How I Made $50,000 Selling on Amazon Last Year

Posted by Madison on February 5, 2014

The numbers are in and for the second year in a row, my experiment selling on Amazon is proving to be a successful side gig.

Last year, our Amazon business generated $50,000 in total profits!

Not bad at all for a business that just started out as a side project that I wanted to test out after I stumbled on the book Selling On Amazon: How You Can Make A Full-Time Income Selling on Amazon.

I know many readers are also pursuing your own adventures selling on Amazon, and you like to see the income reports broken down to use as a comparison for your own profits. Let’s dive in!

Profits From Selling on Amazon

Here is how my Amazon FBA Seller numbers broke down for 2013:

  • Sales: $144.5k
  • Cost of Items Sold: $59k
  • Shipping, Warehouse, Overhead, Workers, etc: $7k
  • Amazon Fees: $36.5k

Base Profit: $42k

Additional money made on the purchases (which included online cash back, credit card rewards, etc): $8k

Total profit: $50,000.

Because Amazon allows holiday returns through January 31, I wanted to make sure that January this year wasn’t a negative number. If so, I’d need to mentally subtract it from my 4th quarter profits last year. I was pleasantly surprised to see that sales continued and more than outweighed any returns in January. We ended January 2014 with a base profit of $2k.

Year Over Year Comparison

Last year, I Made $10,000 Selling on Amazon. However, since the first year was only from August through December, it really isn’t fair to compare the total year.

If you look at just 4th quarter profits, here’s how the base profits (without cash back and other rewards) stacked up:

  • 4th Quarter 2012 Base Profit: $7.5k
  • 4th Quarter 2013 Base Profit: $34k

What’s the difference between the 2 years?

Obviously, there’s a large learning curve in place that happened between the two years, but the second biggest thing was just gaining confidence to scale the Retail Arbitrage model that was successful during the first year. As we’ve improved the process in the second year, here are some of the changes we made:

Buying Multiples. Once I found a product that I think will do well, instead of buying 20 or 40 like I did the first year, this year we scaled it and bought 200 or 400 instead.

Staying in Stock During the Holidays. Last year we sold out of most of the items just days after Black Friday and spent most of December without much to sell. This year, we were able to carry more inventory into the first few weeks of December. However we were still shocked to see we sold out of many items around the second week in December.

Improving Processes. We started having UPS pick up all of our boxes after some big shipping days, so we didn’t have to drop off our boxes anymore. It cut down on wasted time and mileage. This area could still use a lot of improvement.

Focusing on Better Inventory. I’ve eliminated almost all small profit items. Because I have limited time for this project, I set a profitability threshold for any item. Even if it has a great return on the investment, I won’t buy an item unless it returns a minimum profit of $10-$15. I increased it even more during the holidays to limit the number of items I have to deal with.

Inventory and Goals

Back in September, I gave an update and put together some projections to see if You Can Make Six Figures Selling on Amazon. While I didn’t reach my lofty goal of buying $180k worth of inventory, it did jump start my purchasing and we did manage to buy $70k worth of inventory (not all at once, but by continually reinvesting profits) and got almost half way to the goal. If you haven’t noticed before, I like to set really high goals! Here are some additional details about inventory and how I’m integrating my goals with the time I have to spend on this project:

Inventory. We ended the year with $11k in inventory. This is proving to be a nice cushion to provide additional profits (like the $2k in January) without much work. However, a good chunk of that inventory never actually got shipped in to Amazon once the snow started falling. We’ll send it in when I get around to it, or once the weather is nicer!

Time spent. Again, I didn’t track my time closely, but we did do about 4 large/all-day shipping days during October and November. Looking over my schedule over the last year, it doesn’t look like I could have spent more than 100 hours total on the project all year… and that estimate would likely be very high.

Seasonal. I’ve also found that I like to work on the Amazon project during the fall months only. Between tax work and summer with the kids off school, I didn’t really start working on it aggressively until October. After focusing on it during October and November, I took a break again during December to focus on the holidays and skiing with the family.

The best part about it, as you can see, once you purchase the inventory and ship it in, the profits continue to roll in, even when you’re not devoting any time to it!

Action Plan

As always, I like to brainstorm more ways to scale it to even bigger profits. I still believe you could scale it to a six figure business with the right amount of effort. I’m not sure if I have that much time available, since I also have lots of other money generating side hobbies, but I do like the way it integrates so well with helping me meet spending requirements on my Credit Card Application Sprees!

Update: Here are my current year income results: How I Made $100,000 Selling on Amazon Last Year.

If you have an Amazon business, how did you do last year?

More on Amazon





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Comments to How I Made $50,000 Selling on Amazon Last Year

  1. is there a link to what you sell so we can see your items for sale?

    NS

  2. I started selling on Amazon last fall after reading mydollarplan articles on it. I was wondering, where do you shop to find bargains? I was having a hard time finding deals with good profit margins and felt like I was spending way too much time looking for deals and coming up empty handed. In the fourth quarter I made $1000 which I was happy about, but not when I factor in the time shopping.
    Thanks!

    Jennifer

  3. Hi Jennifer,

    Congrats on the $1000! I found that I’m able to streamline most of my shopping time buying things I’m already shopping for. Since I like to shop for toys for my own children, whenever something is on my children’s wishlist, I assume it’s on every other child’s wishlist too. That seems to work pretty well.

    I pulled a list of where my purchases came from last year and there were over 40 different stores. Basically, I made purchases in every toy store that has a clearance section including Target, Toys R Us, Kohl’s, Costco, etc.

    Madison

  4. Hi Madison,

    I have been reading your blog for some time now, and I have enjoyed reading about your amazon endeavors. I think this is something that I would like to try and I plan on reading through the book you suggested, “Selling on Amazon…”
    I do have a question. Could you do an article that would address how to file income taxes from selling on amazon? I can’t seem to find any good information online. But it seems that technically you would be a self employed business. Is this correct?
    Do you have to pay taxes on the revenue in sales you bring in? Or just on the profits?
    Thanks,

    Nick True

    • Hi Nick,
      Yes, you would be running a self employed business. It gets a little complicated depending on how you set up your business, but if you set up your business (or in the absence of setting it up) as a sole proprietor, you would file on Schedule C and attach to your tax return. If you set your business up as a corporation/S-corp/partnership/etc, then the corporation would file a tax return.

      When you run a self employed business, you calculate your taxable income based on the profits of the business. Essentially you’ll start with the sales and deduct the cost of goods sold and expenses to reach the net profits. The net profits will then carry to your personal tax return as business income. You’ll also have to Calculate Self Employment Tax and file it on a Schedule SE.

      Finally, it’s also important to note that since you are running a self employed business you would also be entitled to tax deductions for the self-employed.

      Madison

      • Okay, that makes sense to me. Glad to hear you pay taxes based on the profits, not on the gross sales.

        Thanks so much!
        Nick

        Nick True


  5. I have sold items on amazon off and on, mostly items that I won at raffle, purchased but never used and can no longer return, bought on clearance etc. I’d like to start selling regularly. What’s the advantage of the $40/month subscription fee? Do I still have to pay fulfillment fees, shipping fees etc from Amazon? Any tips on how to calculate break even point? Also curious how did you find 200 of the same items to sell? I usually only find at most 2 or 3 at most on the shelves.

    Astrid

    • Hi Astrid,

      The $40 subscription fee allows you to avoid the $.99 per item fee. If you sell less than 40 items per month, I’d stick to selling as an individual. However, if you sell over 40 items per month, then the professional subscription is the cheaper option. You will still pay the fees for fulfillment by Amazon (FBA), shipping, etc. with either selling plan. If you are referring to the breakeven point on the selling plan, it’s essentially once you sell 40 items in a month.

      Too find huge multiples of items, if I found an item at a store, I’d go to all the same stores (for example, we have 5 Targets in town). And then I’d also check the website version of the store when I got home and if they were also on clearance, I’d order them… hundreds of them.

      Madison

  6. Ok I have a dumb question. You mentioned that if an item does well you buy 200 or 400 now. Whether in store or online, doesn’t mgmt question you or try to limit you?

    Mp

    • Yes, I get some funny looks sometimes… and lots of questions from other shoppers in the checkout lines!

      However, I’ve never had a store tell me that I couldn’t buy something. They are in the business to sell merchandise, not prevent sales.

      Although, if something is on sale, and there are specific limits (Black Friday deals come to mind), I follow all the rules and only buy the number allowed.

      Online I find that if you enter 999 of something, the shopping carts will usually adjust automatically to the number you are allowed to buy.

      Madison

  7. I decided to try out this experiment selling on Amazon. Why is it that some items will not allow you to list them as “New” when they clearly are? I also ran into 3 ipad cases at 1/4 the price, went to list and they aren’t able to be listed due to restrictions. Have you run into this? Is there a way to easily spot these roadblocks while out shopping? I am also using profit bandit and the app works great but half the things I bought my first run are not able to be sold as new or sold at all. Seems as if amazon and companies are catching on and partnering to not allow this to happen as easily. Is it still worth putting time and money into it or will it be nonexistent in a few years?

    Chris

    • Hi Chris,

      Yes, I’ve also run into this. Some items are restricted from third party selling on Amazon. For example, I’ve determined you cannot sell any Apple products and many Sony products. In addition, I don’t sell any cosmetics, but I know that quite a few brands are restricted in that category.

      To determine if you are eligible to sell an item, while viewing the product page on Amazon, click on the box in the lower right that says “Have one to sell?” Scroll down to the condition box and see if it will let you select new. If it blocks it there, then it will restrict you when you are in seller central.

      Obviously, it’s a little harder when you are out shopping, but I found a good rule of thumb to discover them. If you are using profit bandit and you find a really great deal, but there are no third party sellers, consider that your first warning sign. If I see something like that, I’ll take the extra few seconds to click over to Amazon’s full site to do the above.

      For the most part, between memorizing items that have been previously restricted and watching for no other sellers, I’ve caught 99% of the restricted items before I purchased them.

      There are still so many products out there, a ridiculous number really, that I think there is still a HUGE amount of money to be made by people like us that put in the time and effort. Even if things change and evolve in the years down the road (which is always inevitable) I’m still happy to continue to make money and take part in the adventure instead of watching from the sidelines!

      Madison

  8. As with other commenters, you’re first Amazon post inspired me as well. Last year was my first year and I learned a lot. I made about $1,000. I was taking things slow and was cautious about what I was doing. I lost some money on some items, but made huge profits on others. I learned about buying multiples (still wishing I would have bought more of some items haha!!). It’s definitely a nice little thing to do on the side to make some extra income.

    Jon @ Money Smart Guides

    • Hi Jon,
      It’s wonderful to hear that sharing my story inspired you! Congrats on the first $1,000! I think it’s safe to say once you pass that mark the sky is the limit. And yes, I too have many instances where I wish I would have bought more. Good luck this year and keep us posted on your progress.

      Madison

  9. I saw your story last year and started selling in July. I made 10k in just 6 months (before taxes but after fees and expenses). I was very happy with that. This year I’m hoping to do even more and maybe quit my job to go back to school. I enjoy doing it. And even though I don’t like shopping for myself I enjoy doing this stuff. I’m grateful that you shared your story. I’m even more inspired by your 50K year!!

    Dana

    • Dana,
      $10,000 is fantastic! Congrats! I can’t wait to hear how much you make this year.

      Madison

  10. I stumbled across your blog and love it. I’ve been reading your posts about selling on Amazon and I have three questions.
    1. How do you select items with high profit margins (which you wanted to do after the first year)?

    2. How do you pick items that you know will sell and how do you know there is a demand for it?

    3. Do you sell used items such as clothes from thrift shops?

    Toni

    • Hi Toni,

      Welcome! Glad you love the blog!

      1. In general to select the items with the high profit margins, I just skip any that have a low profit margin. I try to be more selective about what I buy and skip items that only earn a few dollars.

      2. I focus on items that are already selling well. I use the sales rank of the items (current and historically) to gauge the demand.

      3. I don’t sell any clothes. I also sell only new items for the most part.

      Madison

  11. Hi, I’ve started selling on Amazon this year too, mainly from purchases made at Kohls during their 30% off promotions. Most of my profits have been in the form of credit card rewards/frequent flyer miles. How do you handle these rewards for tax purposes? It’s hard to value frequent flyer miles. Thanks!

    Jennifer

    jennifer

    • Hi Jennifer,
      It’s tough. In general you do not have to report or pay taxes on cash back rewards for using credit or debit cards. The IRS issued a private letter ruling. Here’s more: Are Credit Card Rewards Taxable?

      However, that generally applies to purchases individuals make for personal use.

      Keep in mind that if the rebate is reducing the cost of goods sold which are held for resale, the IRS could view it much differently.

      The frequent flier miles are also a hot topic when it comes to deciding if they are taxable. Here’s more:

      Tax Court Sides With IRS In Tax Treatment Of Frequent Flyer Miles Issued By Citibank.

      Once again, largely focused on personal use.

      I wish I could be more help, but the IRS hasn’t issued a lot of guidance in this department. It becomes especially difficult depending on your business structure and who is making the purchases and how they are reimbursed.

      Madison

  12. Hi, I’m actually starting out on amazon. And I can’t afford selling through FBA yet. (Still trying to afford the necessary gadgets.) Do you have any advice for someone trying to sell as a merchant on their own for the time being?

    Laura

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