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What Are the Different Business Models That You Can Use with Selling on Amazon?

Posted by Nate Lind in Resources

Are you thinking about diving into the e-commerce market? You are not alone. This is a fast-growing industry and one that generates tremendous interest when we help sell a company as the business brokers for an e-commerce platform or company very successful. There are several different ways that you can dive into the e-commerce marketplace and selecting your business model gives you the proper framework to decide how you’ll move forward and what your business will ultimately look like now and in the future. Amazon is well suited to a variety of different kinds of business models that mean that you can pick the one that is most aligned with your individual needs and your desires in terms of time investments, your personality, and different budgets.

The biggest thing that will help direct which of these marketplace options you’ll consider for Amazon sellers is whether or not you know what you want to sell on Amazon already. Trying to find a low competition and yet high demand product or to validate your market opportunity can help you figure out whether or not you already have something in place or something you can make yourself. There are a couple of different business models that are very popular for Amazon sellers. These include handmade, drop shipping, reselling, whole selling, and private label. Handmade is for those Amazon sellers who are creatives and make products on their own. This might include clothing or gifts.

There is a separate section on the platform and, in total, out of all of the Amazon sellers who are active, approximately 6% sell the Amazon handmade. Drop shipping received a lot of news coverage about 8 to 10 years ago when it first became a very prominent model for selling in e-commerce. Drop shippers market products online but sell the products that truly belong to another supplier or manufacturer. All kinds of Amazon sellers can be successful, but dropshippers get an additional benefit of shipping inventory that is requested first.

The drop shipper decides to purchase the product from the supplier at each time when a product is sold. When it comes to reselling, resellers use a practice known as arbitrage. The buy a bulk amount at discount products, at big box stores or even on sites like eBay and sell them through Amazon. For wholesale companies, this involves purchasing another company’s branded products in bulk to sell on Amazon.

Nearly 30% of Amazon sellers today use the wholesale model. Finally, private label is another final option. This is the practice of manufacturing bulk products that are sold under your own label or brand. A great majority of existing Amazon sellers today use the private label business model. In fact, over 71% of them are private labelled.