Exposing the Raw Truth About Amazon FBA
🔍 Table of Contents:
1. Introduction
2. Amazon FBA is Not a Get-Rich-Quick Scheme
3. Choosing Your Business Model: Private Label vs. Wholesale Online Arbitrage
4. Cash Flow Problems in Amazon FBA
5. Is Amazon FBA a Complex Business Model?
6. Standing Out in a Competitive Amazon FBA Market
7. The Dictatorship of Amazon
8. How to Get Ungated in Amazon FBA
9. Conclusion
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Introduction
In this article, we will be discussing the raw truth about Amazon FBA (Fulfillment by Amazon). As someone who has done over $10 million in lifetime sales on Amazon, I will be sharing my thoughts on the business model, including its pros and cons, and what you need to know before getting started.
Amazon FBA is Not a Get-Rich-Quick Scheme
Let’s start with the most relevant topic: Amazon FBA is not a get-rich-quick scheme. It takes time to be successful in this business, and you won’t see crazy results overnight. You won’t be able to buy a flashy car or watch in under a year, or maybe even two years. In the beginning, it can be a long process because you need to figure out which business model you like. There’s private label, which is starting your own brand, and wholesale online arbitrage, which is selling brand-named products on the Amazon platform. You have to pick your poison and see which one you like.
When it comes to the wholesale online arbitrage business model, we’re more focused on cash flowing. In these business models, you can take off a lot quicker and start seeing a lot of profits because you’re just reaching out to brands and trying to get their products at a discount, which takes a lot less time than actually going and starting a whole new product, doing the research, talking to manufacturers, negotiating pricing, figuring out your target market, figuring out if your product is going to be good, and then building it up from scratch and doing ads for it. All of that is a very, very long process.
The reason why people do private label is that they’re building something of their own, and eventually, it’s a company that they could sell for multiple x’s on the dollar. That’s a big reason why a lot of people pursue that business model. But if you’re someone that’s more oriented towards cash flow, kind of like me, in the beginning, I didn’t start with too much money. I was just trying to figure out a way to make as much money as possible. That’s why the wholesale business model and online arbitrage business models stuck out to me because, yeah, you can actually go and make 10K profit a month in just a few months. It’s very possible. I did the exact same thing myself. I think I hit my first 10K profit month on like month four or five, which is extraordinary for many people. The only reason why I was able to do that is that I took a big risk. I spent every dollar I had as soon as I saw the business model was working. I got credit cards, maxed those out with profitable inventory, and kept going from there. I never really looked back. So I went on to do these 10K months, 20K months, 30K, 40K, 50K, 60K, all the way to months where I’ve hit 70K profit and above. Not to show off, but it’s just it all happened in just a few years because of the way the wholesale business model is set up. All it really takes for you to hit 30K in profit, for example, is just 30 products that give you $1,000 in profit each month, which honestly is not that crazy. There are many different products out here that are selling a few thousand times a month on Amazon, where you can come in and get a thousand sales. It’s very competitive, which I’ll talk about a little later, but it’s very, very possible. I’ve done it many times before. I currently am doing it, and that is why wholesale is something where you can just start cash flowing really quickly.
Choosing Your Business Model: Private Label vs. Wholesale Online Arbitrage
As mentioned earlier, there are two main business models in Amazon FBA: private label and wholesale online arbitrage. Let’s dive deeper into each of them.
Private Label
Private label is starting your own brand. You’re creating a product from scratch, and you’re building it up from the ground up. You’re doing the research, talking to manufacturers, negotiating pricing, figuring out your target market, and doing ads for it. All of that is a very, very long process. The reason why people do private label is that they’re building something of their own, and eventually, it’s a company that they could sell for multiple x’s on the dollar. That’s a big reason why a lot of people pursue that business model.
Wholesale Online Arbitrage
Wholesale online arbitrage is selling brand-named products on the Amazon platform. In these business models, you can take off a lot quicker and start seeing a lot of profits because you’re just reaching out to brands and trying to get their products at a discount, which takes a lot less time than actually going and starting a whole new product, doing the research, talking to manufacturers, negotiating pricing, figuring out your target market, and doing ads for it. All of that is a very, very long process. When it comes to the wholesale online arbitrage business model, we’re more focused on cash flowing. All it really takes for you to hit 30K in profit, for example, is just 30 products that give you $1,000 in profit each month, which honestly is not that crazy. There are many different products out here that are selling a few thousand times a month on Amazon, where you can come in and get a thousand sales. It’s very competitive, which I’ll talk about a little later, but it’s very, very possible.
Cash Flow Problems in Amazon FBA
One of the biggest problems in Amazon FBA is cash flow. It can be extremely difficult to manage, and mostly every single seller that is big that you’ll talk to is running into cash flow issues. Overall, cash flow can be extremely difficult to manage. This is an inventory-based business where the only way we make a profit is by buying a ton of inventory and selling it. But the logistic side of the business is what can hurt our cash flow. Let’s say I’m spending 100K a month on inventory, and I want to profit off that 100K a month on inventory. I’ll probably profit like 30K. I make the first order, and it takes about six days to get here to my warehouse. Then it takes about another four days for my team to prep, label, and ship everything out to Amazon. Depending on if we’re shipping UPS or if we’re shipping truckload, it may be a little longer. But then we have to go check in our stuff to Amazon. It gets checked in, and Amazon starts receiving our inventory. After a few days, we start to sell. Now we’re already in about two weeks, and then after we sell our products, I personally purchase products to sell within a 30 to 45-day time period. So I won’t get my money back until all of the products are sold. After 30 to 45 days after I initially purchased the product, but then after that, it’s going to take another five to seven days for the money to actually appear in my bank account from Amazon. That whole period is a really, really long time. If we’re spending that 100K on a credit card, we’re going to have to come out of pocket to pay off the credit card because we’re not going to get the 100K payback in time. That is why we have all these hacks, such as using lines of credit where you can draw money from the lender using credit cards such as the Chase Plum, where you have 60 days to pay it off because that’s probably the amount of time it’s going to take for you to get the 100K back. With all of that being said, your money is going to be tied into your business for a lot of the time, which makes it difficult to pay yourself, especially if you’re trying to grow your business up. It makes it a little more difficult to pay yourself. Obviously, there’s ways, especially if you keep everything in the business like your expenses are in the business, you can be spending money, but to pay yourself a lot, it’s very difficult until you’re at a scale and you’re at a point where you’re taking profits. You’re