- Nov 10, 2016
Gen Zers Are Bragging About Making Upwards of $3 Million as Amazon Sellers. Is It Really That Easy?by Justin Chan, Entrepreneur.com
March 22, 2021
When Nate Hurst first hopped on TikTok to show off his car, people quickly took notice. The scruffy-looking TikToker has reeled viewers in with mesmerizing shots of his ride, promising his peers that they too can get a luxury car — all without having to sit in a cubicle. In a clip that has since received more than a million likes, for instance, Hurst discusses a side hustle that allegedly netted him approximately $3 million last year. The gig? Reselling cheap items from Marshalls by using the Amazon Seller app to see which products will make him the most profit.
According to a 2020 Pew Research Center report, Gen Zers are also on their way to be the “best-educated generation” yet. In 2018, for instance, 57% of those between the ages of 18 and 21 were enrolled in college. Contrast this with the 43% of Gen Xers who were enrolled in a higher institution in 1987. The education disparity between the two generations may explain why Gen Zers are more inclined to become entrepreneurs. A 2015 study published in Business Research Quarterly points out that “tertiary education increases formal entrepreneurship as a consequence of the higher self-confidence, lower perceived risk and enhanced human capital.”
One of the more popular business ventures appears to involve flipping items on Amazon. The premise is simple: Buy products — whether they’re name-brand or generic — at a cheap price and sell them for just under retail price on the online marketplace. Still, making money off the e-commerce site isn’t as simple as it looks — as some successful sellers will tell you. Here are some points to keep in mind if you’re trying to earn some side income or making a living as an Amazon seller.
Don't expect to make a significant profit immediatelySelling items on Amazon — especially if you’re flipping them — isn't some sort of get-rich-quick scheme that will turn you into a six-figure earner overnight. According to a January report from JungleScout, just 20% of new sellers who were surveyed saw profits within the first three months of selling. The bulk of respondents (40%) said they were profitable between three months and a year. And while a majority of Amazon sellers (59%) said they didn’t spend that much time on their business, they still spent time. Thirty-nine percent reportedly spent fewer than 10 hours per week, while 49% revealed that they spent between 11 and 40 hours. Much of that time was likely allocated to getting a business off the ground — whether it was finding a niche product to sell or strengthening one’s brand in a crowd full of vendors.
Even if you do dedicate a good portion of time to running your business, remember that profit margins can vary depending on what and how much you sell. The JungleScout survey notes that more than two-thirds of sellers (68%) last year saw profit margins higher than 10% — with most making a profit margin between 10% and 50%. As far as monthly sales were concerned, 17% of sellers made under $500 while a third made between $1,000 and $5,000. Just six percent of sellers said they made more than $250,000 monthly.
Spend wiselyYour success on Amazon depends heavily on what you want to purchase and resell. If the objective is to make regular income off the e-commerce site, knowing how much you should spend and what you should spend your money on is key. JungleScout reports that 18% of sellers spend less than $500 to get their business off the ground. An equal percentage of vendors, however, spend between $2,500 and $5,000. Those costs not only cover the price of product inventory but also Amazon fees and promotions. Amazon’s FBA program, for example, charges for services related to the packaging and shipping of your product. By enrolling in it, you’ll have to make peace with the fact that the marketplace takes a cut of every sale you make. If you would rather instead pay for a subscription, then it’ll be about $40 per month. Other Amazon fees to consider are the site’s referral and variable closing fees — the former charges for directing potential customers to your listing (yes, it charges for a click) while the latter charges for the shipping of your item (especially if it’s a media product).
Choose the right productNot all items command the same demand. And moreover, not all sellers experience success in selling the same product. Think about it this way: If 20 vendors are selling the same exact iPhone charger on Amazon, they’re all constantly competing with one another for customers and lowering their prices to attract them. In effect, they’re hurting their profit margins for the sake of appealing to buyers.
The trick is to find a niche market that isn’t saturated with sellers. The market should have enough demand but low competition. If you’re not sure where to start, you can check out sites like JungleScout or Kenji Roi to see what keywords on Amazon are trending.
Most importantly, try your best to avoid selling name brands. If a customer wants to buy a pair of Nike sneakers or an Apple Watch, chances are that the person will head straight to the manufacturer’s website or a trusted retailer (like Foot Locker or Best Buy) before going to a third-party seller like you. Find a generic item — which is often cheaper to buy in bulk on sites like Alibaba — that fills a specific need or solves a problem. If the generic product actually works like its name-brand competitors, there’s no reason a customer would prefer to buy the more expensive name brand over your item.
And in case you’re wondering what the most profitable product categories are, SellBrite lists them here. Spoiler alert: The categories are toys and games; electronics; cameras and photography equipment; video games; books; and clothing, shoes and jewelry.