GIG BUSTING: Selling On Amazon FBA – Part 2

FBA Selling on Amazon
GIG BUSTING: Selling On Amazon FBA – Part 1
February 19, 2021
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GIG BUSTING: Selling On Amazon FBA – Part 2

FBA Selling on Amazon

“Gig Busting” is a series about the potential to level up a particular gig to full-time self-employment. Since I have extensive personal experience with this one, I broke it into two parts to keep your eyes from glazing over. Here we go with Part 2…

The Time & Logistics Involved

SOURCING: I like shopping online for deals but don’t actually have a particularly materialistic streak. So you could say that the deal-hunting part was a sort of hobby, something I did for fun in the background during commercial breaks while watching TV, that sort of thing. I started out setting alerts over at Slickdeals for a few stores with generous rewards and rebates programs I understood and liked to work – Kohl’s, Staples, Office Depot, Best Buy. I got a feel for sales patterns. I learned to go for the items that were hugely popular and had limits, because they’d turn over fast and I could reuse the money faster. If you don’t enjoy shopping online for bargains, this side hustle sucks big time. Don’t even consider it. But if you enjoy the thrill of the hunt, it’s fun! Anyway, call it 3 lazy hours a week, or 150 hours a year.

SHIPPING: UPS and FedEx are going to be at your house almost every day. You will know the drivers’ names, and you might end up hiring one of them to move you 2100 miles across the country in a rented U-Haul because a flirtation happened…*looks around innocently*. Ahem, anyway, you will have trouble keeping track of what you ordered and if everything arrived that was supposed to, especially in the infamous cluster-f of Q4, aka the Christmas rush. From 2014-2019, I had a house with a large front living room that I never used, which I semi-jokingly referred to as “the warehouse”. I received, unpacked, labelled, prepped, repacked and shipped from there. My mother retired and mastered the labelling, prepping and repacking. I “paid” her with lots of steak dinners and trips covered by the miles/points earned from all of her work. Fair, right? We both thought so! Depending on the time of year, this took me anywhere from 3 hours a week to 3 hours a day. Let’s call it 300 hours a year, those done by my Warehouse Supervisor, aka Mom.

CASH FLOW: Expect at least a month to pass between spending the money on the product and getting it back from the Amazon sale, a week or two longer if your FBA account isn’t a professional seller account (Amazon holds the money longer), which has a fee that hits the break even point when you sell 40 items a month. So while you might be able to float a large chunk of your cashflow on a credit card and get the proceeds from the sale back in time, you can’t count on it. And those interest rates will hit your profit margins more than you realize at this point. I feel a math lesson coming on…meh, I’ll spare you that one. It’ll make your head hurt. More interesting numbers are coming as it is!

Show Me The Money

PROFIT: At the the height of my selling, my gross profits from doing this part-time ran $13-16K a year, and that does not include travel points and cash back and credit card rewards earned. That was only about a 12-13% profit margin, which isn’t great. Bear in mind Amazon takes a straight-up 15% on most categories, plus their fulfillment fees, so they were always making more than me. Anyway I was happy enough because of all those travel perks that I was really doing it for, which were worth the same again. So for about 4 years, this was an AWESOME side gig!

AVERAGE EARNINGS 2015-2017:
$16,000 / (150 hours shopping + 300 hours shipping) = $30-35 / hour

These numbers are net of product cost, but gross with regards to tax deductions like mileage, home office, etc.

But Things Always Change – And Never For The Better With Amazon

All of these things happened over time and built up to the profits being squeezed so tight that I decided that the way I did business on Amazon, was no longer worth it. Some are more relevant to the hobby side of why I got involved in FBA selling, but if you’re small potatoes like me, points/cash back is very relevant. Still, for a quite a while, it was was a very part-time gig that took a few spare hours a week and made great money and travel points. So here’s what happened:

  • Kohl’s stopped offering 10 miles per dollar for purchases (of both gift cards AND merchandise purchases, called a “double dip”…so awesome while it lasted)
  • Most shopping portals, for both miles and cash back, stopped paying out specifically for Nutribullets, so clearly I was not the only one dealing in those.
  • Amazon went through a dark period of having a lot of counterfeit products being passed along. It became way too easy for your competition in the guise of a customer to accuse you of fraud and get your account shut down, sometimes permanently, without even the tiniest shred of proof, thereby making them the top seller of that product for a while. I managed not to get targeted in that nonsense, but it was just luck really.
  • Amazon started “gating” products, meaning you needed permission from the manufacturer to sell their merchandise, usually with no notice. If you had stock already in their warehouse, this meant having it sent back to you and either returning it to the store if you could (so awkward if you had a dozen of them) or trying your luck on eBay or Craigslist. Ew.
  • If a customer started a return and got refunded, and your account was deducted, say, $30 for that, then the customer didn’t return the item…Amazon only gave you back like $25. And their seller “customer service” team was very well trained to always have more reasons to keep your $5 than you had for them to give it back.
  • When Amazon started screwing around with its delivery relationships with FedEx and USPS, and then gave birth to its own last-mile delivery logistics, they coincidentally (pfft) stopped reimbursing for anything damaged in delivery. It was classified as “customer damage”, which their terms of service state that they don’t reimburse for. Considering that a big chunk of what I sold were Fiesta dishware at the time, this sucked. I switched to Corelle.
  • You know what else is considered “customer damage”? When someone orders a $180 Sonicare toothbrush, breaks the package seal so it can never be returned just to get the 2-3 brush heads worth $25. Then they return it claiming it was no longer wanted or, my personal favorite, it arrived missing the brush heads. I still have 3 naked DiamondCleans in my closet. They cost me $140, a few bucks to send it in, then Amazon took $152 from my account for the refund and I’m stuck with expensive garbage.

2019 EARNING: $4800 / (50 hours shopping + 300 hours shipping) = $14/hour

Do I Miss It?

I don’t miss it at all, the way it is now. Amazon was a great company to deal with as a seller 2013-2016, but when they silently changed their policies behind the scenes on how to screw over deal with third-party sellers – the whole reason they became the marketplace where you could find anything and everything – they became a company whose stock I’d rather hold in my IRA than whose warehouses I’d want to keep stock in. I stuck it out for the awesome miles and points until I started hemorrhaging money in “damages” that used to be protected. It ceased to be fun, and it ceased to be an income. I’d never consider scaling up to Gig Boss level with Amazon FBA regardless of how or what I sold simply because their underhanded ways of managing their policies with third-party sellers are too unpredictable for my tastes.

Having said all that, I haven’t deactivated my seller’s account – I downgraded to the free non-professional one. I have a Kindle Direct Publishing (KDP) account and a minimally used Merch by Amazon account (MBA) – one of those requires me to have a seller’s account. I’d keep it anyway because Amazon is a pretty cutting-edge company, and you never know what opportunities may arise that require a seller’s account. And getting an account in the future might not be so easy because, well…Amazon.

8 Comments

  1. Very interesting. My husband sells records and other media on Amazon but, we’re still small and old school packing and shipping ourselves. He only does it so he buy more music. A means to an end. Thanks for your insights.

    • Katie says:

      Actually not that different from my Nutribullets-for-Miles start. I just got dollar signs in my eyes and let it become more than a hobby. By the way, if you use small bubble wrap – look for sellers on eBay selling 700ft. I used to pad the bejesus out of those dishes, lol!

  2. Thanks for another interesting Amazon FBA article. I’m still thinking about that UPS guy! 2100 miles he drove that U-Haul for ya???

    But seriously, this was a great education about how it works with Amazon. You’ve broken it all down very thoroughly. Thank you for this.

  3. I started going down this road a few years until someone told me that there were so many restrictions for California residents that it was not financially sound for us.

    • Katie says:

      Oh, I remember when that became an issue. I don’t remember the details, just the feeling of “phew, glad I’m not in California”. I think it had something to do with sales tax. Thankfully online sales platforms got smart about how to handle sales tax in a way that worked for everyone.

  4. Fascinating! Thank you for sharing your experience. I have been selling my books on Amazon for a decade, and they keep changing the rules and charging me more and more. They ordered a lot of my newest book. Then one day I got a box that had no documentation, and inside were a number of shelf-worn copies of the book, to which Amazon inventory labels had been added. I could not sell them as new. Amazon has not been a good selling partner for me. Sigh! For a few years, “books on Amazon” meant more credibility, so I was basically paying them, not to partner, but to advertise.

    • Katie says:

      Last year I tried flipping textbooks from third-party shipped-by-seller to FBA. Yeah, started in early March. Bad timing, but there were other indications it wasn’t going to pan out. I lost about $100, so not devatating. Anyone want some old Microeconomics textbooks before they end up in the recycling bin?

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