How to generate passive income with Amazon

How can you generate passive income with Amazon?

Earn income with Amazon by selling or promoting products on Amazon or investing in Amazon stock. Different ways to sell on Amazon include Fulfillment by Amazon or Merchant, dropshipping, wholesale, private label, and listing your own products. Amazon will also give you a commission for selling products listed on Amazon.

Imagine, making money with one of the largest companies in the world. Amazon already has thousands of paying loyal customers. 

Did you know that you can have a piece of that income?

Luckily for you, I’m going to show you how you can earn income with Amazon. I’ll show you if Amazon income is passive and if you can get rich. I’ll even tell you if it’s even worth your time to partner with Amazon.

21-017 - How to generate passive income with Amazon

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How can I earn with Amazon?

Earn money with Amazon by selling or promoting products through Amazon services. Amazon allows everyday individuals to list and sell products online. Additionally, you can earn a commission by promoting products with the Amazon Associates program. 

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How to generate passive income with Amazon

Generate passive income with Amazon by selling products through fulfillment by Amazon or Merchant. Income strategies include Retail Arbitrage, dropshipping, wholesale, private label, and selling your own products. Alternatively, promote other people’s products or invest in Amazon stock.

Amazon provides numerous ways for you to make money. You just have to figure out what method of making money works best for you.

Once you have determined your method, spend your time figuring out how to make it work. For example, if you want to sell on Amazon FBA, learn the products that sell well. It’s going to take some time to figure out what is worth selling and what isn’t. 

Your first step is to determine if you want to sell with Amazon FBA or FBM. Then, which method are you going to sell products (e.g. Retail arbitrage, wholesale, etc.)? Or, would you rather be someone who sells other people’s products with the associates program?

Fulfillment by Amazon (FBA)

Fulfillment by Amazon is a service that allows you to take advantage of Amazon’s warehouses. Simply ship your inventory into Amazon and Amazon will ship it to your customer when the product sells.

Amazon FBA allows you to generate fairly passive income because you are able to focus on finding products to sell. You don’t have to worry about shipping out products to customers daily.

Essentially, all you have to do is find your products. You then tell Amazon what products you have to sell and Amazon tells you where to ship your products. Amazon will provide you shipping labels when you tell them how many boxes you have.

Box everything up, and take everything to the post office and you’re all set. Amazon will receive, store, and ship out your items when the time comes.

Fulfillment by Merchant (FBM)

Fulfillment by Merchant allows you to sell on Amazon, but you are responsible for shipping the items yourself. You don’t get access to Amazon warehouse or other cool features that Amazon provides.

You can imagine fulfillment by Merchant as selling on eBay.  An order comes in and you have so long to ship out the item.

Therefore, you’ll need to figure out how you are going to store all your items. Your items won’t sell nearly as fast because Amazon gives preference to FBA sellers. However, there are less fees involved so your profit margins are greater. 

Retail Arbitrage

Retail Arbitrage is the process of finding products at retail stores for a discount. You can find deeply discounted products and then flip them on Amazon for a profit. Typically, you are checking clearance items and can occasionally find regularly priced items to flip.

For example, I once went to Grocery Outlet and found dog treats which were selling for a couple dollars. I was unable to sell the same dog treats on Amazon for nearly $10. Amazon took a large chunk of the sale price, but I was still able to double my money on each sale. 

Here’s another example. Joe Hart found video games at Walmart which were selling for $0.03 each. All he has to do is sell these at a reasonable price and he’s making a significant amount of profit.

Flipping walmart video games

The downside with Retail Arbitrage is that it can be very time-consuming to find deals. In addition, some brands may report you for intellectual property or counterfeit claims. Amazon would expect a purchase order to refute these claims and a grocery receipt will not work.

Dropshipping

Dropshipping allows you to have a significant amount of products in a very short amount of time. You never even have to see these products in order to make money. With dropshipping you are the middleman.

A simplified example with dropshipping is finding the product at Home Depot that currently sells for $20. You could then list that product as fulfillment by Merchant on Amazon for $40.

When someone purchases that product on Amazon, you go to Home Depot and buy the product. You ship that product directly to your customers house. 

Most people like dropshipping because you never have to touch the single product. You can run the business completely from the comfort of your own home. However, you still have to check your business daily so it’s not very passive.

The downside to dropshipping is that people don’t like to overpay for products. If my Amazon purchase comes to me in a Home Depot box, I will know it came from Home Depot. Some customers might be mad that they paid $40 for something they could have gotten for $20.

Wholesale

Wholesale is the process of reaching out to suppliers to supply the product you are wanting to sell.  You get the products at a discount otherwise known as the wholesale price. You can then sell the product at its recommended retail price on Amazon. 

It can be very profitable for you to sell wholesale products. Imagine, finding the product that profits you $1,000 every month. The beauty of wholesale is that you can continue to order the same product time and time again.

The downside to wholesaling is that it takes a very long time to find a wholesale supplier that is willing to work with you. Most wholesalers want to stay hidden and others don’t really want to work with you.

For example, someone who supplies wholesale products has to spend the same amount of time with you as a six-figure client. Most wholesale suppliers would rather spend their time with people who have large pockets.

Private Label 

Private label is where you take someone else’s product and slap your own brand label on the packaging. All you have to worry about is getting the sales to the product well someone else worries about the manufacturing.

Create and Sell your own products

You can also create and sell your own products on Amazon. However, this is a very complex and time-consuming business model. When done right, you have exclusive rights to sell this product which limits the amount of competition.

For example, you can find someone that can make toothpicks for you. They make the toothpicks and ship them to your doorstep. You then create your own listing on Amazon for your unique product.

With traditional products, you have multiple people selling the same product competing for the buy box. When you own the product, you can be the exclusive seller to that product. 

Amazon Associates

Amazon Associates is a program that allows you to promote products on Amazon for a commission. You earn money when you refer business to Amazon. Therefore, you will need some method of promoting Amazon products like a blog or YouTube channel.

For example, maybe you have a Blog that focuses on camping. When you’re talking about specific products, you can link to products on Amazon. When someone follows your link and makes a purchase, you earn a commission for referring a sale. 

Amazon has a fee structure which will let you know how much you earn on the total amount of the sale. For example, if you sold $100 worth of video games you would earn $2.

The downside to Amazon Associates is that Amazon has and may continue to cut commission rates. Without warning, Amazon cut commission rates in half in 2020. Therefore, people who were earning $1,000 per month with Amazon Associates were now making $500.

How much you earn is completely up to Amazon. However, Amazon Associates can be a fairly passive source of income. You write one blog post and that blog post can continue to earn for you time and time again.

Amazon Stock

The most passive form of income is purchasing Amazon stock. Amazon has continually increased in price and shows no signs of slowing down. Investing in Amazon stock can lead to continual passive income.

However, you have to have money to buy the stock in the first place. Therefore, you could focus on other methods discussed in this article and then funnel some profits into Amazon stock. 

Is selling on Amazon passive income?

Selling on Amazon FBA is a fairly passive income source. However, you are still responsible for finding products to send in to Amazon’s Warehouse. Other services like Amazon FBM are not a passive source of income.

Passive income is best described as finding systems that require minimal upkeep to continue to earn money. Fulfillment by Amazon is a fairly passive source because you only have to do work once and it will keep earning you money.

For example, let’s say you found a wholesale vendor where a specific product can be purchased for $5. Amazon sells 100 of these products every month at $12 retail price. Assuming Amazon takes $3 in fees, your profit is $4 per sale or $400 every month.

Now, every month all you have to do is order 100 more products and ship it to Amazon. Altogether, this one task might take you one hour to do. Therefore, you’re earning $400 for one hours worth of work.

Can I get rich selling on Amazon?

Selling on Amazon is one of many ways to get rich if you know what you are doing. Thousands of people are making full-time income if not more by selling on Amazon. However, you do not own the business so you do not have full control. 

Is selling on Amazon worth it?

Selling on Amazon has the potential to make you a lot of money when done right.  Individuals have been able to quit their full-time job and focus solely on selling on Amazon. However, you need to be cautious because Amazon has all the power with an Amazon business.

I already talked about how the Amazon Associates program cut commissions in 2020. Individuals lost half of their income because of the decision that Amazon had made.

Amazon makes the rules and you have to follow them. Should Amazon make a decision about your business then you have to comply and can’t say anything.

Selling on Amazon is no different than Amazon Associates. Should you get too many counterfeit claims Amazon could spend your account. It doesn’t even matter if you were selling a legitimate item if you can’t prove where the item came from.

Yes, you can make a lot of money on Amazon and putting forth the effort is worth it. However, you need to tread lightly and make sure you are following the program policies. Additionally, you need to prepare for the unfortunate event that your account gets suspended.

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Summary: How to generate passive income with Amazon

As you can see, it is completely possible to make money with Amazon. Most individuals will probably want to sell with Fulfillment by Amazon or Merchant. You then need to figure out how you will get products and supply it to your customers.

There are many ways to get products. Retail Arbitrage, dropshipping, wholesale, private label, and selling your own products are ways of getting products.

When it comes to selling on Amazon, Fulfillment by Amazon is the most passive form. Fulfillment by Merchant requires a lot of work on your part but may have higher profit margins.

You can make a lot of money when selling on Amazon. As a matter of fact, you can make life-changing money selling on Amazon. However, Amazon still holds all the power so you need to be cautious that your account can be suspended.

Unfortunately, Amazon holds all the power when it comes to making business decisions. Your Amazon business can be greatly affected by a decision made by someone else.