Ever wonder how to people make money selling wholesale on Amazon? Andrew trawled Quora and found someone to teach us how to do it.
Eddie Lichstein has been in the e-commerce business for 13 years selling wholesale on Amazon. He has always been a car nut and runs a site, TH Motorsports, which is the Amazon of car parts. He also runs Rejoiner, a site to help e-commerce business owners improve sales. Eddie has been very generous answering questions on Quora and he came here today to answer our questions.
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America Was Built On Small Business
Small business makes up 99.7% of US employer firms. America has always been a country that fosters small business. And right now, certain sectors like e-commerce, are like the Wild West. In 20 or 30 years, people will look back with amazement at how easy it is to make money right now.
So why aren’t more of us starting small businesses? Because we get caught up in the details; how do I incorporate? I’ll need an accountant, a lawyer. I’m just a regular person, I can’t deal with all that.
Stop thinking that way. You can jump into e-commerce like we’re going to describe with no capital. All you need is a credit card (that you pay off in full every month!) and enough time (but it doesn’t take too much) to do some research and leg work.
If You Have An Awesome Dildo, It Will Sell
Eddie said that I had couldn’t resist using it as a headline. It’s not quite that simple. You have to love dildos, but really, who doesn’t? The barrier to selling through e-commerce is very low but you will be more successful if you sell something you love because the things you love, you know a lot about.
Look around you right now. There are probably half a dozen small things in site that are not terribly expensive that you know a lot about. Choose three or four things and we’ll move on to the next part of the plan.
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Jungle Scout is a site that allows you to do research into what sells on Amazon which is what every e-commerce seller wants to know. We used carrot/potato peelers in our example. You research the peelers and you want something that sells somewhere in the middle.
If you choose top sellers, you won’t be able to compete with the sellers already peddling those. If you choose those at the bottom, there aren’t enough people buying them. Eddie figures that you will spend about 48 in total researching the product you want to sell.
Ali Baba is China’s version of Amazon. But you can get a lot of items there very cheaply because it costs less to manufacture in China than in other places. So you buy 100 peelers. Remember, you are still not really spending money. You’re financing this on net 30 terms because you’re charging it and at least for your first foray into this, you should choose an item that is inexpensive so that if it doesn’t work out, you’re not out much money.
You also aren’t taking much risk because you know what will sell after your research on Jungle Scout.
Become A Detective
You know how to make this whole thing cheaper and more profitable? Cutting out the middleman, Ali Baba in this example. Ali Baba isn’t making those peelers. They’re are getting them from a supplier. You want to see if you can track down the supplier. Who may not be the manufacturer, so you might have to track them down too.
There is a clue that you’re peelers are coming from a supplier. If it takes a long time to receive it after placing the order. It’s taking longer because they don’t have a warehouse full of peelers. They have to place an order with the manufacturer and the manufacturer ships it.
You can try to find out where the peeler came from by looking at the mailing label for information or trying to wheedle it out of the courier, UPS, Fed Ex, etc, who shipped it. At this point, we’ve spent 2-3 weeks on this endeavor and maybe a couple of hundred dollars, depending on the product you choose.
Amazon Is Your Staff
If you find a willing manufacturer, they may send your peelers right to Amazon and you don’t ever even see them. Eddie was pretty cagey about this but I think we can all read between the lines. If the manufacturer can just send them to Amazon, instead of to you, that’s what they’ll do.
So the smart thing to do is to lie. You’re going to sell these peelers at tent revivals. But of course, you just send them to Amazon. This means you don’t need a shipping/receiving department (you), a customer service department (you), no logistics department (also you). Amazon handles it all.
Right now, we’re about six weeks in.
Great, your peelers are on Amazon and the bucks should start rolling in. Except, no one knows you’re there selling peelers because you’re at the end of the line. One way to get to the front of the line (for now) is by getting lots of reviews.
You can ask your family and friends for reviews. You can send your peelers to “professional” reviewers. Or you can pay Amazon for their version of Adwords and they will jump you up the queue. The more reviews your product receives, the higher your ranking.
We’re about two months in and now we’re going to have to spend some money, either sending free peelers to potential reviewers or paying Amazon to push us up the rankings. But that’s not a bad thing according to Eddie, you have some skin in the game and you start making more thought out decisions. This still very cheap lesson is going to help us down the road.
The Long Con
If you’ve done your research and gotten enough reviews to get your peelers seen, you can be making money in as little as three months. There aren’t many businesses you can start from scratch and start making money that quickly. Drug dealing and prostitution come to mind but I couldn’t think of much else.
Now that you know how things work, you can rinse and repeat with different products. HOWEVER, none of this is sustainable. The suppliers aren’t going to play ball with you once they figure out what you’re up to. They’ll just sell direct to Amazon.
And Amazon isn’t going to allow reviews to dictate rankings forever either because they know people have figured out various ways of gaming the system. So what is the point of doing this?
As we said, there aren’t a lot of businesses with such a low bar for entry where you can start making money fast. You will also be learning a lot of lessons without much time or financial risk. How to research and source products, how to develop relationships with suppliers, how to advertise.
All of these lessons can help you start a sustainable business on better footing. You don’t want to do this kind of arbitrage forever. You aren’t creating anything, adding value to anything. At a certain point, you aren’t even doing anything because it’s all so self-sustaining. And while you’re sitting at a job you hate, that might sound ideal, it’s really not enough for most of us.
And you won’t be able to do this forever, as we said, this is all going to come tumbling down eventually. Get in, learn some lessons, make some money, and get out so you can take that money and those lessons and do something more valuable and interesting.
Dirty Bastard: A dark beer with hints of smoke and peat.
THMotorsports.com: Eddie’s first site devoted to selling car parts.
Rejoiner: Helping e-commerce owners improve sales.