Amazon FBA OA (Online Arbitrage) Business Models

[smtlaissezfaire]

How big / profitable can these businesses get?

I see a lot of low 7 figure sellers on social media but I have to wonder how much profit they are actually making.

Specifically: I've been using some automation + VAs to find deals online, then using prep centers to package the goods and send them to AMZN. I'm a programmer so I can write the automation myself, or fallback to 3rd party tools like tactical arbitrage if need be.

I joined PAC and have been trying to scale up an OA replens business. I also bought coaching from Jim Cockrum's org but so far have invested heavily (for me) in both the coaching + inventory buys and have been somewhat disappointed. (My Coach is very knowledge but not focused on OA Replens specifically). Still waiting to see if the inventory can turn a profit.

Still, it's been a valuable learning experience, so I'm glad I've done it.

So...how profitable / big can these businesses get? And I assume they aren't sellable because they violate both C + E in CENTS?

And how much cash flow could these generate if they were 90% automated?. Assuming low 7 figures and 20% margins = presumably $200-$600k / yr?

 

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[biophase]

How big / profitable can these businesses get?

I see a lot of low 7 figure sellers on social media but I have to wonder how much profit they are actually making.

Specifically: I've been using some automation + VAs to find deals online, then using prep centers to package the goods and send them to AMZN. I'm a programmer so I can write the automation myself, or fallback to 3rd party tools like tactical arbitrage if need be.

I joined PAC and have been trying to scale up an OA replens business. I also bought coaching from Jim Cockrum's org but so far have invested heavily (for me) in both the coaching + inventory buys and have been somewhat disappointed. (My Coach is very knowledge but not focused on OA Replens specifically). Still waiting to see if the inventory can turn a profit.

Still, it's been a valuable learning experience, so I'm glad I've done it.

So...how profitable / big can these businesses get? And I assume they aren't sellable because they violate both C + E in CENTS?

And how much cash flow could these generate if they were 90% automated?. Assuming low 7 figures and 20% margins = presumably $200-$600k / yr?

My guess is that net your margin will be more like 3%-10%.

 

[Mike Ronin]

How big / profitable can these businesses get?

I see a lot of low 7 figure sellers on social media but I have to wonder how much profit they are actually making.

Specifically: I've been using some automation + VAs to find deals online, then using prep centers to package the goods and send them to AMZN. I'm a programmer so I can write the automation myself, or fallback to 3rd party tools like tactical arbitrage if need be.

I joined PAC and have been trying to scale up an OA replens business. I also bought coaching from Jim Cockrum's org but so far have invested heavily (for me) in both the coaching + inventory buys and have been somewhat disappointed. (My Coach is very knowledge but not focused on OA Replens specifically). Still waiting to see if the inventory can turn a profit.

Still, it's been a valuable learning experience, so I'm glad I've done it.

So...how profitable / big can these businesses get? And I assume they aren't sellable because they violate both C + E in CENTS?

And how much cash flow could these generate if they were 90% automated?. Assuming low 7 figures and 20% margins = presumably $200-$600k / yr?

I joined the PAC about two months ago and signed up for the coaching program last week. I've been pretty impressed with what Jim offers, especially compared to all the scams out there in the e-comm world. Their yearly conference ends tomorrow and I have livestreamed most of the sessions. It seems getting to about 20-30k in monthly sales in six months is doable at a 10-20% net margin. Many of the coaches and conference presenters have scaled to 660k-1.5 million within a few years. Of course, as they scale they add VA's, repricers, prep centers and employees or contractors.

i want to revisit this in a couple of months and see what we have learned and thoughts after a little time on the ground spinning it up. Good luck!

 

[smtlaissezfaire]

My guess is that net your margin will be more like 3%-10%.

Based on?

 

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[smtlaissezfaire]

I joined the PAC about two months ago and signed up for the coaching program last week. I've been pretty impressed with what Jim offers, especially compared to all the scams out there in the e-comm world. Their yearly conference ends tomorrow and I have livestreamed most of the sessions. It seems getting to about 20-30k in monthly sales in six months is doable at a 10-20% net margin. Many of the coaches and conference presenters have scaled to 660k-1.5 million within a few years. Of course, as they scale they add VA's, repricers, prep centers and employees or contractors.

i want to revisit this in a couple of months and see what we have learned and thoughts after a little time on the ground spinning it up. Good luck!

Where are you in terms of selling on amazon? (have you already setup your account and/or sold previously on amazon?).

What strategy are you planning on using (RA, OA, Replens OA/RA, Wholesale, Private label)?

 

[Saad Khan]

Based on?

Selling.

One of my clients is doing wholesale FBA and we're currently selling at breakeven to gather some sales history for our account. It will take a month or two of sales history before we can ungate other categories.

Statistically, the net margins trend goes like this

Private label > Wholesale > OA > Dropshipping

With Private Label having the most net margins and Dropshipping having the least net margins

 

[Mike Ronin]

Where are you in terms of selling on amazon? (have you already setup your account and/or sold previously on amazon?).

What strategy are you planning on using (RA, OA, Replens OA/RA, Wholesale, Private label)?

I have set up my Amazon professional seller account as well as an eBay business account. I have not started sourcing yet, that will begin next week. I plan on starting with mainly OA replans, but I will do some RA as well occasionally. Once I get my feet wet and learn the process, I will begin to move into wholesale and branded bundles. At least that's the plan for now, but as I learn and grow I could pivot into another (or several) different strategies.

 

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[biophase]

Based on?

Based on my experience selling on Amazon.

It would be hard to get 20% if you were the factory or manufacturer. If you are doing retail arbitrage I’d put your margin around 3% after all fees.

Have you looked at Amazon’s fee structure?

 

[smtlaissezfaire]

Based on my experience selling on Amazon.

It would be hard to get 20% if you were the factory or manufacturer. If you are doing retail arbitrage I’d put your margin around 3% after all fees.

Have you looked at Amazon’s fee structure?

Yeah, I understand parts of it extensively, other parts not as well, as I've written code around it (and lots of bugs around it too, which has definitely cost me $$$s). When you write code around it, you actually need to understand in a deeper way than people who use off the shelf tools do.

I've found there are two parts to it: 1) understanding the actual fee structures in a detailed way 2) having an intuition about it.

I've been selling books both FBA and MF so have a pretty good understanding (esp. MF) on cost structure.

With replens, less so, as I'm doing a lot of grocery and really just started understanding the S&L fee structure. There are also ambiguities there - like - is it better to price my product at $15 and split with the competition or put it at $12 and be the only seller, etc?

It's also kind of a moving target, as even the small and light program is apparently changing in the next 2 months.

 

[smtlaissezfaire]

I have set up my Amazon professional seller account as well as an eBay business account. I have not started sourcing yet, that will begin next week. I plan on starting with mainly OA replans, but I will do some RA as well occasionally. Once I get my feet wet and learn the process, I will begin to move into wholesale and branded bundles. At least that's the plan for now, but as I learn and grow I could pivot into another (or several) different strategies.

Nice, would definitely like to hear updates.

One thing that's delayed my plans considerably is just how long it can take from inventory buys to "getting it on the shelf" at amazon.

 

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[Mike Ronin]

Nice, would definitely like to hear updates.

One thing that's delayed my plans considerably is just how long it can take from inventory buys to "getting it on the shelf" at amazon.

That's definitely a lengthy process from everything I have heard, I will find out soon enough. It seems 6-8 weeks before getting your first payment from Amazon is probably pretty quick, and it seems like it takes them 2-3 weeks to get inventory checked in for FBA. We shall see

 

[smtlaissezfaire]

That's definitely a lengthy process from everything I have heard, I will find out soon enough. It seems 6-8 weeks before getting your first payment from Amazon is probably pretty quick, and it seems like it takes them 2-3 weeks to get inventory checked in for FBA. We shall see

Sounds about right. Also consider how long it might take a vendor if you are buying via OA (and their shipping time), your time (or prep center time) to prep + ship, how long it might take to pick it up from the store / etc.

Amazon pays out roughly every 2 weeks, but they also hold back a substantial amount (usually half) in case of lots of returns / refunds.

Usually I've seen shipping take roughly a week, then several weeks after that before it's really ready to be sold. They will list it as available as soon as it gets to the warehouse, but often they have a two week buffer (I guess for them to properly stock it in their warehouses before it becomes prime eligible) so it will be last in the list of items offered to the customer (or at least that's what I've seen).

Plus, you have to account for some time for the item to sell. Maybe that's in a few days or a few weeks. (If you sell books, you know this can be really considerable for long tail items - like books that sell for $100 but might only sell once a quarter.)

So with all of that included, going from spending $1 to getting $2 might take 2-3 months or longer. Just something to consider. And a reason some people really like MF'ing items (you could buy it in a store today, list it, and if it's fast moving, have an order later today, ship it out tomorrow, and presumably make the $2 a month from now (when accounting for account level reserves - vs. 2-4 months from now with FBA).

 

[biophase]

Yeah, I understand parts of it extensively, other parts not as well, as I've written code around it (and lots of bugs around it too, which has definitely cost me $$$s). When you write code around it, you actually need to understand in a deeper way than people who use off the shelf tools do.

I've found there are two parts to it: 1) understanding the actual fee structures in a detailed way 2) having an intuition about it.

I've been selling books both FBA and MF so have a pretty good understanding (esp. MF) on cost structure.

With replens, less so, as I'm doing a lot of grocery and really just started understanding the S&L fee structure. There are also ambiguities there - like - is it better to price my product at $15 and split with the competition or put it at $12 and be the only seller, etc?

It's also kind of a moving target, as even the small and light program is apparently changing in the next 2 months.

Maybe I don't understand OA enough. Are you purchasing something online, having it shipped to you, then sending it back into Amazon and selling FBA? Or are you selling a listing FBM and when you get a sale, then purchasing it online somewhere else and shipping it directly to the buyer?

If you find a product and sell for $12, how much are you purchasing it for online?

 

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[smtlaissezfaire]

Maybe I don't understand OA enough. Are you purchasing something online, having it shipped to you, then sending it back into Amazon and selling FBA? Or are you selling a listing FBM and when you get a sale, then purchasing it online somewhere else and shipping it directly to the buyer?

Either:
* purchasing it online, and then having it shipped to me or a prep center
* alternatively, purchasing it online, then having it shipped to the store, and I go to the store to pick it up (or send my scout to pick it up and pay him a fee).

If you find a product and sell for $12, how much are you purchasing it for online?

$1.25 purchase price, but need to buy in bulk and often sell in multipacks or combine different items

 

[smtlaissezfaire]

Or are you selling a listing FBM and when you get a sale, then purchasing it online somewhere else and shipping it directly to the buyer?

BTW This is dropshipping and pretty sure it's again AMZN TOS and probably gets your seller account shut down.

 

[biophase]

Either:
* purchasing it online, and then having it shipped to me or a prep center
* alternatively, purchasing it online, then having it shipped to the store, and I go to the store to pick it up (or send my scout to pick it up and pay him a fee).



$1.25 purchase price, but need to buy in bulk and often sell in multipacks or combine different items

So I don't understand why this is called online arbitrage when it's basically the same as purchasing wholesale and selling at retail?

My understand of arbitrage is to purchase one thing at a lower price and sell at a higher price right away. You are taking advantage of the inefficiencies in the market. To me purchasing in bulk to get a lower price isn't really arbitraging. I mean I buy things at $2 and sell for $15 all day. But I don't see that as arbitraging.

BTW This is dropshipping and pretty sure it's again AMZN TOS and probably gets your seller account shut down.

Yes, I understand that. I just didn't understand the distinction of online arbitrage so I thought maybe it was another fancy term for dropshipping.

 

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[smtlaissezfaire]

So I don't understand why this is called online arbitrage when it's basically the same as purchasing wholesale and selling at retail?

I don't do wholesale, but my understanding is: 1) you always need to buy in bulk 2) that causes purchase size (hence price) to be much larger (say, spending $20 on one item vs. $1000 on 50 because that's the minimum qty) 3) you often need relationships with the manufacturer.

My understand of arbitrage is to purchase one thing at a lower price and sell at a higher price right away. You are taking advantage of the inefficiencies in the market. To me purchasing in bulk to get a lower price isn't really arbitraging. I mean I buy things at $2 and sell for $15 all day. But I don't see that as arbitraging.

I just happen to be buying in bulk, def. not required.

 

[Mike Ronin]

So I don't understand why this is called online arbitrage when it's basically the same as purchasing wholesale and selling at retail?

My understand of arbitrage is to purchase one thing at a lower price and sell at a higher price right away. You are taking advantage of the inefficiencies in the market. To me purchasing in bulk to get a lower price isn't really arbitraging. I mean I buy things at $2 and sell for $15 all day. But I don't see that as arbitraging.


Yes, I understand that. I just didn't understand the distinction of online arbitrage so I thought maybe it was another fancy term for dropshipping

So I don't understand why this is called online arbitrage when it's basically the same as purchasing wholesale and selling at retail?

My understand of arbitrage is to purchase one thing at a lower price and sell at a higher price right away. You are taking advantage of the inefficiencies in the market. To me purchasing in bulk to get a lower price isn't really arbitraging. I mean I buy things at $2 and sell for $15 all day. But I don't see that as arbitraging.


Yes, I understand that. I just didn't understand the distinction of online arbitrage so I thought maybe it was another fancy term for dropshipping.

Most items are actually purchased retail for OA, at least as taught in the PAC, though of course you look for items steeply discounted via sales, clearances, etc. Products are analyzed using Keepa software to determine the number of drops and other data points to see if it is worth purchasing a few to test. Drops likely indicates sales but not guaranteed. It's a pretty solid indicator of sales, but sales from Amazon are not shared with sellers.

Wholesale is a separate strategy that is considered more advanced after learning the basics of RA/OA. It is a good route after learning the basics, which for now is my path forward. Dropshipping is not taught in the PAC and frowned upon in the PAC program.

 

[volkov]

Jim Cockrum is one of the real gurus on Amazon selling today. Do you have any luck with replens?

 

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[smtlaissezfaire]

Jim Cockrum is one of the real gurus on Amazon selling today. Do you have any luck with replens?

Correct, purchased PAC and also bought their coaching program (~ $5k I believe).

No, replens hasn't worked out great for me so far, although I was trying it.

I think I have some structural advantages (I'm a software developer so was able to integrate with SP-API - Amazon's API) to get near real time price updates so I wouldn't end up rebuying replens. I was also able to manually program a dashboard that others would have to pay for (and probably wouldn't work as well) and could write scrapers to see what was in stock etc from my main supplier.

OTOH, I also have some structural disadvantages:
* I'm in CA, so everything is more expensive than being in the south / midwest (rent, employees / freelancers, even the cost of physical products when doing RA, taxes, etc)
* Opportunity cost is really high for me. I could do software consulting and make $150 - 300k/yr just by working a "9-5". And if I really applied myself and decided I _had_ to work at FB or one of the giants, I'm sure I could make double that with equity.

After talking to some of the amazon people, I _highly suspect_ that most aren't taking home $300k net. And I bet, more than ever, that most who look really good on social media are making ~ 100k/yr (aka roughly the value of professional job), if netting anything at all. Just my gut / 2c. I'm sure there are outliers though.

What has worked for me re: replens, is doing replens in some of the categories that I know _no one_ is really doing replens in. I won't say more - such is the nature of an arbitrage business - but the opportunities are far and few between in this category - so not enough to build a real business.

 

[Mike Ronin]

Jim Cockrum is one of the real gurus on Amazon selling today. Do you have any luck with replens?

I'm too new into the game to know for sure yet, but I do put faith in what others have done. The key is to build up the replens model and then run it with VA's and a prep center so it becomes passive. Once that is done, move on to other strategies like wholesale, branded bundles, private label, etc. And it isn't just Amazon, it's e-comm in general on multiple platforms so multiple income streams are created. That's the plan for now, time will tell.

Jim is awesome, I'm in the coaching program and he reached out immediately to make sure I had his personal cell number if I needed him. We corresponded for a bit, he is really down to earth and a solid guy and good human.

 

[smtlaissezfaire]

My guess is that net your margin will be more like 3%-10%.

BTW, ran into this - some interesting datapoints (linked to by Ryan Grant in his newsletter, another person I like in the amazon space):

https://www.reddit.com/r/FulfillmentByAmazon/comments/16ekzx2 View: https://www.reddit.com/r/FulfillmentByAmazon/comments/16ekzx2/what_is_your_average_gross_profit_margin

 

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[Saad Khan]

OA on Amazon is the fastest way to get your account suspended. Will only recommend OA to someone I really don't like.

 

[smtlaissezfaire]

OA on Amazon is the fastest way to get your account suspended. Will only recommend OA to someone I really don't like.

Don't think so...why/how?

But dropshipping, yes.

 

[Tjack102]

how is it going? I started the PAC and sourced my first product on Sep 18th and got my first sale exactly a month later. I guess this time of year it takes a while for things to get processed into fba. fast forward to now, things are going well and i'm still learning. I want to start wholesale or branded bundles next but haven't gone through the courses because I don't want to jump from one thing to another without establishing processes.

Pretty cool making sales while I sleep! It's my first time experiencing that and now I don't wanna give it up lol

 

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