If you’ve been searching for a reliable business to make substantial income online and you have not yet considered selling on Amazon, then you could be missing out on a huge opportunity. Amazon controls the largest US e-commerce market share by a landslide. In fact, recent 2018 figures estimate that Amazon’s ecommerce market share hit 49% – that’s nearly half of all online transactions! Interestingly, competition relative to marketplace demand is nowhere near the saturation point. That means that for sellers like you and I, there is still plenty of pie to go around!
You may be asking yourself: How can you even sell products on Amazon?
One of the biggest misconceptions surrounding Amazon is that all of their products are actually owned and fulfilled in-house (i.e. sold and shipped by Amazon). However, that is not the case.
Figure 1: Product Page - 3rd Party Fulfillment
There are actually more sales from 3rd-party merchants on the Amazon marketplace than direct-to-consumer sales from Amazon. Later, we will be analyzing the market scope and sale projections of independent merchants, like ourselves.
SELLING ON AMAZON
If selling on Amazon has already crossed your mind but you’ve been hesitant to actually start due to the financial risks involved, I am going to propose to you a low-risk solution that won’t require any upfront inventory costs.
Online Retail Arbitrage (OA), or reselling products from an online retailer onto a marketplace (in this case Amazon), is a very common business model which doesn’t require sellers to have an immediate cost of goods.
You only have to buy the products after you’ve already been paid by your customer, therefore eliminating your personal capital investment. You may already have experience with this as an eBay seller, as this is the most common business model on the eBay platform. But, did you know that you can also do this exact same model as an Amazon seller too?
That’s right, many Amazon sellers use the OA model to decrease their financial risk, improve cash flow, acquire existing market data, and eliminate themselves from the fulfillment of the product. These advantages, among others, are key reasons why this business model is so enticing. Compared to other popular business models on Amazon such as private label, FBA, or wholesale, online arbitrage is by far the least capital intensive.
Dropshipping is the actual fulfillment method we use as OA sellers. More commonly, you will hear us referred to as dropshippers since we are leveraging a source (our retail supplier) to fulfill the shipment to our customers directly from their warehouses.
Putting it all together, we’ll see that the high income opportunity of selling on Amazon coupled with financially low-risk dropshipping can be a highly profitable and scalable business. With this type of potential in mind, let’s now take a look at the top 5 reasons to start Amazon dropshipping in 2019 and beyond…
5 REASONS TO START AMAZON DROPSHIPPING
1. AMAZONS SITE TRAFFIC IS UNMATCHED
With over 533 million monthly site visits, Amazon is the #1 most visited shopping website in the U.S[1] This massive consumer shopping preference shows no signs of slowing down either. The high level of “customer obsession“ that Amazon boasts to offer, has evidently paid off for the company. In 2018, Amazon reported its annual revenue of $232.887 billion dollars. That’s up by 30.93% from the 2017 fiscal year.
For sellers like us, this suggests that there are a lot of eyes on our listings. Additionally, the large majority of these customers make up what is known as “final step consumers”. These are people who are on the fifth and final step of the consumer decision process – ready to purchase! Just by virtue of being an Amazon seller, you will have a built-in consumer base who are actively seeking to buy your products. This greatly simplifies marketing efforts compared to that of selling through your own independent website.
If you’ve ever attempted to sell products on your own website (e.g. Shopify, Wix, Woo Commerce, etc.), then you’ll likely have an appreciation for the high volume of inbound traffic that a marketplace like Amazon provides. Driving site traffic is undoubtedly one of the biggest challenges that online retailers face. The fact that Amazon already does this at scale helps streamline our operations and lets us focus on scaling our business.
2. AMAZON’S MARKET SHARE IS DOMINANT
In 2018, Amazon’s share of the US e-commerce market hit 49%.[2] Simply put, Amazon is completely dominating in the online retail space. If you’re not currently selling on the platform, then you’re likely missing out on thousands of sales. The opportunity cost of not selling on Amazon far outweighs the inherent risks involved with being an Amazon third-party merchant.
Even if you’re currently selling on your own website or another marketplace like eBay or Etsy, you should also be selling on Amazon in addition to those channels. It is a great way to increase your business’s overall revenue. Also, from a diversification standpoint, selling across multiple channels is a strategy that can help hedge against risk.
3. LESS COMPETITION + HIGHER DEMAND
Surprisingly, Amazon is still an untapped platform to do business especially when you compare it to its closest competitor, eBay. In fact, there are approximately 3x fewer active sellers on Amazon than eBay.[3] This indicates that eBay has a much more saturated seller landscape and a higher competition mark than Amazon.
What’s even more remarkable though is that there is 6x higher overall sales generated on Amazon than eBay.[4] So even with a considerably less number of other sellers on Amazon to compete with, there is also much more sales to go around.
With such a drastic difference in the amount of competition and overall sales between Amazon and eBay, it is truly a no brainer as to which marketplace will yield better results. For example, my top selling Amazon item sold over 300 times in a month while it only sold 3 times on eBay for that same month! In nearly all instances, we have seen identical products sell significantly more times on Amazon than eBay.
Figure 2: Amazon Sellers vs. Yearly Revenue
4. AMAZON SELLERS EARN THE MOST MONEY
It is commonplace in a competitive market that a small percentage of people will make a disproportionately large sum of money while the rest of the people will earn a considerably smaller amount. This is what is known as income distribution and it usually behaves in a way that does not favor the majority of participants.
However, recent Amazon marketplace statistics tell a different story. About 51% of Amazon sellers make more than $100,000 per year in gross sales on the platform.[5] Let’s consider the average profit margin of 15%, which is our target percentage with dropshipping. That would mean that the average person will be able to make an extra $15,000 Dropshipping on Amazon in a year. Not too bad for being an average Joe!
5. THIRD-PARTY MERCHANTS HAVE THE UPPER HAND
While Amazon does sell a considerable amount direct to consumer, there are actually more sales attributed to third-party merchants. In 2018, 52% of sales on Amazon were generated from third-party merchants.[6] Most of these third-party merchants are just small business owners who are making additional income online.
Here’s what Jeff Bezos (Amazon’s CEO) says in his April 2018 letter to shareholders:
In 2017, for the first time in our history, more than half of the units sold on Amazon worldwide were from our third-party sellers, including small and medium-sized businesses (SMBs). Over 300,000 U.S.-based SMBs started selling on Amazon in 2017, and Fulfillment by Amazon shipped billions of items for SMBs worldwide…Our Global Selling program (enabling SMBs to sell products across national borders) grew by over 50% in 2017 and cross-border ecommerce by SMBs now represents more than 25% of total third-party sales.[6]
From the large pool of third-party merchants, many are dropshipping. Consider this an invitation to begin selling on Amazon while your reducing financial risk by leveraging dropshipping!
Ready to Make a Full Time Income Dropshipping?
We are now accepting new student enrollment for our Amazon Dropshipping Course. Just go ahead and click the button below and you will be directed to the course sign up page.
This all inclusive Amazon Dropshipping course is filled with high-quality content not available anywhere on the internet. Dropshipping on Amazon is explained in depth, including tips and tricks that we’ve used to build multiple 6-figure Dropshipping business!
From beginner to advanced, the course is a step-by-step guide made specifically to minimize the learning curve. Packed with over 7 hours of curriculum and spread over 56 sections, this course will put you on track to having your own successful dropshipping business within 1 day!
References:
1. https://www.bigcommerce.com/blog/amazon-statistics/
2. https://www.bigcommerce.com/blog/amazon-statistics/
3. https://smallbiztrends.com/2018/03/ebay-statistics-march-2018.html
4. https://www.digitalcommerce360.com/article/ebays-sales/
5. https://www.marketplacepulse.com/articles/amazon-merchants-selling-more-than-1-million-a-year
6. https://qz.com/1256651/amazon-marketplace-sold-more-stuff-than-amazon-itself-in-2017/