There are several ways to make money selling on Amazon, you can:
- Sell your own brand, also known as Private Label
- Sell other people’s brands
- Arbitrage
This article aims to help those planning to do Private Label, i.e. selling their own brands on Amazon.
1- Not having enough funds
This is likely the most common mistake made by people new to selling on Amazon. Starting a private label business requires cash to pay for initial samples, inventory, and shipping.
How much money do you need? This really depends on what product you want to sell, the sales velocity, competition and PPC costs. For instance, a high-cost product that sells 100 units per day requires a much higher investment than a ten-dollar product that sells one per day. You need to have at least enough money to buy enough inventory that will last 60 days and also a decent budget for advertising/launching.
2- Not checking for trademarks
You’d be surprised how many people get in trouble by not checking if their newly discovered product violates any trademark or patent.
Trademarks not only apply to names, it also applies to artwork and design. On the other hand, make sure your product doesn’t violate any active patent. Patents are more difficult to verify, you might want to consult an attorney to be on the safe side.
3- Competing against Amazon
Once you have identified the product you want to sell, make sure to check your competitors, this includes Amazon. Typically, Amazon is able to supply better quality products at a much lower price so it will be very difficult for you to compete against this as a new seller.
4- Not doing proper product research
Take your time to find the best product to sell, this will likely determine whether your product is successful or not. In-depth research will increase your chances of making money.
A few things to consider are cost and potential profit of the product, quality, size and shipping costs, complexity, reliability of suppliers, competitors, etc. I highly recommend you to read our section about research tools for Amazon sellers, it will shorten your learning curve and likely save you time and money.
5- Violating Amazon Terms Of Services (TOS)
Amazon has many restrictions and it will just get worse as that marketplace matures. Many seller accounts have been suspended or terminated for violating the Amazon TOS. Some serious infractions include:
Manipulating customer reviews
Make sure you’re not doing anything shady and that only legitimate Amazon customers are leaving reviews. Incentivized reviews are prohibited, meaning you cannot offer any sort of compensation or perk for people to leave reviews about your products.
Manipulating sales rank
Basically the only white hat method to get initial sales is running a pay per click campaign, you should start with this anyways. Giveaways or deep discounts are frowned upon and can get you in trouble before selling your first batch of inventory.
Using trademarked phrases or images on your product listing
Only use your own images on your listings, alternatively, you can use stock photos as long as you have paid for the proper license. Also, be very careful not to infringe any trademarks by using protected terms on your listing, did you know that ‘Velcro’ is a trademark and you cannot use it without proper approval?
6- Running out of inventory
Make sure you do a proper calculation of how much inventory you need to order. Your sales rank will suffer if you run out of product.
This calculation is based on sales velocity, ie how many items your product typically sells per day and transit times, this is, are you shipping by air or sea?
You also need to consider your supplier lead time to manufacture your items, typically, for first orders you should expect between 45 and 60 days of lead time.