I started doing a little bit a Amazon FBA reselling back in August. I had just got my Chase Ink+ and there were iPad Air 2’s on sale at Staples. With 5x UR bonus, I couldn’t resist dipping my feet into reselling. Since then, I have scoured online for deals to resell via Amazon FBA. In 2015, I made roughly $550 profit on $7,250 of sales. This is only about a 8% profit margin, which isn’t very good, but this is also due to the fact that I bought a few products that were more difficult to sell.
I kind of stopped searching for products to resell as tax season started and my work began to ramp up. I found a few deals here and there during weekend and have sold roughly $3,000 of products in this first quarter. However, I’m starting to realize what a small fish I am in a large Amazon FBA pond. I initially started to resell as just a way to generate a little extra income and meet minimum spending bonuses. I want to continue reselling because it’s nice to have a little extra cash inflow. At the same time, I am starting to realize 1. how much work it takes to actually run and maintain a business 2. how much time it takes to source products that there isn’t already competition in.
Let me first address point number 1. For all intensive purposes, reselling is a business. Therefore, it has to be operated like a business, which means you have to report all of this activity on your tax return. You also have to consider paying sales tax for the states that you have a presence (nexus) in. Being a public accountant (albeit on the assurance side), I want to be in compliance with all tax related things. All this to say, I don’t want to get audited by the IRS. From everything I’ve heard it does not sound like fun. As a soon to be CPA, tax evasion isn’t necessarily looked kindly upon in our profession. Furthermore, I don’t want to have to pay penalties for not collecting and remitting sales tax. In order to do all these things, it takes time (researching) and money (to pay for services). While I’m not opposed to investing either of these two things, it leads me to my second point.
I haven’t had much luck sourcing products. Sure I can find online deals here and there, but these deals are also found by the people who are doing this for a living. Therefore, my product hits Amazon at the same time as everybody else’s and the price starts to drop. Basic economics: more supply and the same demand equals lower price. It is pretty frustrating and my profit margins haven’t been all that great on the products that I’ve sold over the past 6 months. There have been a few deals that I’ve jumped on that have paid off, but for the most part I am competing with people who have been doing this for years.
I honestly can’t decide whether to keep pursuing this as side income or whether it isn’t worth my time. I would love to be able to generate an extra $500/quarter to put towards student loans and investing, but I am starting to feel like it is taking away from my day job and other aspects of life. I could always just manufacture spend to meet my minimum spend, but reselling is definitely more lucrative.
I may change my mind if I am able to find a way to more easily source products, but that doesn’t take away from the compliance piece of the puzzle that I’m also struggling with. We shall see. It’s not like I’m going to “close my business”. I would just stop buying as many products and sending them to FBA.