New Amazon Business – Today’s Big Q: When will I Start Seeing Profit on Amazon
When you’re planning what to sell in your business, you look not only at product demand or quality. Looking at the product’s profit margin is imperative. Calculating the revenue is also crucial when you begin selling your products or start investing in marketing efforts.
Evaluating and calculating the profit margin and revenue, respectively, are vital in assessing the profitability of your business. It will reflect your financial gain or earnings from all the costs and efforts you put into selling your products.
Once you start receiving orders and payments on your Amazon store, you’ll begin to wonder how long it will take to finally gain profit and see a return on investment. You might know a lot of testimonials from entrepreneurs who claim to have waited a few months or a few years before earning and seeing returns from their Amazon business.
You must have also read or heard somewhere that it only took some business owners a few weeks to recoup investments. These stories are plenty and typical when you search the web, after all. Although these keep your hopes up and allow you to learn from other entrepreneurs, the truth is, there are a lot of factors affecting the profitability of your business and how long you’ll get one.
Other business’ profits and waiting time to earn one will not determine your own.
Factors Affecting the Profitability of Your Amazon Business
In reality, a lot of factors affect your Amazon business’ profitability. Here are some examples of them:
- Product demand and existing market trends.
- Profit margin. Products with a low-profit margin mean the selling price is not much higher than the cost of the product, allowing you to earn only a meager amount.
- Competition in the industry or niche you chose to enter. If the industry you entered is already saturated, the competition is cutthroat, giving you fewer opportunities to make a sale.
- Relative costs. It refers to the ratio of prices between your products and some other things in your business affecting them like labor.
- Advertising expenses. Although your advertising and marketing efforts are sure to return an ROI, your revenue needs to cover the cost of marketing and advertising.
- State of economy. Depression, recession, or inflation will affect the demand for your products. Growth in the economy will help your products get better demand from consumers. Moreover, the continuous economic growth of Amazon can also help with your profitability.
- Overall management of your business. The decisions you make for your business and the overall handling of business affairs will either make you profitable or bankrupt in a worst-case scenario.
It’s worth learning about your business first, as well as the marketplace you choose to use in the conduct of your business. When you are well-informed not only about your products but also the industry you entered and the tools and platform you’re using to run your Amazon business,
it’s easier to get a clear idea of how much you’ll gain and how long it will take for you to earn from your e-commerce store. On that note, take the time to understand how Amazon works and how you can gain better profits from selling on the platform.
The Amazon Market Growth and Business Model
Amazon is undeniably one of the largest, most successful powerhouses in the e-commerce industry. From selling books online in 1997, it has branched out and expanded into different industries focusing on technological innovations and customer experience and has now grown as a business worth $1 trillion.
Statista projects that its e-retail sales alone will reach $468.78 billion this year, 2021. It is continuously climbing upwards in economic growth and tapping on new fields to offer its b2b and b2c customers new tools and services in the digital age.
About the Amazon business online marketplace, the opportunities it provides to startups and seasoned entrepreneurs to shift business to digital commerce are consistently ample and strong. Aside from selling on the platform, online store owners and entrepreneurs can take advantage of other programs such as Amazon
Business for purchasing and Amazon FBA for warehousing and fulfillment options. It is a melting pot of a vast collection of products, sellers, manufacturers, and suppliers from all over the world.
As if this isn’t enough, Amazon, being the “everything store,” offers digital solutions for your other business needs like advertising and marketing. Amazon advertising does not only include being able to market your brand and products on the marketplace but also in its on-demand and audio- and video-streaming platforms.
If you have an independent e-commerce website or physical store and using the marketplace only as another avenue, Amazon allows for multi-channel and omnichannel marketing.
Therefore, if your concern is if your Amazon business can be profitable, all the data leads to a definite “Yes!” However, your profitability will also depend on the strategies you implement and how you handle your business.
When will I Start Seeing Profit on Amazon: Tips and Tricks to Become a Profitable
1. Learn the industry and get familiar with your tools – If you’re new in the entrepreneurial scene or e-commerce space, there’s a high chance that a learning curve is hindering your Amazon sales performance. Acquaint yourself with all the tools available at your disposal.
Most of the time, it is not maximized enough by sellers. Make use of all the learning resources and continuously learn even if you are already making a sale. Remember that trends and strategies change with time, so it’s always an advantage when you’re updated.
2. Automate – Online business is only easier to handle because you can automate your business processes. Although the marketplace itself gives some free business analytics and data reporting, manually managing all the data going to and from your business can take so much time and be extra-exhausting.
Plus, it leaves more room for error because it cannot give the same accuracy that an automated system has. If you lack the budget yet to hire for help, you may not find the time to focus on other crucial aspects that actually lead to the profitability of your business. Marketing is one example that can bring fast ROI.
3. Invest and re-invest – You need to set aside a budget for promotion and for tools to help you manage your business. Though it may add to additional cost, it improves the management and performance of your business. Invest in digital solutions that will help smoothen the processes of your business.
When business is running smoothly, you’ll have more time and energy to devote to strategic and financial planning. Then, when sales pour in, re-invest in your business. Improve your product packaging, labels, customer service, or any other problem areas in your business so that you can attract more customers who will bring in more sales.
For tips on how to sell on Amazon, continue to read this blog: Top-10 Secrets to Selling on Amazon.
How long does it take to profit from my Amazon business?
Amazon business profitability is more of a case-to-case basis. There’s no one-size-fits-all timeline or formula in achieving a specific profit unless you have a well-defined business, business goals, financial report, and budget.
However, according to a Junglescout survey among Amazon sellers, those who have 1-2 years of selling experience on the marketplace reported that within three months, they already have a 20% profit. Within 3-6 months, they claimed their profits to be at 17%. For 1-2 years of selling, they noted a 16% profit. Selling for more than two years brings in a profit of 4%.
How much money do Amazon sellers make?
From the same survey, Amazon sellers make a profit ranging from $25,000 to $10,000,000. In terms of sales, Amazon sellers make at least $1000 per month on average. Some good businesses make $250,000 sales in a month which sums up to $3 million in one year.
How much does it cost to start selling on Amazon?
You can create an Amazon seller account for free. If you’re a small-time seller who doesn’t plan to sell more than 40 products per month, the individual seller account is the best fit for you. In this account, you’ll be charged $0.99 for every unit of the item you sell on the platform.
Positive business profitability on Amazon is more than possible. Still, there are many areas of consideration before you arrive at a point where you earn more than you sell. At the very least, your effort, persistence, and openness to exploring possibilities and opportunities will all contribute to your success in selling on Amazon.