Pin Money

By Tamra Fakhoorian

Last year, I paid $6,000 for a course on building an Amazon wholesale business. Yes, $6,000.

The man running it was a multimillionaire who seemed earnest, down-to-earth and genuinely interested in helping ordinary people build successful Amazon businesses. I trusted him. The numbers looked good, and this was not one of those “watch 47 videos and maybe someday start a business” programs. As you worked through the course, you actually built the company.

So I did. I set up the business, opened the bank account, got the Amazon seller account going and worked through all the little steps involved in becoming a real company. By the time I got to inventory, I was ready. Really ready.

I had even pulled $40,000 out of my retirement money because I wanted enough capital to get the business moving quickly. Based on the numbers being presented in the course, if I chose products that sold well and turned that inventory several times a year, the potential looked pretty darned attractive.

There was just one problem. I couldn’t find anything to sell.

The Part I Hadn’t Counted On

I was starting in wholesale, which meant I needed legitimate brands or distributors willing to sell products to me at a price that still left enough room for me to resell them on Amazon. I contacted company after company. Mostly, nothing.

Some ignored me. Some already had enough sellers. Some simply weren’t interested in adding a brand-new Amazon reseller with no track record. Eventually I got two hardware companies to say yes.

Great. At last I had catalogs. Now I could start digging through products and looking for winners. And I dug. By the time I calculated the wholesale price, Amazon fees and fulfillment costs, the products that looked viable were leaving me around 1% to 3% net profit.

One to three percent. I remember looking at those numbers and thinking, You have got to be kidding me.

Amazon charges sellers in several different ways, depending on what and how they sell. There is the selling plan, referral fees, and, if you use Fulfillment by Amazon, additional fulfillment and storage costs. None of that is unreasonable. Amazon is doing a lot of the work. But those costs come out before you get paid.

Suddenly a product that looks wonderful when you compare the wholesale price to the Amazon selling price can get very skinny by the time everybody takes their piece. My bigger problem was that I had $40,000 sitting there ready to buy inventory, but I still had not found inventory worth buying.

Two Months of Looking

I stayed in that mode for about two months. Every day I was researching products, contacting companies and trying to find something where the numbers actually worked. Other people in the course would say things like, “Oh, it took me almost a year before I really started finding good products.”

A year? That bothered me. Not because I expected Amazon to hand me easy money, but because finding something profitable to sell seemed like a fairly important part of the business model. If the normal experience for a beginner was spending months hunting for products before finding reliable inventory, that belonged much closer to the front of the sales pitch.

I later found other sellers describing the same problem: getting wholesale lists, finding that most of the products were not profitable after Amazon costs, and struggling to find enough inventory even when they did locate something worthwhile.

That made me feel a little better about my two months of digging. Apparently I wasn’t unusually bad at this.

Finding a Product Is Only the Beginning

There was another wrinkle I had not fully appreciated when I started. You do not necessarily get to sell whatever brand you want just because you can buy it somewhere. Amazon may require approval for certain products and brands, and sellers can be asked to provide qualifying invoices or other documentation. So access to good products is a big part of the business.

And then, if you do find one, you still have competition. Maybe four other sellers find it too. Maybe somebody cuts the price. Maybe the brand adds another distributor. Maybe Amazon itself is selling the same item. Suddenly that beautiful margin you calculated when you bought 500 units does not look quite as beautiful.

That was the part that finally stopped me. I was willing to invest money in a business. I was not comfortable putting retirement money into inventory where I had so little control over what happened next.

I never bought the $40,000 worth of products, and I am glad I didn’t.

That Does Not Mean Amazon Wholesale Doesn’t Work

It absolutely does. There are sellers doing serious volume on Amazon and making real money. Some build up slowly, some start with retail or online arbitrage and move into wholesale after learning the system, and some already have strong supplier relationships.

But the more I looked at it, the more I realized this was not the little flexible side-income opportunity I had imagined. At a 10% profit margin, $50,000 in monthly sales produces about $5,000 in profit before taxes and any expenses that are not already included in that margin.

That is nothing to sneeze at. But it also means you are moving a lot of merchandise and tying up a lot of money to produce that income. That is a real business.

What I Would Do Differently

I would reverse the order. I would not build the company, fund it with $40,000 and then go searching for something profitable to sell. I would prove that I could source profitable products first.

Maybe I would start very small. Maybe I would learn through retail or online arbitrage before trying wholesale. Or maybe I would already have relationships inside a particular industry where I knew the manufacturers and understood the products.

But I would want evidence that I could repeatedly buy something for X and reliably sell it for enough above X to make the whole exercise worthwhile. Then I would put serious money behind it. Not before.

The Bottom Line

Amazon wholesale is a real business model, and people are making money doing it. But I would hesitate to call it an easy side hustle. It can require substantial capital, supplier relationships, product research and a tolerance for operating inside somebody else’s marketplace where the rules and economics can change.

For the right person, especially someone who already knows an industry or has access to good suppliers, it might be a terrific opportunity. For a complete beginner with retirement money sitting on the sidelines, I would be very careful.

My $6,000 course taught me quite a bit about how to sell on Amazon. The more valuable lesson came afterward.

Before you worry about how fast you can turn your inventory, make darned sure you have something worth buying in the first place.