How I Made $10,000 Selling on Amazon
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
Additional money made on the purchases (which included online cash back, credit card rewards, etc): $2k
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?
More on Amazon
- How I Made $100,000 Selling on Amazon Last Year
- Examples of Profits from Selling on Amazon
- How to Make Money on Amazon
- 14 Ways to Save Even More Money Shopping on Amazon
- How I Earned $16,755 Selling a Private Label Amazon Product
- Selling On Amazon: How You Can Make A Full-Time Income Selling on Amazon (Book)
- Retail Arbitrage (Book)
Amazon has a habit of suspending your account and keeping the money for 90 days if you sell too much at one time or undercut them in prices.
It happened to me and many others. Just do a search on the sellers forums and on Google. You’ll see there are class action suits also.
Thanks for the heads up JJ. I’ll do some digging and get up to speed on what is going on!
What kinds of products did you buy and where did you get them from?
I list some examples here: Examples of Profits from Selling on Amazon.
In general I focus on toys (because that’s what I like to buy for my kids anyways) and some electronics that I can get at Target for 70% off on clearance. I also like to get clearance items from Costco.
I had small electronics, tools, dvd, cd’s and a few books.
There is a guy in NH that sells plumbing supplies. The are holding $30k of his money.
I can point you to newspaper articles and tv news that did stories on this.
I bought these at Costco, Sears and Sams club. They were deep discounts or free after rebates.
This is a pretty cool system. My wife sells books from time to time but nothing for profit. just to get rid of junk. I never heard of this before. Thanks for sharing.
Very interesting.If I want to get into this business, do we have to register as a small business ? if so what is the cheapest way to get registered ?
You don’t have to. However, personally I prefer to keep all of our business ventures as businesses for tax and liability purposes.
How do you know whether an item is popular enough to sell? Is there a threshold where you look up an item’s popularity on Amazon and if it’s in the top 1,000 or something for it’s category, it is likely to sell?
Also, do you ever worry that the price you look up the day you buy will drop by the time you get the item to Amazon?
it’s a gamble
I look at the sales rank to determine the popularity. It’s not perfect, but it does give some idea of the popularity. During the holidays I focused on toys that were in the top 100,000 sales rank.
And yes, I do consider that the price will drop when I look it up between the time it takes to get the items to Amazon. I factor in the price erosion each time I buy an item. For example, items on Target clearance seem to all show up at the same time and the price drops quickly. Sometimes I cut the price, and sometimes if the items are really popular I’ll just wait out the price war. Often times the prices return to their previous prices.
Did your extra income from Amazon affect your taxes much?
The income gets reported on our taxes just like all income. The impact is the same as other income based on your own tax bracket.
Can you address if you ave to set up a small business to do this?
See my response to Gana above.
Thanks for the wonderful tips!
So just to understand .. You buy toys that are on sale? How do you compete with the price of what the store sells it for? I am just confused do you buy in advance because the toys sell out? During the holidays? What happens when you sale not in the holidays ?
Sorry I these questions sound dumb I just have no clue how to start selling.
Yes, I buy toys on sale. However, they aren’t just on sale for a slight discount, they are usually on clearance for a deep discount, usually more than 50% off.
You don’t need to compete with the price of the store since they likely aren’t restocking the item.
Many of the items were bought in advance (but not all). For example, toys that I sold during the holidays were mostly purchased at the end of summer and early fall.
I hope that helps!
What was the most efficient ways to locate clearance items from retailers that you later used to sell on Amazon?