As an Amazon virtual assistant, the first thing you should do is learn how to sell on Amazon. You will encounter several business models as you build up your clientele, and learning about these will help you better manage your clients’ Amazon Seller accounts. In this post, we will talk about the six most common business models on Amazon today. Read on for more!

What is a business model?

Before we discuss the items on our list, it’s necessary to understand the definition of a business model. 

A business model is an action plan on how a business intends to generate revenue. It also establishes the services or products, target market, and any foreseen costs. There are many different business models you see on ecommerce today, and it’s an open-ended list where new models are added with recent innovations. 

Lucky for you, we won’t have to go over all of them. Amazon sellers often use six business models as they work best in online marketplaces. So now let’s get started!

#1 Wholesale

First up is wholesale; this means an Amazon seller buys in bulk directly from suppliers and sells the products on Amazon with a markup. Bulk buying makes it possible to acquire high-value items at discounted rates, allowing the seller to gain a significant profit margin for each product.

One thing to note is that suppliers usually require a minimum quantity order, so extensive research into the demand for the right product and how it cycles through the market is vital to success.

Poor market research will leave a business with unsold inventory that can become obsolete or unwanted. So getting wholesale right helps to avoid losses and potentially makes large profits.

PROS

  • If done right, wholesale can provide a regular supply of profitable products.
  • The time and effort required to advertise the product and do product research are only significant in the initial phases.
  • Wholesale products allow for stress-free inventory management and supply replenishment.

CONS

  • It requires considerable capital as wholesale suppliers often have a minimum quantity requirement for the buyer.
  • Failure to do diligent research will cost hefty losses.
learn how to sell on amazon - department store sale

#2 Retail Arbitrage 

Retail arbitrage means looking for bargains or discounted goods and selling them for a higher price on Amazon. It’s a popular business model among new sellers, and its popularity is not going anywhere soon. 

Sellers benefit when they buy a profitable product sold at a lower price in a different marketplace or store, then raise the price to sell on Amazon. Retail arbitrage is derived from arbitrage, the process of simultaneously trading financial assets on different financial markets to profit from the price difference.

It is a simple business model that allows the seller to generate a stream of revenue as they build their inventory and discover which products are in demand.

Profits generated from retail arbitrage are calculated from the buying price, selling price, and Amazon fees. Competitor research is also important to see the price range of the products in the marketplace. 

PROS

  • A relatively low capital is required to start the business.
  • Gradual inventory expansion is possible as opposed to wholesale.
  • Quality control is possible in small-scale product acquisition.

CONS

  • Inventory management and product sourcing can be a pain.
  • It’s a time-consuming process.
  • Product supply may run dry if there are no deals or bargains available.
  • It has a potentially lower profit margin.

#3 White Labeling

White labeling means taking a generic product that is re-brandable and resellable from a manufacturer. The seller then rebrands the products and sells them in the marketplace. The name comes from the white color of the packaging, which allows the vendor to print their own brand.

It allows companies to enter existing markets without developing and manufacturing their own products. White-label products are also easily tailored to meet a brand’s specific marketing direction.

Some Amazon sellers prefer to use white-label products since focusing on marketing rather than product development research is generally easier.

PROS

  • It’s a great entry-level business model for otherwise saturated markets.
  • Generic products often have high turnover rates, which means high-volume sales.
  • There’s no need to research or develop a product as white-label products are tried and tested in the markets.

CONS

  • Products are cheaper to buy and resell, so doing it on a small scale will result in subpar profits.
  • Inconsistent product quality may be an issue.

#4 Private Labeling

While private label and white-label products are the same on the surface, private labeling is more exclusive. Private label products are manufactured only for a singular company. Sellers who go through this route usually start from scratch. So experience in marketing and branding is helpful to building brand reputation and establishing a presence on Amazon.

PROS

  • Gain an edge over competitors selling the same line of products.
  • A private label product’s pricing is more flexible than a white-label product.
  • Quality control is slightly better with private label products than white-label products.
  • Vendors get more control over production compared to white-label products.

CONS

  • It can be more expensive than white labeling.
  • Some manufacturers have a minimum order contract, like wholesaling.
  • Bigger and established brands will be your major competitors.
learn how to sell on amazon - aerial view of storage containers

#5 Dropshipping

Dropshipping is a widespread business model in the world of ecommerce. This business model lets vendors sell a profitable product line they don’t physically have. Instead, they purchase products from a manufacturer, and then the manufacturer directly ships them to the customer under the vendor’s name. As a result, the customer will never be made aware that the products didn’t come from the vendor. 

Amazon set some restrictions and rules to ensure product quality and responsibility via dropshipping. The ecommerce giant requires dropship vendors to always be the seller on record. In addition, their name must reflect on the following:

  • Packing slips
  • Invoices
  • Anything related to the sale

Vendors must also remove anything that pertains to the third-party manufacturer before product shipment. Finally, vendors are responsible for processing returns and refunds.

PROS

  • Get zero warehouse and overhead costs by shipping products to customers without actual inventory.
  • Dropshipping allows a vendor to diversify their product line.
  • It doesn’t require big startup capital.
  • Huge market opportunities make it profitable when done right.
  • No shipping cost on your end.
  • It’s ideal for a small business.

CONS

  • Slow logistics may become an issue as most manufacturers are based overseas.
  • Pricing is competitive for dropship items, so they have low-profit margins.
  • It’s counterintuitive to Amazon’s promise of fast delivery.

#6 Manufacturing

Finally, manufacturing is producing the products sold on Amazon. By manufacturing products, vendors have total control of product quality and value. This business model is for any entrepreneur with a brilliant product idea that they want to sell on Amazon.

Manufacturing any product is a complex route to take, but doing diligent research will help run things more smoothly. It gives the vendor complete control over everything, but this model’s downside is steep for beginners.

PROS

  • There is complete and total control of the manufacturing process and standards.
  • Higher quality is attributed to self-manufactured products.

CONS

  • It’s a painstaking process.
  • Extensive hours of energy, time, and labor are required to succeed.
  • Huge capital investment is necessary.
  • It scales slower than the other business models.
  • This business model is not recommended for a small business with limited resources.

Learn to Sell on Amazon as Part of Your VA Training

Amazon VA training allows any beginner to learn the Amazon Seller Central dashboard and tools, but it also involves other topics, including learning how to sell in the Amazon marketplace. As an Amazon VA or account manager, you must put yourself in the vendor’s shoes to better understand and manage the store.

Amazon FBA and Amazon Seller courses will teach you the basics of selling on Amazon and how to manage an Amazon store to generate profits. Here are some of the topics you will learn in these courses:

  • Amazon’s business model and its vendors’ business models
  • Amazon Seller Central dashboard management
  • Learn the Amazon Seller Central tools
  • How to manage an Amazon store
  • How to create a product listing
  • How to optimize the product listing for keywords
  • Amazon product research
  • Amazon brand registry
  • Customer service
  • Organizing product category and inventory management
  • Amazon FBA fees
  • Amazon sales and marketing
learn how to sell on amazon - a woman working

Jumpstart Your Amazon VA Career with Digital Academy

To recap, we’ve discussed the six different business models on Amazon and how learning them benefits your work as a virtual assistant or account manager. We’ve also discussed what you’d learn if you enroll in a specialized course. As you can see, you need to know plenty of topics to become a highly paid VA. 

There’s no disputing that you can find free resources online to start learning how to become an Amazon VA. But it’s a maze of information you need to solve to get things in order. Plus, with Amazon’s constant innovation and updates, some information you find online might be outdated. 

Digital Academy is here to help you! By enrolling in our courses, you can fast-track your progress and save on resources as you learn how to become a successful virtual assistant. Our courses contain the latest information and tools to help you in your Amazon VA journey. Best of all, we’re constantly on the lookout for the best practices and tips in managing a Seller store.

Get started with Digital Academy today, and get 50% off our Amazon Account Manager Certification and Freedom Ticket 2.0 courses!

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