Which Business Model To Pursue: Amazon FBA, eBay or Etsy?

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I’ve always wanted to have my own business one day ever since I was a freshman in college.

Life took me in a different direction, and now I’m working a full-time job for my employer.

Don’t get me wrong. I am appreciative that they took a chance on me and tolerate all of my mistakes.

However, the entrepreneur in me has been yearning to surface and urging me to reexamine my goals in life.

That’s one reason why I decided to start my blog.

After 7 months of constantly churning out new content, I got burned out.

I started questioning myself and my passion. I got tired of writing.

There has to be more to life than sitting in front of the computer and staring at WordPress.

And I took a break. No one knew I did because I still managed to post new content three times a day.

I was active on social media and responded to comments like usual.

But deep down, I knew it was time for me to slow down, at least temporarily.

One thing I didn’t really do as much was trying to finish a new post every 1-2 hours on a daily basis. My brain needed a break, and so did I.

In one of the steps I took to get over the blogger burnout was to examine my passions prior to blogging.

I plan to create products related to blogging such as e-books and courses.

But after writing nonstop to stay 4.5 months ahead of schedule, I just didn’t want to write anymore. I wanted to sell a physical product, not just something I had to use my brain to create from scratch. There has to be something I can do besides typing up words all day.

I have heard a lot about Amazon FBA (Fulfillment By Amazon). Many businessmen have become millionaires by selling products and scaling their products on this platform.

I wanted to explore this business model. And there’s no better way to learn something by actually doing it. Amazon FBA was like a buzzword for me, just like Pinterest a year ago.

I heard about Amazon FBA success stories on a regular basis but didn’t really understand what it was and how I could enter this market.

If you know me, you can probably tell that I don’t like to spend money. Instead of paying for a course, I turned to one of my long-time mentors – Google – for help. I also looked into Etsy and eBay to see which business model meets my needs the best.

Related: 6 Ways Google Has Saved Me Thousands Of Dollars

Amazon FBA

Definition: “With Fulfillment by Amazon (FBA), you store your products in Amazon’s fulfillment centers, and we pick, pack, ship, and provide customer service for these products.” – Amazon website

Pros

1. Ease and convenience

I won’t have to worry about storage, packing, waiting for 30 minutes at the post office to mail something or deal with customer service. All of these activities could easily take up at least 1-2 hours of my already busy day.

2. Scalability

Since I don’t have to pack and ship each item to the customers, it will up my time to focus on marketing and expanding my customer base. We all have 24 hours a day, most of which is spent on our sleep, daily routines (i.e. eating, walking, brushing our teeth), and work (if you have a full-time job).

If it takes me 10 minutes to fill an order (i.e. packaging, printing the label), I can only sell 6 items in an hour. If I want to sell more products and make more money, I will need to trade more time for more money.

If Amazon handles all the fulfillment, however, I can sell 10, 20, or even 100 products in 10 minutes. I will be able to focus on finding more suppliers, marketing, and researching more products instead.

3. Customer base

Amazon has an active user base of 244 million customers. If you choose Amazon, one of the fastest growing retail websites in the world, to launch your product, you have the ability to tap into these 244 million potential customers.

Not all of them will buy your products, and you won’t be able to reach all of them overnight. But I can’t think of any other platform that can expose your business to such a large network of customers and, of course, potential sales. You can also use an Amazon FBA calculator to estimate your profits in bulk.

4. Brand recognition

If you decide to build your private label and start a website or a blog to market it, it will take you a while to promote your brand and build a customer base.

When I see products on a website I’m not familiar with, the first question I’ll ask is: Can I trust this site? About 15.4 customers were hit with some form of identify thefts in 2017, an increase of 13.1 million from 2016, according to Javelin Strategy & Research.

I know I don’t want to be one of them. Entering my personal info and especially credit card number on a site that I’m not familiar with is a big no-no for me. And I know I’m not the only one who feels this way.

When people turn to Amazon to find products, however, they feel secure knowing that Amazon has a good cyber security system in place. Even if something happens to their financial info, they know Amazon will take care of it for them. After all, customers’ satisfaction is one of Amazon’s top priorities.

If I start private labeling products, no one will recognize my brand in the beginning. But if I sell them on Amazon, people will at least trust that my brand is good enough to be marketed on the platform without being shut down by the retailer giant.

Once I sell more products on Amazon and establish my private label, I can then transition my brand to a new self-hosted website separate from Amazon.

Cons

1. Constantly stay in stock

The biggest con I see with Amazon FBA is that I need to have products in stock at all time. That means that I will need to constantly invest profits (if any) into purchasing new products to avoid delays in shipment.

Amazon takes their customers’ satisfaction seriously. If a seller runs out of stock, their ranking in the search function will be penalized, which in turn affects their bottom line.

I see this as a major drawback for Amazon. Although I want to be active in the business, I do want to take a break every once in a while. For example, if Baby FAF gets sick or if we go on one-month trip to Asia to visit our family, I want to “close the store” temporarily and focus on what’s more important to me at the time.

That’s obviously not how Amazon wants their sellers to operate. You’re either in or out, not in between and not on break.

2. Approval process for restricted categories

Not everyone can sell anything on Amazon. Products that belong to restricted categories have to go through rigorous approval processes, and there’s no guarantee that your product will get approved to sell on the platform.

3. Fierce competition

If you look up certain items on Amazon, you can easily find out who their suppliers are in China. Those items tend to be identical. The only differences might be the private labels and colors. Your product is not unique, which lowers the entry barriers for other sellers who can wage a price war to push you out of the market.

My Amazon FBA experiment

I watched a series of tutorials and read lots of materials on how to launch a product via Amazon FBA. And I have to say selecting a product is the most difficult step of all.

If I choose the right product, it will smooth out the rest of the process. However, if I pick a product that provides a thin or even negative profit margin, I will end up in the red. And the whole experiment will collapse.

One can argue that no matter if I succeed or fail in this pilot phase, I will at least learn something from it. And I whole-heartedly agree. There’s no better way to learn than to actually do something, make mistakes, and learn from it.

However, I am frugal and hate losing money. I don’t want to get suck in analysis paralysis. But I want to do adequate research to avoid any financial pitfalls that could easily be prevented with adequate preparation.

After looking at potential products, I picked one which I thought was the winner. It’s something that:

• I’m interested in and can picture myself and others using every day
• has a sales price of at least $10
• has a healthy profit margin of more than 50%
• is light, easy to ship, and not seasonal
• has over 100,000 monthly searches in Merchantwords.com
• has 2-3 products with fewer than 50 reviews on the first page on Amazon (meaning less competition)
• can be outsourced cheaply in China

Challenge

I found a couple of suppliers and products that I are good candidates for the experiment. However, there’s one big problem. The product belongs to a restricted category on Amazon. Potential sellers will need to go through a rigorous approval process to sell their products.

I was really disappointed when I found out about this. It’s good that I kept researching and didn’t just jump into ordering the products. At this point, I was fairly certain that I wouldn’t be able to launch the product through Amazon FBA. I thought about two other options: eBay and Etsy.

eBay

Pros

1. Selected item not restricted

I looked up the item on eBay and see that the item is not restricted. The competition is definitely fierce, but this is the easier route to sell the selected product than Amazon FBA.

2. Flexibility

On eBay, I don’t have to constantly stay in stock and can take a break if I don’t have any inventory to sell.

Cons

1. Shipping & handling

The biggest con with eBay is that I will need to fulfill an order by myself. If I have a sale, I will need to package it and ship it directly to the customer. If there’s a complaint or question, I will also be handling costumer service. These activities will not only take time but also prevent me from scaling the business.

2. Smaller user base than Amazon

While Amazon has 244 active users, the number for eBay is only 168 million, 31% less than Amazon’s. A smaller user base could mean few sales of your product.

Esty

I thought about selling the selected product on Etsy. But it doesn’t seem feasible since I didn’t make the product from scratch. If reported to Etsy for selling manufactured items, my account will be banned and my reputation tarnished. That’s not that route I want to pursue.

One thing that really attracts me about Etsy is that it’s a an online store for hand-made items. I love the idea of making a product from scratch and explored this retail website for a while.

When I thought about what product I wanted to sell, however, I got stuck. My art skills are almost non-existent. I can’t draw or build anything that looks remotely interesting. I thought of two options: (1) knitting and (2) making templates.

1. Knitting

I haven’t knit anything since elementary school. But knitting is the only form of art I can do by hand. After coming up with an idea of what I wanted to knit, I started thinking about the production and got stuck. It would take me probably 30 minutes to an hour to complete a product. It’s a huge time sink and is definitely not scalable in the long run.

2. Templates

Creating templates, calendars, and notebooks are a great way to make passive income on Etsy. It’s still a product of your own, but if you want to make it a printable or downloadable version, you don’t have to deal with shipping and handling. It’s a scable model with minimal overhead.

I do want to create e-products in the future, but I want to save it for my blog. With other platforms such as Etsy and eBay, I want to experiment with a physical product.

I’m not sure why I’m so obsessed with that idea. But I will need to do more research on what niche or products on Etsy I can break into without facing fierce competition from other sellers.

Pros

1. Develop my own products

I can build my own product from scratch and market it on this platform. It will give me a great sense of ownership and gratification.

2. Less competition

Any seller can buy manufactured products outsourced in China, slap their private label on them, and market them as their own products. However, my products are likely to be more customized, if not unique.

3. Low cost

If I decide to create templates using a free software, the only cost I will incur is my time instead of a huge amount of capital

Cons

1. Lack of art skills

This is the biggest con I see with Etsy. I am not very creative when it comes to making original products. I once tried to make a dress from two free T-shirts. Needless to say, I didn’t even want to wear it. I doubt if anyone will.

2. Shipping & handling

Like eBay, I will need to package, ship, and deal with customer service by myself, which will take up a charge chunk of my day and is not scalable.

Conclusion

I am a big fan of passive income. I like the idea of having money working for me, and I do plan to make that happen by maxing out my 403(b), investing in rental properties, and growing my blog.

However, part of me is restless, and I don’t want to sit still. I am only 30 years old and want to make the most of what life has to offer. I want to put myself out there and explore the world of business without getting myself and my family into debt.

Starting with any of the three platforms mentioned above (Amazon FBA, eBay, and Etsy) doesn’t a huge amount of capital. I can start a side business for as little as $300 as a pilot project.

I want to be carefully adventurous. I had read personal finance blogs for two years before launching mine and have learned a lot from other blogs to improve my own.

I don’t want to wait for two years to launch a physical product. But I will need to do more market research before devoting my time and money to my next project. I don’t mind failures. I just don’t want to lose money.

And one of the few things I can do to prevent losses is to prepare myself well before taking the plunge.

Stay tuned for more updates!

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