Reselling items on Amazon: While some local families cash in, former worker offers this warning
Michael and Nicole Lorenzo’s basement is packed with steak knives, fishing rods, laundry detergent, anything they can buy at a discount and flip on Amazon for a profit.
“The more you do it, the easier it gets,” Michael said.
The couple became full-time Amazon sellers in June 2021. Using the Amazon Seller app, they spend hours scanning products inside local stores, find the items in demand, and determine how much they stand to pocket after it resells on Amazon. Michael said they’ve already made around $50,000 this year.
“People will say, ‘How can you buy something for $20 and upcharge?’ Please, we’re doing the same thing the stores do. You walk into Walmart, what do you think they get it for? Pennies,” Nicole said.
Amazon third-party seller sales have jumped from $11.7 billion in 2014 to $117.7 billion in 2022, according to e-commerce intelligence firm Marketplace Pulse. There’s also a lot of competition, with more than 2 million third-party sellers operating on the Amazon marketplace, according to James Thomson, former head of Amazon Services and president of PROSPER Show.
Thomson said when selling on Amazon, “You must realize the marketplace is designed to make it easy for practically anyone to list products on the site, including the brands themselves.”
Chris McCabe, owner and CEO of ecommerceChris and an Amazon investigative specialist between 2006 to 2012, said making money as a third-party seller is not as easy as it looks.
“We’re getting hundreds of emails a day from sellers who are either suspended or are on their way to being suspended,” McCabe said. “Amazon hasn’t told them why their appeals are being rejected and they don’t know what to do next.”
McCabe said it was easier to make money reselling products on Amazon in 2017 and 2018, but now more brands are putting pressure on Amazon to crack down on third-party sellers.
“[Companies] are trying to police their brands on Amazon. Sometimes they don’t like the way the listing or the images look, or they don’t like the detail page and they’re trying to get those people kicked off Amazon,” McCabe said.
McCabe said potential third-party sellers need to do their homework, not only by completing Amazon University, but by knowing the laws and compliance requirements around the products they sell. McCabe also said you need to set aside enough money for ads and marketing, potential refunds and Amazon inventory fees.
“This is not a passive income situation. Eventually you’ll hit some sort of wall,” he said.
While third-party sales have increased, so has the amount Amazon takes from seller’s revenue. Marketplace Pulse found Amazon is pocketing more than 50 percent of sellers’ revenue, up from 40 percent five years ago.
A typical Amazon seller pays a 15 percent transaction fee, 20 to 30 percent in Fulfillment by Amazon fees, and up to 15 percent for advertising and promotions on Amazon, according to Marketplace Pulse.
An Amazon spokesperson disputed the Marketplace Pulse study and said fees vary greatly depending on storage fees and a product’s size and weight.
“While the numbers laid out in this study are not an accurate depiction of the cost to sell on Amazon, it is true that Amazon is investing more than ever in supporting the growth of our selling partners and helping them achieve record sales,” the spokesperson said.
Michael Lorenzo said there’s a lot of trial and error with Amazon selling and most people will give up after a few months.
“Most people will quit within four months. There’s going to be road bumps and there’s going to be times you’re not sure what to do. You might buy a bad product and don’t make a profit. It’s all a learning experience,” Michael said.
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