Amazon profit guide (explaining 8 different ways in 2024)

According to Statista, 57% of sales on the online marketplace are made by third-party sellers. Anyone can start selling on this marketplace, regardless of the size of their business.

This means that you can also start a business on Amazon and earn passive income, as long as you have a laptop and a good internet connection.

In this guide, we’ll explore how to make money on Amazon through different selling models. And if selling isn’t for you, we’ll also show you how to make money on Amazon without selling.

Why is Amazon considered the top platform for selling?

 Amazon has been in the e-commerce business since the 1990s, and they have made a lot of money. The site’s annual revenue was $386.06 billion in 2021. This puts them above other competitors in the online marketplace such as eBay, Etsy, and Walmart.

A significant portion of Amazon’s revenue comes from e-commerce sales on its platform. They make a lot of money from fees charged to third-party sellers. Yes, third-party sellers make a lot of money on the platform. Thousands of small businesses have seen a significant increase in their sales and revenue when they started using the platform as a sales channel. Many regular individuals have diversified their income streams by selling here as well.

According to ZipRecruiter, the average third-party seller can make up to $45,000 per year (source: Zip Recruiter). That’s just the middle ground, which means you can still push those numbers higher if you can improve your sales and revenue. You can also get a slice of the pie once you learn how to make money on the platform. That’s why we wrote this article to explain how to make money on Amazon by selling products. And if you read to the end, you’ll discover the software we recommend to help increase your revenue.

Ways to generate income on Amazon: Selling products.

You can make money on Amazon with or without selling. However, selling is the most profitable way to take advantage of the platform’s dominance and widespread reach.

When it comes to selling on Amazon, there are two options widely available to interested parties. The first is to sell directly to Amazon. The second is to sell to customers. To better understand how to make money from this platform, let’s take a look at these two options below.

Sell ​​to Amazon directly (Amazon seller)

Are you familiar with the saying, “If you can’t beat them, join them”? Well, the same concept applies here as well. Amazon is a force to be reckoned with when it comes to making money in e-commerce. And if you’ve read Sun Tzu’s The Art of War, you should know that it’s unwise to compete against a giant.

Since it’s best not to compete with them, the opposite is true. That means you should partner with Amazon instead. If you’re a large manufacturer or distributor, your best bet for increasing your profits is simple. You can sell wholesale as a direct seller.

To do this, you need to be a direct supplier or manufacturer and sell wholesale goods to Amazon. You will then resell your goods to customers but under your own brand. There are several advantages to this selling model, such as:

Advantages of direct selling

1. No need to worry about shipping, delivery and fulfillment. All you need to do is send your goods to Amazon warehouse and collect your payment.

2. You don't have to worry about customer service either. Amazon will handle all refunds and returns, so you can sit back and relax.

3. Amazon Trust Badge will make selling easier. If you are selling under your own brand and you are relatively new to selling, it can be tough. When you become a direct seller, you don’t have to worry about all of this.

This business model is easier, and it guarantees you more sales because consumers trust Amazon. They are more likely to buy goods sold by Amazon rather than a random, unknown third-party seller.

However, selling to customers is best if you want to control your prices. This is especially true if you prefer to build brand awareness and your own customer list. If you want to create your own brand identity and name as a seller, selling directly to Amazon may not be the best option. Furthermore, you can only be an Amazon direct seller by invitation as well. This brings us to the second option, selling directly to customers.

Sell ​​directly to customers on  Amazon

Alternatively, you can sell directly to customers on the marketplace as a third-party seller. This option is your best bet if you want to build a distinct brand identity. People who already run small businesses but want to reach a larger audience can join the marketplace.

Amazon is open to anyone who wants to become a third-party seller. You must complete your registration and choose between an individual seller account and a professional seller account. Here are the differences between the two:

Individual Seller Account

With an individual seller account on Amazon, you don’t have to pay a monthly subscription fee. However, you have limited access to the advanced selling tools offered by Seller Central. Selling on restricted categories is also not available to you. Apart from that, you also have to pay $0.99 for each sale you make and other selling fees. If you’re testing the waters and aren’t looking to stock up on a huge inventory, this might be a good option.

Professional Seller Account

With a professional Amazon seller account, you have to pay $39.99 per month. However, there is no longer any need to pay $0.99 per product sold. Moreover, advanced APIs, third-party tools, and Amazon features are available to the professional seller. You can now use Seller Central to fulfill all your e-commerce needs. You can also apply to sell items in restricted categories.

Whichever model you decide to use, it’s entirely up to you. All you have to do is create an Amazon seller account, which can be done in just a few minutes. What’s more, you can always modify your selling plan at any time.

Although you may have to compete with Amazon in some product categories, selling through a third party still has greater profit potential. As a seller, you can control your prices and introduce new products. You can also start building your brand name. However, you will have to pay Amazon a commission to sell on its platform. And if you decide to use Amazon’s fulfillment service, also known as FBA, this may incur additional costs.

Third-party sellers account for more than half of the sales on the website, so this selling strategy is worth considering. As a more viable option, let’s discuss how to profit using different third-party business models.

How to Make Money on Amazon: Third Party Selling Models

Are you a private label seller and wondering how to make money on Amazon in the best possible way? Then you should sell your own branded products. Small independent businesses with an offline presence can also offer products through the private label selling model.

Private labels basically offer a generic product under your brand. You can choose to upgrade or enhance existing products. However, the goal of private labeling is to have your brand name, logo, and unique packaging.

Private labeling is the most profitable way to succeed on Amazon. Because you can control your costs during the manufacturing and distribution process, you can also control your profits. Controlling costs allows you to set competitive prices that give you a good profit margin. You can adjust your prices as you wish, and you can control your inventory. Plus, you can differentiate yourself from competitors because you are the exclusive seller of your own private label products.

Do you want to make money as a seller without building a brand or manufacturing private label products? Then you should be an Amazon wholesaler. Wholesalers buy branded products in bulk at a discounted price and resell them to customers at a higher price to make a profit.

Wholesale allows you to benefit from the reputation of the established brands you sell to. This way, you won’t have to spend a lot on marketing and promoting your products since the brands already handle that aspect.

However, wholesale means that you will face competition from other sellers who offer the same branded products as you. And because you don’t have control over the brand, you may find it difficult to differentiate yourself other than by lowering your prices. This is a problem that can reduce your profits.

• Retail Arbitrage

Both private labeling and wholesale require huge startup capital to source and ship products, and some potential sellers may not be able to afford it. This is where retail arbitrage acts as the perfect compromise.

If you are thinking about how to make money on Amazon without a lot of upfront capital, retail arbitrage is the perfect solution. You should buy items at a discounted price during a sale or liquidation at your local retail stores. Examples of such retail stores are popular discount places like Walmart or Costco.

After purchasing items at a discount, you can start listing items for sale at a higher price. This is how you make money on Amazon through retail arbitrage. Since this method is cheap and easy to start, many third-party sellers who do not have their own products use this model. However, be prepared to deal with low profit margins and intense competition since you do not have a monopoly on your items.

• Online arbitrage

Online arbitrage works similarly to retail arbitrage in that you buy discounted products to resell them on Amazon at a higher price. However, the difference is that you are purchasing the cheap or discounted products from another online marketplace, rather than a retail store. You can get low-cost items from e-commerce sites like Etsy, Walmart, Target, etc.

Online arbitrage is one of the easiest ways to make money because you can do it from the comfort of your home. You don’t have to go from one retail store to another looking for bargains and deals. You also don’t have to invest a lot of capital up front to get inventory.

If you're a crafter, you can sell handmade products through the Amazon Handmade program. Handmade sellers can sell handmade products in 14 categories, including accessories, shoes, handbags, clothing, jewelry, watches, toys, and games.

However, Amazon Handmade is an invite-only program, so you will have to apply and get approved. To be approved as a Handmade seller, your items must be designed and produced by you or a small group of family members and friends. This means you cannot outsource the design and production to third parties or resell handmade items made by someone else.

Branded goods

If you’re a creator, you can sell branded merchandise through Amazon’s print-on-demand service, Merch by Amazon. These designs can be printed on products like t-shirts, sweatshirts, jackets, pillows, and more.

With the Amazon Merch business model, you don’t have to purchase or maintain inventory. All you have to do is upload your original designs to the platform. When a customer places an order, Amazon will print the design on their favorite product and ship the product to them.