Amazon has become a powerhouse in the retail industry, with a significant portion of its sales coming from third-party sellers. These sellers have the opportunity to utilize various business models to sell their products on the platform, each with its own advantages and challenges. According to a survey conducted by Jungle Scout, there are six popular Amazon business models that sellers commonly use: Private Label, Wholesale, Retail Arbitrage, Online Arbitrage, Dropshipping, and Handmade.
Private Label is the most popular business model among Amazon sellers, with 54% of sellers using this method. This involves rebranding or renaming a product that is already being manufactured under their own label. While it can be more expensive to start, with an average of $2,500 or more spent by 61% of sellers, it can also be highly profitable. 56% of private label sellers make $5,000 or more in monthly sales, with 35% realizing a profit within the first six months.
Retail Arbitrage is a method where sellers find low-cost or discounted goods in physical retail stores to resell online. It is the least expensive way to start selling on Amazon, with 49% of sellers spending less than $1,000 to get started. However, it is also among the least profitable, with 62% of sellers earning less than $5,000 per month.
Online Arbitrage is similar to retail arbitrage but involves finding products on one website or online marketplace to resell on Amazon. 58% of online arbitrage sellers spent less than $2,500 to start, and 55% earn less than $5,000 per month. However, 54% see profit margins of 16% or higher.
Wholesaling involves purchasing goods in bulk to sell as individual units on Amazon. 47% of wholesalers spent less than $2,500 to get started, with 61% earning more than $5,000 per month. Dropshipping is a business model where sellers do not keep their own inventory but transfer orders directly to the manufacturer or supplier. 50% of dropshippers spent less than $2,500 to start, with 39% earning $5,000 or less per month.
Handmade sellers create their own products to sell on Amazon. While it is among the least costly at startup, with 53% spending less than $2,500, it is also among the least profitable. 50% of handmade sellers earn less than $5,000 per month, with 52% having profit margins between 11-25%.
Each of these business models has its own set of challenges, from finding products to optimizing listings and managing expenses. However, with the right strategies and resources, sellers can overcome these challenges and find success on Amazon. Whether it’s through private label, retail arbitrage, online arbitrage, wholesaling, dropshipping, or selling handmade products, Amazon offers a platform for sellers to reach a wide audience and grow their businesses.
