Most of us are familiar with Amazon by now — and have probably spent too much there. But did you know that SellerApp, 63% of Amazon sellers become profitable in the first year? If that’s true, it would be great to make some passive income on Amazon.
Passive income refers to income you receive from business activity other than employment. This could be from passive business activities, which the IRS defines as business activities in which you don’t materially participate.
However, passive doesn’t mean effortless. It can take a lot of work upfront to get your passive income streams to the point where they make a significant amount of money.
Still, there can be a lot of benefits to earning passive income from Amazon. This can be a scalable business that eventually offers you flexibility and residual income. Here’s how to get started earning passive income on Amazon.
Strategies for Earning Passive Income on Amazon
Amazon is a marketplace for selling goods and services. This means most of the income you earn on Amazon will come from sales.
But how do you make money selling things on Amazon? Two big examples are selling physical products and digital products.
While you can sell both, most sellers focus on one or the other, at least initially. In fact, most sellers niche down further, focusing on something like FBA or retail arbitrage.
Let’s take a closer look at either of these strategies and how they might work.
Selling Digital Products
Digital products are things like ebooks, audiobooks, courses, and other non-tangible items. Here are some ideas to make money on Amazon by selling digital products.
Kindle Direct Publishing (KDP)
Remember that Amazon began as a way to sell books online. Today, you can use KDP to sell books digitally on Amazon.
With this method, you can self-publish ebooks and use Audible to publish audiobooks.
You’ll need to decide whether to use one of the two formats — or both. Each has its own benefits and drawbacks.
Once you decide on your format, research popular genres and look for something that interests you. These might include romance, self-help, business, and, of course, finance.
Then, write your book, formatting it to fit the Kindle. You can also hire designers to help you create a captivating cover. The goal is to draw people in as much as possible.
You can use keyword research tools to optimize your book’s title, subtitle, and description to make them more discoverable.
You can also engage with the community around the topic or start a blog discussing related issues to grow your reach.
Print-on-Demand (POD)
Print-on-demand (POD) is a business model where products are created only after receiving an order. For instance, this might include products like custom t-shirts or business cards.
You can create many different products with this strategy, such as apparel, accessories, home decor, and stationery. You can sell your products via Amazon Merch on Demand, one of Amazon’s many services.
A benefit of this approach is you can sell your products without upfront inventory or fulfillment costs. In addition, you can scale your production based on demand.
Plus, there is passive income potential with this idea.
To decide what you should sell, research popular themes and designs using tools available on Amazon and third-party research tools. Then, create your own art using graphic design software. Or you can hire freelancers such as freelance writers in addition to independent artists.
Another possibility is to partner with illustrators, photographers, or other artists to create unique designs. The most important thing is you don’t need to do everything yourself.
Then, use social media or run ads to promote your business. Eventually, you can start selling products without much work needed on your part.
Digital Assets
Another way to make passive income on Amazon is with digital assets. Generally, this refers to products like online courses, printables, or software applications.
The benefit of digital assets is you do almost all the work upfront, then kick back and reap the rewards. Once the product is done, you make it available online, and people pay you to access it.
Customers might turn your products into tangible items, such as when creating planners or printables. However, that is done on their end — there’s no need for you to create physical products.
Of course, you’ll need to identify in-demand niches and product ideas and then promote your product when done. It won’t sell itself. But if you can find the right product for the right audience, you can turn this into passive income on Amazon by selling it there.
Selling Physical Products
It can be slightly tougher to make passive income on Amazon by selling physical products. Often, that means maintaining physical inventory and shipping products to customers.
However, there are a few ways to make it work, even with physical products. For example, you might try Amazon FBA, dropshipping, or other methods. We’ll cover those here.
Fulfillment by Amazon (FBA)print
Fulfillment by Amazon (FBA) is one of the most popular ways to make passive income from Amazon. Rarely will Amazon FBA be completely passive, but this strategy can enable you to make money on Amazon with less hands-on involvement.
What is Amazon FBA?
Amazon FBA is a service where Amazon stores your inventory, picks and packs orders, ships orders to customers, and handles returns and customer service. This removes a lot of the involvement you would normally have when dealing with selling physical products.
In addition, using Amazon FBA means you can take advantage of Amazon’s fast shipping times and improved customer satisfaction. This can lead to higher customer satisfaction and more repeat business.
Also, Amazon FBA products are eligible for Amazon Prime. This can significantly increase visibility and attract more customers.
However, Amazon FBA can also require a significant upfront investment in inventory, packaging, and other costs. Plus, Amazon FBA charges ongoing fees, such as fulfillment fees and storage fees. These can lead to lower profit margins.
Private Label
Did you know you can earn passive income on Amazon by selling products under your name that are manufactured by a third party? It’s true, and this is exactly what private label means when selling on Amazon.
How Private Label Works
Here’s how private label works:
- You come up with the product idea and specifications. This could be anything from clothing and accessories to food and household goods.
- The manufacturer produces the product according to your specifications. They handle sourcing materials, manufacturing, and packaging.
- You sell the product under your own brand name and set the price. You’re responsible for marketing and distribution.
To succeed using this strategy, you must find a profitable niche. This means finding one with high demand and not a lot of competition. That’s easier said than done, but tools like Jungle Scout and Helium 10 can help you find potential niches.
Then, you need to find a manufacturer that can produce your product according to your needs. There are lots of online platforms you can use to find manufacturers.
Once you have created your products, list them on Amazon. Again, you’ll want to use relevant keywords when creating item descriptions to help people find your products.
You can use Amazon FBA here as well to help save you the hassle of shipping.
Dropshipping
Dropshipping is a fancy buzzword, and, let’s be honest — most people probably have no idea what it is.
The simplest way to explain dropshipping is a business where you accept customer orders without keeping any physical stock on hand. Instead, as orders come in, you send them to a manufacturer, wholesaler, or other retailer, which ships the product to the customer.
This might sound like an easy way to make passive income on Amazon, but success isn’t guaranteed. In other words, you’ll need to do things right.
Here are the pros and cons of dropshipping:
Pros
- Low barrier to entry. You don’t need physical inventory or space, making it easier to get started.
- Scalability. Since you aren’t dealing with your own products or warehouse, you can easily scale based on customer demand.
- Lower operational burden. There’s no need to package or ship products, making the operation simpler.
- Take advantage of Amazon’s marketplace. Amazon has a large customer base and trust, which can make it easier to find customers.
Cons
- Potentially lower profit margins. There is a lot of competition on Amazon, which can lead to razor-thin margins. In addition, purchasing products from a third party creates another layer of cost.
- Limited control. Because you rely on a third party for much of your operation, you may not have much recourse if something goes wrong. This could damage your reputation and trust with customers.
- Not necessarily passive. Although this sounds like passive income, there can still be a lot of active involvement. For instance, you might need to do product research, marketing, and customer service, all of which may be ongoing.
Tips for Maximizing Dropshipping Passive Income Potential
To maximize your potential income with dropshipping, you’ll want to focus on profitable niches. Again, this means finding in-demand, low-competition niches with high profit margins.
You should also create quality listing with high-quality images, compelling descriptions, and optimized keywords. This will make your products more visible.
Also, regularly monitor sales data, customer feedback, and competitor activity. Make adjustments as needed to stay relevant and competitive.
IV. Practical Tips for Success:
- Market Research and Product Selection: Emphasize choosing profitable niches and understanding competition.
- High-Quality Listings and Customer Service: Importance of optimized product descriptions, positive reviews, and responsive communication.
- Optimizing for Profitability: Managing costs, pricing strategies, and analyzing sales data.
- Scaling Your Business: Strategies for expanding product lines, automating processes, and outsourcing tasks.
Bottom Line
There are many ways you can make money on Amazon. These include digital products, like ebooks, print on demand, and digital assets. It could also include physical products, like Amazon FBA, private label, or dropshipping.
Some of these strategies require more active involvement on an ongoing basis, but they still require less time than traditional businesses. Others only require you to create a simple product, which you only have to market and support.
Generally, though, you’ll still need to do at least some work upfront, which can take a lot of time. But once that work is done, you can start earning passive income on Amazon.
