Imagine working just a few hours each week, from anywhere in the world, and making enough money for you and your family to live comfortably. Believe it or not, it’s possible through the increasingly popular side hustle known as Amazon automation.
But what is Amazon automation? Is it worth the initial effort to set up? Can you really make the big bucks? Keep scrolling for Amazon Automation 101, in which we answer all of these questions and more!
What is Amazon Automation?
Amazon automation is an e-commerce strategy that has the end goal of creating passive income. It takes full advantage of profitable product categories, depends upon the business model known as dropshipping, and strategically uses branding and customer service to move the business forward. Let’s break that down.
Dropshipping is a relatively common method of fulfillment used in retail. Instead of keeping a product in stock at all times, retailers who use the drop ship method hire a vendor to fulfill the orders from a third party, who then send them straight to the customer. Thus, a shop owner neither stores his own inventory, nor ships his own orders.
Dropshipping has become especially popular amongst Amazon sellers in recent years because it doesn’t require purchasing or storing any inventory upfront. The shop owner only purchases the item from the vendor once it has been purchased by a customer.
To put it simply, the seller sells the product online, and the vendor ships it.
So what then is an Amazon seller’s responsibility when utilizing dropshipping and Amazon automation? In this case, everything boils down to researching just the right products to sell, composing a professional and persuasive product listing, and garnering good reviews.
Many Amazon business owners who employ Amazon automation hire a third-party company to manage their entire business. These third-party companies tend to know the e-commerce industry inside and out. Because the goal of Amazon automation for a seller really is passive income, all an Amazon shop owner needs to do is hire the right people, then sit back and reap the rewards.
How Does Amazon Automation Compare to Amazon FBA?
Amazon FBA stands for Fulfillment by Amazon, by which Amazon’s warehouse stores a seller’s inventory, and its logistics and fulfillment team pick, pack, and ship every order. Fulfillment by Amazon certainly makes things easy for a seller, who is left with enough time to focus on other aspects of his or her business, but it isn’t the easiest way to operate an e-commerce business on Amazon.
While Amazon FBA sellers must purchase products from a wholesaler, retail store, or other supplier, those who pursue Amazon automation only purchase products from vendors as orders are placed. Some entrepreneurs make things even easier for themselves by hiring a management service to run their dropshipping store.
Another big difference between FBA selling and automation has to do with the amount of time a store owner is required to put into running his or her business. Because Amazon is limited in what tasks it will take over, an FBA seller must still negotiate for and order inventory, apply for tax exemptions, upload new products and create listings, and otherwise manage the rest of the business.
Finally, unlike Amazon FBA, Amazon automation doesn’t require sellers to pay to store inventory.
What Are the Benefits of Amazon Automation for an Amazon Seller?
Once you consider the benefits of Amazon automation, it’s easy to understand why the business model has become such a hot topic in the world of e-commerce.
With the dropshipping form of Amazon automation, the store owner never has to front the money for inventory. This is because they only buy products from a vendor when a customer has already made the purchase. Because the vendor ships the item directly to the customer, the Amazon business owner never even has to handle any product. Who knew running a lucrative business could be so hands-off and easy?
Unlike Amazon FBA sellers, Amazon automation sellers don’t have to worry about paid-for inventory sitting around too long and not selling. In short, a business model built around Amazon automation is less risky than a business model built around Fulfillment by Amazon, or similar.
However, the automation method of Fulfillment by Amazon comes with its benefits, too. For example, full-service Amazon automation businesses can be very expensive, whereas the Amazon FBA option requires just a few additional fees. Because FBA products are dealt with by Amazon’s own team, Amazon business owners can be sure that the job is getting done, and it’s probably getting done right.
Finally, no doubt some Amazon sellers enjoy retaining some control over their business. For this type of entrepreneur, the FBA option is ideal, as it requires the business owner to continue to choose and procure products, create listings, and more.
What Are the Risks of Amazon Automation and the Dropshipping Method?
If you are looking for a form of passive income and have been considering Amazon automation and dropshipping, then you may think it’s all sounding pretty good so far. But like anything, the fulfillment method of dropshipping isn’t completely free of risk. Some common risks of dropshipping include:
Amazon sellers who use automation are completely dependent upon those who must supply the items that have been purchased. In the overall scheme of dropshipping, it is the supplier that is responsible for shipping high-quality items in a timely manner.
Perhaps not surprisingly, there exist quite a few dishonest suppliers who take advantage of vendors and sellers who are new to the Amazon game. To keep yourself and your business safe from scammers, avoid any potential supplier who:
- starts talking about subscription fees
- insists on bulk orders in advance
- runs both a dropshipping business and a retail business
- is slow to communicate
Don’t hesitate to follow your gut. There are plenty of hardworking and honest drop shippers out there, too. If a potential supplier doesn’t feel right to you, then it’s okay to continue the search for another.
Retail arbitrage — that is, purchasing products on sale in a retail establishment and reselling it on Amazon — is a popular and legitimate form of e-commerce. However, some sellers began to pair retail arbitrage and dropshipping by fulfilling their orders with purchases from another online store.
Needless to say, this has raised a lot of red flags. Both eBay and Amazon currently ban this form of arbitrage, and attempting to sneak around the rules usually doesn’t end well.
Small Profit Margins
A big benefit of Amazon automation and dropshipping is that it is a form of passive income. But because the shop owner must hire a team to do the majority of the work, he also has more people to pay. This fact alone means fewer profits for the shop owner.
Unfortunately, things are a little more complicated. Most dropshipping suppliers work with more than one shop owner. In other words, they supply the same product to multiple online brands. To overcome this inherent competition, shop owners must lower their prices to entice sales, which decreases their final profits even further.
Getting Started in Amazon Automation
Many Amazon sellers who have successfully automated their e-commerce businesses began as FBA sellers. After all, Fulfillment by Amazon is in itself a form of automated selling because it takes much of the work away from the business owner. Those who have taken the automation of their online business a step further usually commit to the method of dropshipping. In this case, the first step is to find a legitimate drop-ship supplier.
This is perhaps easier said than done. Reaching out to manufacturers who create products you want to sell is the typical first contact. You can also attend trade shows, read Google reviews, or approach a dropshipping company. Some popular and well-respected dropshipping suppliers include AliExpress, Wholesale Central, Suppliersdata, and Doba, among others.
Once a seller is working with a trusted supplier, then the seller’s job becomes researching products, creating listings, and pocking the profits. The first two can even be hired out to Amazon automation companies that specialize in all parts of the automation process.
How Much Can You Make With Amazon Automation?
The vast majority of active Amazon sellers, both automated and otherwise, make at least $1,000 per month on Amazon. Meanwhile, 6% of all Amazon sellers make upwards of $250,000 per month. How much they make depends on a variety of factors, including how many different products they sell, the competitiveness of their sales niche, and their method of fulfillment.
Those who automate their Amazon business through the Amazon Marketplace’s Fulfillment by Amazon option pay slightly higher fees than sellers who store, pack, and ship their own sales. However, those fees are all they are paying, which allows them to pocket the rest of any profit.
On the other hand, sellers who automate through methods like dropshipping or through an Amazon automation service have less to do, but far more fees to pay. This thins their potential profit margin, and has an effect on their overall income.
How Much Do Amazon Automation Services Cost?
The cost of an Amazon automation service depends on the individual service. For example, an Amazon FBA seller pays slightly higher Selling on Amazon fees in order to pass along the tasks of inventory management, shipping, and dealing with returns and exchanges. These fees are exclusive to FBA sellers, but are not prohibitive by any means.
If an Amazon shop owner is interested in automating their entire business, then they will need to hire a full-service Amazon automation business. These companies usually require an upfront cost which they then use to build the shop, procure inventory, create listings, and manage the coming and going of stock. These upfront costs vary from company to company, but can sometimes total as much as $35,000.
Pros & Cons of Amazon Automation
- Can be a successful form of passive income
- Multiple automation options allow sellers to determine the time they wish to personally spend working on their business
- Amazon business owners won’t spend a lot of time each week dealing with work
- Full-service automation companies will manage every aspect of an Amazon business, and sometimes even guarantee a product winning Amazon’s coveted Buy Box
- No need to worry about too much inventory, or inventory going to waste
- Because sellers have to hire vendors, the profit margin for a product is usually a little less than it would be with other fulfillment methods
- Depending on the method of automation, pricing for services can total in the tens of thousands
- Amazon automation programs are not immune to scams, and shop owners need to remain vigilant to ensure they are always working with honest suppliers
- Lots of team members mean lots of paychecks and thinner profit margins for the Amazon business owner
- Amazon business owners could earn negative feedback because of a mistake made by someone on their automation team
- Ever-changing industry can make it difficult to keep up with how it works
Amazon Automation: Is it Worth It?
The business of selling on Amazon has changed rapidly in recent years, and will like change at lightning speed for the foreseeable future, too. As our society continues its obsession with four-hour workweeks, passive income, and working smarter rather than harder, automated Amazon e-commerce businesses are bound to keep popping up.
Automating something like an online Amazon shop simply means delegating much of the heavy lifting. Usually, this delegating leaves the shop owner with few responsibilities and as much time as he or she wants to focus on their business. The easiest way to automate an Amazon business is through Amazon’s offered Fulfillment by Amazon scheme.
In this case, Amazon stores a seller’s inventory and deals with everything from picking items to pack and ship, to dealing with returns and exchanges. Another way to automate is through a fulfillment method known as dropshipping. In this scenario, Amazon sellers never make inventory purchases upfront. Rather, they team up with suppliers and vendors to buy items only at the rate at which they can sell them.
Both of these automation methods come with their risks and downsides. However, they are ideal for the entrepreneurial Amazon shop owner looking for a passive income. But for some, even FBA and dropshipping aren’t passive enough! It is this type of seller for whom Amazon automation companies exist.
These companies can require a hefty upfront cost, but deal with absolutely every aspect of starting and managing an e-commerce business, from deciding on a name to shipping out orders.