Amazon Business Models: How to Choose the Best Option for Your Company
More than a half of Amazon’s retail sales are made by third-party sellers, not Amazon itself. The freedom it gives to its sellers is greatly beneficial.
There are six major models that sellers use in order to offer products on the marketplace, each having its pros and cons. You should decide with which model you will begin your own business on amazon.com.
One day, if you have done a good job and built your Amazon business quite effectively, you may ask yourself, “Should I sell my Amazon business for profit?” Be prepared for this moment and find out what steps you need to take in order to achieve the maximum benefit from your precious company at that time.
But before everything else you have got to decide what kind of an Amazon business strategy will suit your purposes best. Let us see how.
The first is private label
Rebranding process involves creation of private label. Under this strategy, a seller finds unbranded goods or an unknown brand and makes those goods his/her own.
Some sellers also make some adjustments to the original product while rebranding it as well. Thus creating more value for their clients who may suggest improvements based on their experiences with certain aspects of the product.
The private label method takes significantly longer time compared other approaches but has lower competition and higher profit margins.
Next is wholesaling
Wholesale implies purchasing huge quantities of products directly from manufacturers and then reselling them on amazon.com at higher prices. When bulk buying from suppliers’ one gets quality items cheaply. Once they complete orders, wholesalers send out their goods to retailers making up many thousands of individual purchases simultaneously.
With this strategy a wholesale buyer has to purchase large amounts of stock so as get preferential pricing from a supplier in return. Wholesalers can therefore realize bigger margin when they mark up items sold through retailers where item cost price is minimal. Bulk purchases are of great importance to most suppliers. Therefore, wholesale traders get favorable pricing and delivery terms.
Then comes retail arbitrage
Retail arbitrage is a business model in which an individual discovers items that can be sourced at low prices from physical stores and sold on Amazon for higher profits. For instance, if you find a product at Target going for $8 and resell it at Amazon for $15 you are engaged in retail arbitrage. The difference between the cost of your Amazon pricing and the original price of the product should include all the costs charged by Amazon plus your own mark up.
It may seem like a straightforward model, but there are hidden risks involved. Although this is the least profitable model due to stiff competition despite its ease of entry and low cost. Moreover, it takes some time before one makes significant earnings.
Last but not least online arbitrage
Like retail arbitrage it works on buy cheap sell high principle; however, online arbitrage sellers go onto the internet to source their products as opposed to shopping physical stores as suggested by its name. Consequently, one of these strategies does away with the main setback that kills retail arbitrage: physical browsing among brick-and-mortar businesses will not be necessary.
One of the most time-consuming tasks for online businesses is product research. You don’t just find a profitable product. To avoid restrictions, make sure that you can list it on Amazon or not. Additional delivery fees could be incurred if the item is heavy or bulky.
Dropshipping
Dropshipping is where a seller posts a product on Amazon, gets an order from a customer and asks their supplier to ship it directly to the end user. The difference between what a dropshipper retails it before and its wholesale price by the manufacturer forms part of his profit margin. This technique has been appreciated by sellers because it is easy to start up and does not require any initial investment in products.
Selling Handmade Products
Handmade means selling your “hand made” stuffs via Amazon e.g., jewelry; wall arts etc.
How Do You Pick an Amazon Business Model?
There are several critical factors you should consider when thinking about your options and deciding which Amazon business model is right for you:
Budget: How much do you have to spend on initial stock?
Time: How many hours daily can you spend purchasing inventory, maintaining stock levels and delivering orders?
Flexibility: Are you looking to work at home or do you need office space?
Experience: How much experience do you have with selling and marketing?
Final Thoughts
As far as third-party sales are concerned, they involve among others identifying advantages and disadvantages of each business model while being realistic about available time and capital resources. Stick to your plan after settling on what works best for you? If you are willing to stay dedicated to a business strategy over the long run, then there is money in selling on Amazon and participating in this multimillionaire company.
