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

The numbers are in and for the second year in a row, my experiment selling on Amazon [1] 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 [2] 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 [3].

I know many readers are also pursuing your own adventures selling on Amazon [4], 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 [5] 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 [6], credit card rewards [7], 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 [8]. 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 [9] 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 [10]. 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 [11]. 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 [12] 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 [13]!

Update: Here are my current year income results: How I Made $100,000 Selling on Amazon Last Year [14].

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

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