Looking at a few of my more recent income reports (late 2014 and early 2015), it’s hard to miss that my total online income numbers have skyrocketed. This is due mostly to the recent business venture that my lovely wife and I are doing together – selling on Amazon via FBA. If you haven’t seen it already, be sure to check out my original post about how we got started – Side Hustling with My Lady. Income is up. No doubt about that. But expenses have skyrocketed too. Due to the nature of this type of business – we have to spend money to make money.
In this post, I’m going to dig through my numbers from my first 4 or 5 months in this business and answer the following questions:
- Is selling on Amazon via FBA a profitable online business model?
- Is selling on Amazon via FBA considered passive income?
- How much money have I spent?
- How much money have I earned?
- How much inventory do I have at Amazon?
Amazon FBA – Profitable Online Business?
To be clear – I should mention that there are two different methods of selling on Amazon via FBA. 1. You can sell your own products or goods. Things that you produce or have produced and sell with your own private label on them. Or, 2. You can sell products that somebody else has already produced and marketed. My wife and I have started out doing the latter. We find and buy stuff for cheap that we can send to Amazon and sell for a profit. One way to estimate how much you could possibly earn is to use an Amazon revenue calculator.
Selling on Amazon the way that we are isn’t exactly a totally online business. There is plenty of offline stuff that we need to do to make it work. But the sales that happen on Amazon rely completely upon the online marketplace. And the sales just keep rolling in. So, is it a profitable business? After nearly 5 months into this experiment – I can say with confidence that…
Selling on Amazon via FBA absolutely is a viable and profitable online business.Click To TweetHow profitable is this type of business? Well… keep reading. But one thing is for certain. Profits are completely dependent upon how much money you are willing to spend. Spend more – make more. Spend less – make less. We’ve experienced both sides of this equation within the 4 or 5 months we’ve been selling on Amazon. When we stay consistent with buying stuff and sending it in, our sales keep flowing. When we take some time off, our sales numbers begin to suffer as a result.
Amazon FBA – Passive Income?
Do I consider this passive income? Yeah – mostly (I guess). I like to define passive income as money earned by not directly trading time for a specified amount of money (like with an hourly or salary paid job). In our case, we are spending as much or as little time as we want and the amount of money we earn does not correlate with how much time we spend.
In our case, we are doing the retail arbitrage version of this business. We spend time upfront searching for deals. We buy as much as we can during each shopping trip. We then prepare the items and ship them to Amazon. On average, we spend just a few hours each week doing these activities. Maybe 2 or 3 hours shopping and another 2 hours to get the stuff prepped and shipped. Some weeks we shop a little more and some weeks we don’t shop at all.
After doing those things, all we do is sit back and wait for the sales to happen and wait for the money to roll in. Sounds like passive income to me! This isn’t 100% true though. There are some things that I like to monitor in our Amazon Seller account on an almost daily basis. But I spend just a few minutes each day – and even that isn’t even necessary. If I wanted, I could log in maybe only once a week or so and do what I need to do.
How much money have we spent?
$10,486.76 – This is the exact dollar amount we’ve spent on everything related to selling on Amazon from the day we started until the day I published this post. That’s from September 2014 until February 2015. The following screenshot is taken from Quicken, where I track all of our income and expenses.
As you can see, the bulk of our spending is on inventory purchases, as it should be. In order to sell stuff, we need to buy stuff. A couple of other business expenses to note, including dining. Yes, we sometimes go out to eat while we are out shopping for inventory. And yes, this is a business expense! What a cool thing to do on a date night – go out shopping “on business” with My Lady and go out to eat as a business write-off.
Lastly, we’ve spent just over $300 on supplies. These include things like printer ink, labels, boxes, packing tape and a few other tools that have made life easier for us. GO HERE to see my full list of FBA Seller Tools and Supplies.
How much money have we earned?
$10,584.00 – This is the exact dollar amount that Amazon has actually sent to us. This is money in the bank! Amazon sends out payments every 2 weeks. We’ve opted for the direct deposit option. So, every 2 weeks we get a deposit into our business checking account. The screenshot below shows all of the payments we’ve received to date. Note: we have not received the top row payment yet, as it is a running total for the current pay period and this screenshot was taken only 5 days into that pay period.
It’s pretty clear to see how we benefited by jumping into this business right before the holiday buying season. For just getting started, I think we kind of made a killing during November and December! Our first January payment sucked. And this was due in part to the fact that we stopped shopping for 3 weeks and also because the holiday buying season ended. But as you can see, our earnings picked back up in late January and February as we got back into the swing of things and started shopping again and sending stuff to Amazon to sell.
How much inventory do we have left?
$7,798.45 – This is the current total value (at the time this post was written) of all of the items we have left in Amazon warehouses that has not yet sold. Just like if we were running a traditional brick-and-mortar retail store, we have to carry inventory. Not everything we buy and send to Amazon sells immediately. Some stuff does. But other stuff could potentially sit in the warehouse for weeks or months before it sells.
To me, this inventory represents future passive income. Even if we do nothing for a few weeks, we still have inventory at Amazon and potential to make sales. In fact, we are currently in a bit of a lull right now. We are in the middle of our 3rd straight week of doing absolutely nothing towards the Amazon business – yet sales continue to drip in day after day.
Is it profitable? Is it worth it?
If you look at only the income and expense figures, it doesn’t appear that this has been very profitable at all. Those two figures are almost identical. But it’s all a matter of perspective. The way I see it, the income we’ve brought in has offset our expenses almost exactly and has completely paid for our inventory assets that are valued at over $7,000! Is this a profitable online business? Hell yes it is!
Considering the time we spend on this business is very minimal, I would absolutely say that it has been worth it. The weeks that we bring home a couple of shopping cart loads of inventory and get it all processed and shipped to Amazon, we spend less than 10 hours “working.” There have been many weeks that we’ve worked zero on the business. And money keeps rolling in. Worth it!
Lessons Learned
Lesson #1 – spending more equals earning more. Twice now since we’ve started this business, we’ve taken a 3-week hiatus (meaning we stopped buying stuff to send in). And during both of those time periods, our earnings started to dwindle. If we want to keep earning big, we have to keep spending big.
Lesson #2 – not everything we buy is going to sell right away. We just have to get comfortable with the fact that we have to carry inventory and mentally write that off as a temporary expense.
Lesson #3 – prices on Amazon change constantly, and they usually go down. Before buying items now, we never assume that the current low price on Amazon is going to be the low price by the time our item is listed for sale. Other FBAers just like us are constantly competing to sell items for the lowest price. Now we make sure there is plenty of wiggle room and plenty of profit to be had even if prices go down significantly.
Lesson #4 – testing, experimenting and constantly making adjustments are essential. For us, most of this is referring to our buying decisions and the credentials we use to make them. During our first 4 or 5 months, we’ve definitely learned a little bit about what sells well, what might not and which items to buy or avoid buying based on potential profits.
Lastly – A Free Gift for You
I created a simple guide, in the form of a PDF download, which shows you exactly how we find items to buy and send in to Amazon to sell. This guide includes all of our updated criteria and walks you through the process, step-by-step, by showing screenshots from my phone with a real-life example.
Click Here to get my FREE Guide – How to Find Items to Sell on Amazon
My hope is that this post helps shed some light for you on the profitability possibilities of selling stuff via Amazon FBA. I’ll be happy to try and answer any questions, to the best of my ability, in the comments section below.
The Private Label FBA Model – Brief Overview
Image Credits:
“Blast Off!” by Roger Johnson via Flickr
FBA Infographic courtesy of Jungle Scout
Matthew Allen
I’m one week in and loving it!
Thanks for all the information. I’ve dabbled in FBA. Where do you typically find your inventory? Is it at places like dollar stores and Big Box Discount or retail stores like Target.
Very interesting. My wife’s a stay-at-home mom and loves shopping. Hmmm…
I’m guessing you’re also earning a good amount of credit card rewards/points when purchasing inventory.
Sweet! Stick with it for the first couple of months and wait til those big paydays start rolling in.
Hey LB, for us we’ve had good luck at the big box type retail stores. We mostly buy clearance or sale items that are brand new and in good condition. To answer specifically, there is a chain of retail stores in our region of the country called Meijer. The vast majority of our purchasing has been done at various Meijer stores. We’ve had some pretty good luck at Target too.
Ivo, my wife also stays home with the kids and she’s a really good bargain shopper. This business fits perfectly for her! Admittedly, she now runs probably 80% of our Amazon business. I only help with shopping occasionally.
And yes. We’re racking up plenty of rewards dollars with our Discover card!
My wife and I are just a little over a month in and since we started after the holidays I bought a ton of xmas stuff on clearance for the future xmas to come. On top of that we found great luck with Meijers, Target, Walmart, and Sams as well. I do have a question though and I may be reading this wrong but with the numbers you provided wouldn’t your total profit currently be $97.24?
Hi Adam, If you only look at income and expenses then, yes, you would be correct and that would be a miserable profit. But you have to consider the almost $8k in inventory that we’ve built up during this time period. It isn’t profit yet, but it will be after it sells. So, I’m not embellishing at all when I say that this is a profitable business. It just takes time for the expenses to turn into earnings and profits.
Thanks for the question! Like I stated in the post, it’s all a matter of perspective. Sometimes it’s not easy to envision future profits when expenses are piling up.
Thanks for responding Matt. I didn’t mean to imply you were embellishing anything I was just curious at the way it was laid out. I have about 2 grand worth of inventory myself and have roughly been paid $300 to date so current expenses are negative on my end. If I account for future sales though it should surpass what I’ve paid into so far (I hope) anyway. I’ve been having a blast actually sourcing inventory and I normally hate shopping but when I’m looking for items to sell it becomes treasure hunting instead. I certainly agree with you though that it can be a profitable business and unlike other things has been a fun learning curve.
I know you weren’t implying Adam. I was just clarifying. And I agree – sourcing trips are a lot of fun for the reasons you stated. And more so for the going out to eat as a business expense!
Love it Matt, I’m on the brink of trying this out for myself, I keep seeing people doing well with FBA, might have to pull the trigger and jump in.
Cool Steve. Saw your comment on G+ too – you’re living in Japan. Not sure how that works over there. I’ve heard about people in the UK doing well with this. Eventually I want to try producing private label products and selling them through Amazon FBA. Looks like that is where the real money is at. Perhaps that is something you would have better luck with over there?
Yeah for sure, the importing something off Alibaba and selling it is appealing – I know they have weird import rules here so might be a bit tough initially – no reason why it couldn’t work though! Looks like Chris Guthrie is doing well with his barbecue equipment that he is importing!
Ha! I don’t think Guthrie is actually settling barbecue equipment. He just used that as an example in his webinar.
Even if importing to Japan doesn’t work, I don’t see why you couldn’t send stuff to US or UK warehouses and sell stuff there. Not sure on Amazons policies regarding that though.
I’m so trusting when he was talking about grill brushes, I just assumed he’d not be lying to me haha
Wow! This is going great Matt. Well, I really want to try this model too, but sending stuff from Thailand maybe a bit difficult. Well, keep going! 🙂
Helpful post. I’m thinking about getting my feet wet with Amazon FBA and it is nice to read a more realistic perspective (vs. just all the “I MADE $1 MILLION IN 45 DAYS!!!!!!!!” reviews). Curious how you have fared since February? Are income levels from this venture trending upwards?
You can see for yourself in my monthly income reports that I publish… But I will tell you anyway. 😉 Income levels for us have actually dropped off the side of a cliff. But it’s our own fault. We have done almost nothing towards our Amazon business for the entire months of February, March and now April. We still have close to $5k worth of inventory in Amazon warehouses waiting to be sold and sales keep trickling in. Our bi-weekly paychecks from Amazon have been only a few hundred dollars for the past few months. Read all about why in my last income report if you want – https://dumbpassiveincome.com/dumb-passive-income-report-march-2015/
I’m surprised Pat Flynn hasn’t sued you for copyright and trademark infringement.
Last I knew – Pat encourages his followers to copy him. That is why he does what he does. And what trademark are you talking about, exactly? Does Pat Flynn own the term “passive income?” If so, there’s about a million other blogs that he should sue too!
Matt good synopsis! I have been experiencing the same things. My best month was over $20,000 in sales and about $4000 net, but now my margins are increasing because I am focusing more on books and new in the box thrift items!
Thanks Scott. So – are you doing all retail arbitrage then? Do you have any private label products?
As the holiday season is getting near – I’m starting to think about jumping back into this. We literally haven’t touched the Amazon FBA side of our business since around last February (about the time that I wrote this post).
All RA…but I have a few ideas for private label based on some successful RA items. I really like books and the northeast has many colleges so the inventory is always pretty good!
Thank you for this post!!! I want to ask you – is your Amazon FBA earnings in the “Other” column on your income report? Is that all that’s in that category? And have you stopped sending in inventory?
Hey Michael – yes, my FBA earnings are included under ‘Other’ on that page. And no, that is not all that is included in that category. Although, it did account for most of my ‘other’ earnings last fall and winter.
Yes – we stopped sending in inventory. Mostly because my wife got sick of it and I don’t have time to try and do all of it myself. I’ve got enough going on with my websites. My FBA account is still active though and I’m considering jumping back in with a private label product maybe sometime soon.
Here’s what I’ve come to observe about FBA, and why I’m leaning seriously toward not doing it anymore, and just letting my small inventory either sell or send back to me before I get hit with a storage fee. I think that the mantra of “feed the beast” that people use is very true. With FBA, you have to constantly add to your inventory, which takes a lot of time and a lot of money. The sellers that are making selling $30,000 a month and getting a payout in the $10,000 range are having to reinvest most or all of that payout to keep the cycle going. You can get to a point where you can take payouts, but when you do, you do that at the expense of less payouts later because of lower inventory. FBA can and does make money, but to me, it’s a volume business, and the ones who best are the ones who private label or source at garage sales. And it takes a LOT of time to do.
Overall, I just think it’s too much for me, and there are other ways to earn a passive income – this one is definitely not passive.
Excellent observations Michael! And I agree totally. The reasons you described are exactly why my wife and I pretty much stopped sending in inventory. We still have inventory left – and we did get hit with the storage fee. But I have yet to pull the plug completely because I do want to try the private label thing at some point.
I also agree that it’s not exactly passive. The income itself seems passive once you put in the work upfront. But the passive income won’t remain unless you keep ‘feeding the beast,’ as you say.
We’ve also found that it has gotten much harder to find the good deals at stores. I think the market had definitely gotten flooded. It seems like everybody is doing this now because bloggers like me show them why and how! Lol…
Great read! Very insightful. Thanks for sharing!
No problem Whitney! Thanks for reading and thanks for commenting. I actually published this post a little over one year ago. Currently – we’re actually working on our first private label product to sell on Amazon. It’s SO much fun and really exciting. Here is a more recent article showing how we got started with this new venture – https://dumbpassiveincome.com/private-label-products-to-sell-on-amazon-fba/
Your blog has been so helpful. I have been toying with this idea recently and I wasn’t sure if I should dive right into the Private label or if I should try retail arbitrage first. After reading this article, I was convinced that I would give retail arbitrage a try to get started and once I have enough capital, I will get started with my own private label. Do you think that’s a wise decision or do you agree with the other gurus – should I go right into private label?
Definitely start with retail arbitrage – especially if you don’t have a few grand (at least) to get started with private label. You’ll learn so much about the inner workings of Amazon Seller Central while doing retail arbitrage, which will put you way ahead when you start private label.
Retail arbitrage can be frustrating and time consuming if you don’t have luck finding products. But it was a great learning experience for us and we came out a couple grand ahead which helped towards jumping into private labeling.
Good luck with everything Whitney!
Great! Thanks for all of the tips!
Hi Matthew,
I’m just thinking of getting started with selling on Amazon. Your simple and clear PDF on how to choose items for resale was really helpful! As I’m looking around online on how to get started, there’s so much info behind paywalls; it was refreshing to find a basic sheet for beginners for free! The courses (Proven Amazon Course, etc) that cost $300 seem like a lot before I’ve even decided if it’s something I really want to do. Have you done a course, and if so, was it worth it?
Also, what sources did you find most helpful when you were just getting started? And what are your tips for preparing shipments?
Hi Amy! I’m really glad my PDF was helpful for you. I realize the images are a little outdated at this point as the Amazon Seller App has changed their interface – but you get the gist.
I did not do a course to learn how to sell on Amazon. I self-taught and learned by trial and error. If I was ever confused about something, I would just look it up on Google or YouTube. For example, learning how to prepare shipments to send to Amazon was confusing at first. I remember watching a few different YouTube videos on the topic and it was pretty easy after that.
What sources did I find most helpful? You mean for information? Jessica Larrew’s site was very helpful to me at the time – http://thesellingfamily.com/ and I found and listened to every possible podcast I could find on the topic.
Hope this helps. Good luck with everything!
Thanks, Matthew! I’m doing the trial and error thing right now, but I was curious if that was an OK move. Sounds like it’s worked well for you. Thanks for the response. Do you do any OA or just RA right now?
I actually quit doing RA quite awhile ago and now I’m selling a private label product via FBA! Very glad we started with RA though. Great way to learn the back end and inner workings of Amazon and the FBA program.
Nice! Good luck with your private label.
Hi! I want to know how does a consumer by from your account and how do u advertised it once you sent the products to amazon?
Depends if you are talking about retail arbitrage products or private label products. Retail arb – the consumers typically buys from your account if you have the cheapest price. For example – you and 6 or 10 other sellers could be selling the exact same product. Look at some listings on Amazon and when you see the link that says, “this item may be available from other sellers” (something like that) – click on that and you’ll see all the other sellers selling that exact same product. Most buyers try to find the cheapest – so you just price yours a little cheaper than everybody else.
I probably wouldn’t advertise for retail arb products – but you can if you want to. Setting up advertising is really easy and you’ll find the links within your Seller account right inside Amazon and they are self explanatory. Private labelers are big on advertising to get their products selling.