Three Step Formula To Becoming a Amazon Profitable Retail Flipper

The entire selling process I follow can be categorized into THREE steps. Each step involves its own processes, resources, and time management. Some steps are more involved than others, but here are the three steps we will cover:

  1. Finding Best Selling Inventory with a Profitable Markup
  2. Leveraging the Amazon Marketplace to Sell Your Items
  3. Just Rinse and Repeat – Fueling Your Selling Machine

These steps cover all of the critical aspects of selling on Amazon. We won’t cover non-revenue generating tasks such as navigating the Amazon Seller dashboard or contacting Amazon Customer Service. Any of this information is readily available on the Amazon Seller’s Website. There is no reason for this post to repurpose their content when you can simply find any answer in their documentation.

Anyone capable of capitalizing on this retail flipping business model is more than capable of handling the minute, administrative responsibilities of maintaining a seller’s account. Of course, we will cover all such tasks that impact sales, revenue, and the success of your online selling venture.

#1 Finding Best Selling Inventory with a Profitable Markup

The most difficult, but critical aspect of the retail-flipping model is:
Step 1 – Finding Best Selling Inventory with a Profitable Markup.

However, this is the step that I enjoy the most, and have perfected to the best of my ability. This is where “Retail Flipping” gets is a name. Unlike most other online sellers, retail flippers find inventory to sell in other retail stores. I am not getting my products from a wholesaler, a Chinese manufacturer, or my buddy’s sketchy uncle down in Panama. My products come from the exact retail chains you have in your town and in every town across the U.S. I am talking about your Home Depots, Walmarts, Targets, Macy’s, etc…

Since the beginning of the marketplace (probably the stone age), one simple principle has been its driving force. That principle is arbitrage. It is the simple act of buying a product in one market and selling it in another for a higher price. We all can recall a time where we’ve purchased a product only to find that it was $20 cheaper at another store. Without the driving force of arbitrage, merchants would not be able to make a profit and therefore the marketplace would not exist.

You may be thinking that the Internet has destroyed arbitrage because everybody can see all of the prices of a product across all marketplaces. This is true…somewhat. You may be able to see that a certain pair of headphones is 5 dollars cheaper on Buy.com versus Walmart.com. Or that Amazon is charging more for a pair of sunglasses you found on the manufacturer’s website.

But…would you know that the Ipad 2 case you just purchased online was 30 dollars cheaper in their brick and mortar store? Yes, if you went to that store. Yes, if you knew the exact store. Yes, if you had the time to sit in traffic on your way to the store. Yes, if the item was in stock that day. Yes, if you had the coupon to reduce the price. Yes, if you were registered for the super savings card.

So…Yes, the information that a particular Ipad 2 case is $30 cheaper in the store is available. But what percentage of the American population knows this? And if so, what percentage prefers spending their limited free time waiting in traffic, dealing with crowds, just to save $30?

A very, very small percentage (I am one of the few and you can be too). Not only that, many of these consumers that end up paying a premium online, knowingly choose to do so. Whether they don’t have

the time, whether it’s their kid’s soccer practice, whether they live where there is no store, whether their time is more valuable than $30, there’s a reason.

Sorry I got carried away there, but this is why arbitrage still exists in today’s marketplaces; this is why retail flipping will continue to thrive. The price difference between a product found in a brick and mortar store and an online marketplace is where profits are made. This is the foundation of retail flipping. Without this differential, you would not be reading how I earn close to 3k a month in revenue.

Got It! So What Exactly do I buy?

Once people understand how I operate, the next question that always follows is: What do you buy? Simply put: I buy everything – electronics, consumer goods, seasonal products, books, CDs, video games, mostly anything with a big enough arbitrage opportunity.

I do stay away from certain types of products such as apparel and jewelry to name a few. Just using common sense you can determine what product categories will succeed. For example, clothing is not the best category as there are different sizes, colors, and variations of the same shirt. This makes listing products online a lot harder. Also, a clothing product is more likely to get returned if it doesn’t fit right or is in the incorrect size.

My favorite categories include toys, electronics, and personal care products. However, my mentor who introduced me to this business model operates in entirely different categories. There are endless amounts of products out there, and you will find certain niches that you are more comfortable in. You will quickly find that most anything that sells in stores, also sells online so don’t stress this question.

Found Something! How do I know if I should buy it?

This is probably the most asked question, and it should be. As stated earlier, in order for you to make a profit, there has to be a difference between the purchase price of an item and the price for which it will sell. Keeping it simple, I tend to look for items that are generally at least a 2.5x markup. This means that I will only buy a $10 product if it will sell for $25 online. The markup has been at least this high because certain costs come into play, which we will get into later.

However, there are exceptions. Sometimes I may buy a product with only a 2x markup if I know that it’s a hot selling item that will sell quickly. For example, I recently purchased an iPad accessory at a price of $15 that was only selling for $30 (2x markup) because I knew it would sell very quickly. Once you get the hang of it, you will be able to identify products that will sell almost instantly and therefore pose almost no risk.

In this instance, my profit margin is not as high, but I am able to quickly sell the product and the funds will appear in my next bi-weekly payment from Amazon. Since I like to pay my credit cards in full every month, these hot selling products are ideal. I am able to purchase these products with my credit card, and will receive payment within the same billing cycle – making my finances very easy to manage.

On the contrary, you may come across products with a 5x-10x markup that isn’t hot selling products. Examples of such products include toys on clearance after the holiday season. Prices are slashed, and you get toys for up to 95% off. However, these toys will most likely not sell until summer time or even the next holiday season depending on how popular the toy is. If you have the funds, you can acquire a massive amount of inventory for next year’s holidays during the post-holiday months. Don’t expect to sell a lot of these products right away, but your margins will be amazing and you will make a killing during next year’s holiday season.

Know Your Marketplace

By understanding your marketplace, you can dissect what products are best for selling on Amazon. There are certain metrics that Amazon uses to organize products, all of which are vital for Amazon Sellers to understand. This information is readily available on Amazon’s product listings. Learn how to break down the following information and your life as an Amazon Seller will become drastically easier.

There are four components of a product listing that you should focus on Price, Amazon Sales Ranking, Feedback, and Competition. All of these factors are readily available on each product’s listing on Amazon.You can visit Amazon.com if at home or use a simple smartphone app to help you research these factors when out in the stores. We will discuss the tools of the trade later, but for now, you must understand what to look for.

The Four Factors to Identifying Winning Inventory

In this exact order, these 4 factors should always be analyzed before making a purchase:

Price

Simply look at the price of an item. If I can’t achieve my 2.5x markup, I’ll usually stay away from a product. On the flipside, if there is a 5x markup on an item, this may help me decide to buy more of that item. Always check the price first, because if there isn’t a profit margin then there’s no need to move forward. Some months are better than others and this will also influence my decision on pricing. If there aren’t many deals to be found I may buy a deal with a markup of only 1.5x.

If you want to fully calculate how much profit a certain product will generate, you can use the FBA calculator. You can input the proposed product into the calculator as well as the current price for which it is selling and the calculator will determine how much money you will receive from each sale. It will deduct the commission Amazon takes, as well as the certain fulfillment costs associated with that product such as shipping and packing, and return final dollar amount you will B receives from each sale.

Example:

I recently purchased some tablet computers for $80 that were only selling for $120. Even though the markup was only 1.5x, I was able to profit $25 on each tablet because the price point was high enough and I knew they would be hot sellers based on the other criteria we will get in to.

#2 Leveraging the Amazon Marketplace to Sell Your Items

The hard part is over, and therefore the profit has already been made. While there are still remains several variables that affect the profitability of your inventory, your hard work will mostly get rewarded.

“Your profit is determined when you buy your inventory, not when you sell it.”

While you don’t have full control of how much your items will sell for, you can control how much those products cost to acquire. If you are diligent in your search for highly profitable items in Step 1, no remaining factors will have much impact on your inventory selling. Some competition and pricing changes will come into play, but your 23x margin will provide more than enough room to handle any minuscule price drop.

It’s similar to Warren Buffet’s famous expression for investing:

“You leave yourself an enormous margin of safety. You build a bridge that 30,000-pound trucks can go across and then you drive 10,000pound trucks across it. That is the way I like to go across bridges.“

With your highly profitable items ready to go, all that remains is sending your items into Amazon and leveraging their FBA services to reduce the amount of work you will need to do.

I’ve broken down this process into several steps for organization purpose. However, all of the steps should take very little time once you get the hang of it. The hardest aspect of retail flipping, finding the profitable product, is in the rearview – this step simply requires patience and attention to detail.

Getting Started

Instead of reiterating the steps to opening a Seller’s Account on Amazon, we will defer to Amazon to clearly state how to get started. I would suggest that you visit Amazon’s Seller Central to read up on any questions you may have. There are a few important things I’d like to address just to save you some time and clarify any thoughts you may have right now.

  • You do not need to own a business or an LLC to sell on Amazon. As an individual seller, you can simply supply a bank account for payment purposes and your SSN for tax purposes.
  • There are two types of payment structures for operating an Amazon Seller Account. You can pay a monthly fee, currently $39.99 a month plus any associated fees (Amazon’s commission), or you can pay a $0.99 fee plus any associated fees (Amazon’s commission) for every product sold. Simply put, start with the $0.99 per sale fee structure. When you begin selling more than 40 products a month, switch to the monthly $39.99 fee as it will be more cost-effective.
  • As previously mentioned, you will also need to enlist for the Fulfillment by Amazon service. Although optional, we’ve already explored how leveraging FBA is one of the key components to your success when selling on Amazon. It’s a simple service that you enroll in once you’ve opened your Seller Account.

Ninety percent of your time will be spent back in Step One as you hunt for deals. The remaining ten percent will fall into the following process. With your Seller’s account in place, and FBA services enlisted, let’s get started.

Uploading Product

In the top left navigation, you will select “Add a Product”. This is where you will enter the Barcode/UPC of your item (the number you’ve scanned with your Price Checker App). Several matching listings will pop up and you will have to go through and choose the appropriate listing. Usually, your product will appear right away, but sometimes yo may have to weed through incorrect listings and similar products.

 

The right listing will be the one that has the most reviews, contains all of the product information, and ultimately is the listing that you judged your purchase off of. Other sellers will get sneaky and try to create additional listings for the same product, but this is stupid for 2 reasons. A) Amazon will catch you and suspend your seller’s account. B) Anybody searching for your product will be directed by the Search Engines to the listing with the most reviews and proper description.

You do have the option of creating a listing for a new product that has yet to have been listed on Amazon. My retail flipping method does not include this strategy because you have little indication as to see if your item will sell ahead of time. I know people that successfully make their own listings, but it creates more work and is much riskier by nature.

Completing the Listing

After choosing the correct listing, you will have to enter certain information, such as if the product is new or used. All of your products will be new unless you decide to sell used books as discussed earlier in which case you will assign a certain condition of used (like new, good, etc.).

Assigning the Price

Amazon helps you determine the price as it suggests you match the lowest price at that time. Although helpful, you should always look at the item’s listing one more time. You will find that the lowest price suggested by Amazon is usually correct, but you may want to consider  pricing differently because you are an FBA seller and here’s why:

FBA sellers not only leverage the fulfillment operations of Amazon such as the storage, packing, and shipping but by using FBA, sellers are able to sell their items at a premium price. The three benefits are listed below:

  • FBA listings garner more attraction because they are marked with a Fulfillment by Amazon notice – this is a huge trust factor for buyers. Buyers will rather purchase from a third party seller using Amazon’s fulfillment services, than a third party seller who will do the shipping and handle returns themselves.
  • FBA items are eligible for free Super Saver Shipping and Prime shipping. This means buyers will be enticed to purchase from you over other Non-FBA sellers because Amazon will offer free shipping to them. (Since Amazon is making some money from you using their fulfillment services, they prefer that buyers purchase from FBA sellers.)
  • FBA items qualify for customer service direct from Amazon, just like any products purchased directly from Amazon. This further increases buyer trust as they know they can return their items to a huge company, rather than a mom and pop shop that may provide hazy return policies.

The product you are listing will have several sellers, all of whom can be sorted on the product’s listing page. You can sort all of the sellers of your item by those using FBA, and those doing the fulfillment themselves. From here, you will be able to determine the lowest price offered by an FBA enlisted seller and can match that price accordingly.

Everyone’s pricing strategy will be different.

I like to match the lowest FBA price in an effort to achieve quick turnover with my products, allowing me to pay my credit cards in full and start fresh every month. Other sellers, with more capital, will wait me out in an attempt to achieve better margins. It all depends on how much capital you are willing to pump through the retail flipping business model.

Sale Price

Amazon allows you to create a Sale’s Price for your listing. For marketing purposes, I always utilize the sale pricing option. Amazon gives you the option of setting a sale’s price in which you can offer a price that is lower than the regular asking price, for a certain number of days.

I will set the regular price at $10-20 higher than I would like to receive, and then set my Sale’s price at the actual price I want it listed for. I will make the sale last several months just so this pricing structure remains. All you are doing here is adding another layer of marketing and increasing the conversion rate of your customers. They will get the impression that they are getting the item on sale, as they will see a regular price crossed out and a sale price highlighted. If you peruse through various Amazon product listings, you will see that this method is often used.

Inventory and Shipments

With the items uploaded into your inventory and pricing defined, you’re almost ready to ship. To clarify, since you using Amazon’s FBA service, you are not shipping products to customers – you ship all of your products to Amazon, for they will be doing the packaging and shipping on your behalf. If you are still a little unclear about Fulfillment by Amazon, please visit the FBA Website.

Inventory Types

Before you initiate your first shipment, Amazon mandates that you select one of two inventory processes. The two options for sending your inventory into the Amazon Fulfillment center are 1) Stickered Inventory & 2) Stickerless, Commingled Inventory.

Stickered Inventory

By selecting Stickered Inventory, you will have to label every single item in your shipments before sending to Amazon. This is somewhat easy to do by yourself, as Amazon prepares the labels into one document to print out. If you have a label printer, this process is not too daunting. The benefit of labeling your items is that you’re ensuring that when somebody purchases your product, they actually receive your product.

Stickerless Inventory

By selecting Stickerless, Commingled Inventory, your products do not need to be individually labeled. Your products will not receive an individual label, and they will be placed with identical items upon arrival at Amazon’s fulfillment center. When somebody purchases your item, any one of the available products (regardless if it is yours or another seller’ product) can be used to fulfill the order. The benefit of commingled inventory is that you do not have to spend time or money labeling your products.

Create Shipment

With your inventory type selected, you can now create and send out your first shipment. Let’s say you want to send in 10 headphones. You’ve found the correct listing and submitted a quantity of 10 at a sale price that matches the lowest FBA price. You’ve hit the “Save and Finish” button, which confirms this item as added.

Packaging Options

You are now at the next screen, where you have the option of sending them in as individual items or case packed items.

Individual Items

By selecting individual items, you are telling Amazon that you will be adding different items to this shipment.

Case Packed Items

By selecting case packed items, you are telling Amazon that you have a larger quantity of this same product and will be only sending this product in this shipment.

Unless you have a large quantity of a single item, always select “individual items”. This will allow you to add other items to your shipment, which will help lower the cost of the shipment since you can place everything in the same box. You will then move to the next screen where Amazon will assert your inventory into different shipments.

Sometimes Amazon will split up your items in different shipments. They do this because their different fulfillment centers may be short on an item and will need to restock in order to fulfill customer orders closer to the geographic location of that fulfillment center. It is not much you can do about this. You may end up having to send 3 separate boxes to 3 different fulfillment centers, increasing your cost of shipping products to Amazon.

To help minimize these cots, I suggest that you wait until you have a lot of products to ship out. You will end up filling up large boxes, and this helps reduce the cost. Also, this process is much easier when you do product uploading and shipping tasks together, rather than trying to do it every few days.

Working on Shipments

Once you have listed all of your products and have placed them in appropriate groupings (either in the boxes like me or a different way), you will be ready to prepare the shipments.

In the first section, you will make sure the quantity set is correct. Quickly make sure that you’re providing the exact quantity of inventory assigned to the shipment in progress.

The next section, Label Items, will only occur if you have selected Stickered inventory OR the inventory you are sending are Media Items. Amazon will prompt you to print out the labels and will suggest the type of label paper you could use for printing. With these labels printed out, you will now affix them to the appropriate inventory. Amazon mandates that you place these labels over the UPC label found on your item.

As mentioned earlier, I prefer the stickerless inventory option so I can avoid this step. However, if I am selling any used books that month, I have no choice but to affix labels to the books.

The third section, Select Carrier, is where you will choose your shipping method. Like most retail flippers, you will be selecting “Small Parcel Delivery” which simply means you will be sending in individual boxes and NOT pallets or shipments over 150lbs. In the next section, you will choose the Amazon-Partnered Carrier option. Amazon has partnered with UPS to give its FBA sellers greatly discounted shipping costs. There is no reason in the world not to select this option and have UPS be your career. These rates are very cheap, helping you reduce your shipping costs.

The next section, Prepare Shipment, will simply ask you for the number of packing slips you will need. Here is where you will begin to actual package your items. If you can fit all 10 of those headphones in one box (you better!), then all you will need is 1 packing slip. Each box needs its own packing slip, so just enter the number of however many boxes you needed to pack up all of your items in that shipment.

To clarify, one shipment may contain more than 1 box. The term shipment just dictates that all of the products in that shipment be sent to the same Fulfillment Center. Shipments may contain 100’s of products, in which case you will need several boxes (each containing a packaging slip) to complete the shipment.

After printing out your packing slip(s), you will head to the next section, Provide Details. Here you will enter the dimensions of your boxes to determine the shipping cost. After providing details, Amazon will give you a shipping cost based on their discounted rate and your shipment’s dimensions.

Once you give the consent, Amazon will provide the UPS labels for you to print and affix to the outside of your box. Make sure you have already labeled each item, if needed, and have placed the packing slip on top of your items before taping up the box and attaching the shipping label.

*Tip: Make a UPS account online and you can order shipping labels, 50 at a time, for FREE. They will deliver these labels right to your door the very next day. They do this because they want you shipping with them. These labels would otherwise cost you $15 a package at Staples or anywhere else.

*Tip: Buy boxes in bulk from your nearest Home Depot. I usually purchase the Large boxes as it provides the most cost-effective dimensions when using UPS as your partnered carrier.

Completed Shipment

You’ve done it! Your first FBA shipment is completed. The shipping cost will be deducted from your Seller Account’s balance or charged to your credit card on file if a sale has yet been made. You can schedule a UPS pickup to your residence for a small fee or drop off your boxes at your local UPS shipping office.

Amazon will receive your shipment in a few days, check to make sure the inventory claimed is actually there, and then mark your inventory as available for sale. When logged in to your seller account, you will see all of your products that are available for sale. Under the inventory menu item, select manage inventory. This will provide you the entire list of your products, the remaining quantity, and allow you to make changes to the price and other product listing details.

# 3 Just Rinse and Repeat – Fueling Your Selling Machine

With your shipment or shipments now on the way to Amazon, sales will begin to come in. There is no need to stand by your computer. Everything is now in place and sales are on autopilot. Amazon will fulfill your orders, take customer feedback, process returns, and handle any administrative duties. Any questions or concerns you may have can be directed through your seller account to customer service.

So what should you be doing while those 10 headphones sell on autopilot?

Go back to Step One of the formula – Find Best Selling Inventory with a
Profitable Markup!

Head back to the clearance section of your favorite retail stores, local book sales, or scour the Internet for daily deals. I like to refer to this step as Fueling Your Selling Machine. Your selling machine is all set up and in great hands (Amazon’s), and now it is up to you to pump it full of profitable inventory.

I know this is a lot of information, but not many businesses can be fully explained in such a short length. However, this is why I love this business. Anybody with access to a computer and a few dollars can get started, although it does help to have a smartphone for on the go. We’ve gone over the benefits of using FBA as an Amazon Seller, but I’d like to highlight the benefits of this business to convince you of its unlimited potential.

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