment to get started.
4. Dropshipping Cons - Do it wrong and you’ll lose your Amazon account and be banned from Amazon for life.
5. Retail Arbitrage Pros - Doesn’t take a large investment to get started.
6. Retail Arbitrage Cons – A Logistical nightmare, you have to drive to big box retailers to find products. (Not easily scalable)
7. Online Arbitrage Pros - Doesn’t take a large investment to get started.
8. Online Arbitrage Cons – Have to order online from big box retailers with the products shipped to you. Takes longer to get the products into Amazon. Not easily scalable.
9. Wholesale Pros – Can start without a major outlying investment. Can start small and scale. Some suppliers will ship directly to Amazon.
10. Wholesale Cons – Competition is fierce. Race to the bottom in price. Lower ROI’s
Now that we’ve talked about the 2 ways to sell on Amazon and the various business models, let’s talk about the difficulty level of implementing any of the business models versus having a done for you Amazon store.
Amazon's selling platform is an extremely complex software that is constantly evolving. Learning the ins and outs of Seller Central as well as navigating the complexity of Amazon’s Seller Central has a VERY large learning curve that takes years to master.
Amazon holds all their sellers to a high standard, and they are unforgiving when it comes to all the rules and regulations that we Amazon sellers have to adhere to.
If you’re navigating all this on your own be prepared to get frustrated as Amazon isn’t very helpful in training you on all the 1000’s of SOP’S and best practices that they require you to know.
Get something wrong and you should expect to get penalized or suspended altogether.
In short, selling on your own is a daunting venture full of trials and tribulations. I wouldn’t even attempt to sell on Amazon without a mentor or a service that manages everything for me.
What to Look For in a Done-for-You Service.
There are many advantages of using a done-for-you service, but as with any venture you need to pick the right company as there are many fly-by-night “posers” out there.
Some of the things to look for when deciding on a done-for-you Amazon service are, does the company have its own warehouse(s) or are they using a 3PL service?
If they’re using a 3PL service they will have more expenses involved in prepping and packing the products to ship to Amazon, thus affecting your bottom line with lower ROIs.
What business model is the Done-For-You-Service using? If they are dropshipping, run in the other direction as fast as possible.
Where is the company providing the services located? Are they in the States? Or overseas. If they are overseas, run in the other direction as fast as possible.
The Advantages of a Done-For-You-Service.
If you’re partnering with the right company, they will have teams of experts at everything Amazon.
You should have complete visibility of operations and be able to see all the KPI’S of your Amazon store.
You will own the store and all proceeds will be deposited into your bank account.
You will make the majority of the profits generated by your store while the management company will share in a small percentage of profits for managing the store.
Enjoy passive profits while someone else does all the work.
In summary, an Amazon Done For You Service could very well be the best passive investment of 2023 if you’re partnered with the right team