Many Canadians are interested in starting an online business selling products on Amazon, and with good reason. Over 30,000 Canadian small-medium businesses made more than $900 million in sales on Amazon.ca in 2018, according to Amazon. Sellers on the marketplace boast of reaching profitability in record time, intriguing online entrepreneurs around the world.
2020 Amazon Seller Benchmark Data
A recent survey of Amazon sellers, conducted by Jungle Scout, has revealed in-depth information about how and why participants sell on the marketplace. This benchmark data is invaluable to those who are considering it as a business, and it allows current sellers to compare and adjust their strategy.
The overwhelming majority (52 percent) of Amazon sellers are in the United States, followed by China at only 8 percent. Canada comes in fourth at 5 percent, with tremendous growth potential. Seventeen percent of Canadian Amazon sellers reach beyond our borders through global marketplaces.
Amazon Seller Profile
Seventeen percent of sellers have a high school diploma or less, confirming that you don’t need a fancy degree to be successful on the marketplace. That said, 82 percent of sellers have a university degree, implying that selling via online marketplaces is an accepted business practice.
Selling on Amazon is quite often a side hustle, with only 21% doing it full-time. Eighteen percent have a part-time job and 37 percent have a full-time job. Twenty-three percent also do freelance or gig jobs. Five percent are retired and three percent are students. Fifty-four percent own a company that isn’t related to selling on Amazon.
Selling on Amazon is one of the fastest and easiest online businesses to start. Sixty percent of those surveyed say their Amazon retail business is their first online business. Sixty percent had their business started and their first live listing within three months. Ninety-two percent had their business operational within a year.
The Most Popular Products to Sell on Amazon
The most popular Amazon categories for sellers are:
- Home / Kitchen 43%
- Toys / Games 22%
- Sports / Outdoors 21%
- Beauty / Personal Care 20%
- Health / Household / Baby Care 20%
- Kitchen / Dining 20%
- Clothing / Accessories 18%
- Baby 17%
- Office 16%
- Home Improvement / Tools 16%
- Outdoor / Gardening 15%
- Pets 15%
- Electronics 14%
- Grocery 12%
- Books 12%
- Arts / Crafts 12%
- Industrial / Scientific 9%
- Auto Parts / Accessories 8%
- Cell Phones / Accessories 6%
- Appliances 6%
- Travel / Luggage 5%
- Computers 4%
- Games / Apps 4%
- Musical Instruments 3%
- Handmade items 3%
- Collectibles 2%
- CDs / Vinyl 2%
Fulfillment by Amazon (FBA) is the top fulfillment option, with 66 percent of sellers using it alone and 29 percent using both FBA and Fulfillment by Merchant (FBM). Just six percent use FBM only, yet FBM sellers have more product listings than FBA sellers.
Amazon Seller Business Models
The business models used on Amazon are based on how the seller obtains and sells inventory.
Private Label sellers create their own product label and brand (71%). The profit margin on private label products is 21%.
Wholesale sellers buy directly from wholesale distributors or directly from the brand/manufacturer (26%). Profit margins on wholesale products are 15%.
Retail (20%) and Online Arbitrage (15%) involves finding exceptional deals on products and then flipping them on Amazon. Retail and online arbitrage has a 20% profit margin.
Dropshipping allows sellers to fulfill orders by having products shipped directly from the supplier to their customers (8%). Product margins from dropshipping on Amazon are 13%.
Product creation includes anything a seller makes, such as crafts (6%). Twenty-eight percent of those surveyed claim a profit margin of over 25% for handmade items.
How Much Does it Cost to Start a Business on Amazon?
- 28% spent under $1000 to start their Amazon marketplace business, including inventory, fees and promotion.
- 59% spent less than $5000 to start.
Naturally, the profit generated often relies on the number of listings. Over a third of sellers have five active product listings or less on Amazon, while 27 percent have more than 100 active product listings.
How Much Money do Sellers Make on Amazon?
- Sixty-seven percent of Amazon sellers have profit margins higher than 10 percent, while 36 percent of sellers see margins over 20 percent.
- 74% of Amazon sellers earn over $1000 per month in sales.
- 39% have over $10,000 in sales each month.
- 24% see under $1000 in sales each month.
- 10% rake in over $100,000/month in sales.
- 50% of sellers have lifetime sales of over $100,000.
- 22% have made over a million dollars in lifetime Amazon sales.
- 86% percent of sellers are profitable.
How Long Does it Take to Make Money Selling on Amazon?
- 67% were profitable within one year
- 80% were profitable within two years
- Just 14% reported they weren’t yet profitable
Million-Dollar Tips
Those surveyed who make over a million dollars on Amazon, have the following things in common:
- Sellers who make a million dollars or more started selling fast, launching their first product within six weeks.
- 59 percent of them have more than 50 listings, while 31 percent of all sellers surveyed had more than 50 listings.
- 74 percent use private label sales.
- Respondents appear to have nailed sourcing and report less challenges in finding profitable products, as well as with the promotion of those products.
- Inventory and expense management are the biggest problems faced by million-dollar sellers.
Web Retailer has ranked the top 500 sellers on Amazon Canada for 2020, providing many examples of top sellers to learn from.
The Experience
Eighty-five percent of sellers surveyed cautioned that it takes work to make money on Amazon. Like most legitimate online businesses, it isn’t a way to “get rich quick”. That said, 57 percent claimed to spend less than 20 hours per week working on their Amazon business. Just 18 percent put in 40 hours each week. Thirty-eight percent say they have one or more partners.
Ninety-two percent of Amazon entrepreneurs will continue selling there in 2020, and 97 percent of sellers plan to expand their business. Why? Well, for all of its faults, Amazon sellers are twice as likely to be profitable as other small business owners. Sellers enjoy flexibility and control how much effort they apply.
It’s not all sunshine and roses. Only fifty-eight percent think the online marketplace is good for sellers overall.
There’s a growing concern over:
- The rising cost of advertising on the marketplace.
- Amazon competing with them with their own products.
- Lack of security.
- Amazon’s power to shut down accounts and listings without apparent cause.
- Inadequate seller support.
- Competition with Chinese suppliers.
- Tariffs
Perhaps the most telling, is 80% of those surveyed wished they’d started selling on Amazon sooner. Seventy-two percent believe Amazon will continue to be profitable in the future. That’s an impressive vote for starting an online business selling on Amazon and other marketplaces as soon as you possibly can.
Source:
Jungle Scout is the leading all-in-one tool for selling on Amazon, with the mission of providing powerful data and insights to help entrepreneurs and brands grow successful Amazon businesses.
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Melody McKinnon is an internet entrepreneur with 25 years of experience in a wide range of online business models, backed by a formal business/marketing education and enhanced by training and mentorship. She has owned or managed both educational and ecommerce websites. Her book, 7 Recession Proof Online Businesses to Start From Home, is available from all major ebook retailers.
Melody has worked with many businesses in a multitude of capacities. She can often be found on CanadianDigitalMedia.com, CanadiansInternet.com, CanadianFamily.net, and AllNaturalPetCare.com, as well as other quality digital publications. Her content has earned reference links from highly-respected websites, magazines and university textbooks.
So useful! But I’m skeptical about only 5% in Canada? Maybe there weren’t many Canadians surveying.
Either way I’m just so thankful for the info that helps point me in the right direction. I’ve been bogged down in choosing products and it took me over a year to choose a niche for my Amazon store. I’m tired of planning and have to launch something.
Thanks for motivating me too and all Canadians who want to start an internet biz.
Kind regards,
Telma