Last fall I stumbled on a new project to make money: selling on Amazon. I promised I’d report back once I determined how profitable it was. I just finished our tax return, and I have some solid numbers to share!
We got an email that we were a top 25% seller during the holiday season. Not bad for just testing the waters to make money selling on Amazon. Wait until next year, when I’m ready to really ready to make a run at it!
Overall, I’d say the Amazon arbitrage project was a success! We figured that the holidays would bring on lots of sales, but I was shocked at how fast products moved. I bought multiples of many toys that I figured we would sell throughout December. Imagine my surprise when we were sold out of most of the items just days after Black Friday. We went into December without much inventory! We also went into overdrive buying as many things as we could for the first 3 weeks in December and shipping them in as fast as we could! I also picked up a friend along the way (you know her as Annie from her Beginner Credit Card Application Spree) who I hired to help with the shipments. She also started selling her own items on a smaller scale.
Profits From Selling on Amazon
Here is how my Amazon FBA Seller numbers broke down for 2012:
- Sales: $30k
- Cost of Items Sold: $13k
- Shipping, Warehouse, Overhead, Workers, etc: $2k
- Amazon Fees: $7k
Base Profit: $8k
Total profit: $10,000.
How the sales broke down by month:
I tested it out in August and September, with sales of $1,000. Once I was ready to give it a shot, I sent in more items for the holidays. Here were the sales for the 4th quarter from my 1099-k:
- October: $3.5k
- November: $9k
- December: $16.5k
In addition to my $10,000, Annie made another $900 (on a very small initial investment; she spent $350 in total purchases).
Inventory. The $13k spent in inventory cost wasn’t all at once. I started with a $500 investment and added to it over time. However, most of the inventory was purchased by rolling in the profits as I went. During the holidays I set my target to try to keep $5k in inventory (which was the amount I earmarked for the adventure at the beginning) at any point in time. As soon as something would sell, I would reinvest in more things.
Time spent. During 4th quarter I usually spent about an hour a week shopping while my kids were at preschool. (Although, I often did my own holiday shopping at the same time!) During 4th quarter I believe we spent about 10 hours shipping. My husband made roughly 25 trips to UPS to drop off boxes! (Thanks Scott!) I didn’t keep close track of my time spent, but I think it adds up to roughly 25 hours total. Although, this is probably understated since I spent additional time thinking about it, researching it, learning the process, writing about it, and just having fun with it. Why don’t we double my time estimate just to be on the safe side?
Overhead Costs. The overhead included some one-time start up costs of about $400. In addition, we also spent about the equivalent of $400 in mileage.
The New Year
I wanted to be sure to account for the holiday returns, so I continued to compile results for the 1st quarter this year, which included the 4th quarter returns. I ended the year with $5k in inventory. We spent $1k on inbound shipping to Amazon, which included the inventory in the new year.
First quarter base profits: $2k
The profits during first quarter were mainly due to the inventory that was carried over from last year. We took a break in January and didn’t do any shopping or shipping (I had to devote my time to tax season). We shipped in additional items once in Feb and once in March. It’d estimate the total time spent in first quarter was at most 5 hours. Right now, everything is pretty much running on autopilot!
Obviously, the Amazon pilot was a huge success! I’m excited about continuing on this adventure during 2013, and brainstorming ways to scale it to even bigger profits. One of my favorite benefits of purchasing all the items for sale is that it’s a very easy way to satisfy spending requirements to Maximize Credit Card Sign Up Bonuses!
What else would you like to know about my adventures selling on Amazon?