If someone wants to be a successful businessman by using the Amazon marketplace he or she needs to know about the business models of Amazon. Sellers are earning handsome profits by using the world’s largest online marketplace. There are five popular business models of Amazon. According to your product, budget and goals you can choose any of its models. None of them can be called a right or wrong model. Anyone can succeed by using Amazon’s platform to boost his business.
Sellers’ growth is also the growth of Amazon. In this article, we will try to discuss all these business models so that after reading this article you may choose any business model which is the best fit for your business. If one of the models is suitable for one business or seller it does not mean that it is suitable for all others. Millions of sellers are using these business models and promoting their business with Amazon. Eventually, everyone wants to succeed and puts the best effort into the growth of business and to increase revenue.
Five Types of Business Models of Amazon
1. Private Label
3. Retail Arbitrage
Private Label Model
Sourcing product from a third party which is already being manufactured on their own label and renaming/rebranding them is known as Private Label Model. It is usually considered one of the most expensive business models of Amazon. Sellers have to start from scratch to build their brand reputation on Amazon. So sellers need to have some extent of experience in managing inventory, marketing, and branding of the products.
Wholesale model consists of purchasing a large volume of items at low or discounted prices directly from suppliers and selling those products on Amazon at a high price in retail. In this model, you have to maintain a bulk store. Wholesale can leave a lot of unsold which may become outdated or obsolete if you cannot predict the marketplace right. A huge amount has to invest however if you manage well to arrange/purchase products at a lower cost, you may get a good profit margin. On the other hand, it is a very risky model.
For entry-level people, Retail Arbitrage is one of the most popular business models of Amazon. In Retail Arbitrage, you purchase the product from a retail store at a lower price and resell it on Amazon at a higher price. Seller profit is the difference between the sale price of the product and the purchase price of the products minus Amazon’s fee. The sellers with a tight budget may start with small selling and gradually work way up on large volume.
In Dropshipping seller has no brand, no inventory rather directly transfers customers’ orders to the actual supplier or manufacturer. In other words, it can be called as selling of products on behalf of a supplier. In this case, the seller has no control over inventory, quality, and shipping methods. Any delay due to non-availability of stock or delivery of damaged product directly hits the reputation of the supplier.
In this case, people sell their own created/manufactured products on Amazon. On one side you have complete control over the quality of the product but on the other hand, you need a lot of time, ideas, workspace, resources, and effort. Usually, home decors, jewelry, and artworks come under this umbrella.
How to choose any business model?
To choose any business model, you need to keep in mind
- The flexibility of work hours and workspace
There are always pros and cons in every type of model. So the person working for it can decide to choose any them only by himself. None of the models can be called fit for everyone.