If you study cases published on different sites, you will soon find out that good earnings can be boosted mainly by sites dating back to 2014-2016. The fact is that until March 1, 2017, you, as a partner, could count on a commission of 8.50% on each product sold, if you sold more than 3,131 products per month. In this article, we are going to discuss a case study on Amazon affiliate marketing & Amazon FBA.
Commission before March 1, 2017
After the changes, the amount of commission depends on the category and, for example, for the sale of children’s toys you now only get 3%. In some categories, such as animal products, there is an 8% commission. In this niche, Amazon competes with a large online store, Chewy, which has more than 10,000 employees and 13 Fulfillment centers in the United States.
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Are there any prospects and what are the potential risks?
According to statista.com, Amazon is actively increasing its market share from year to year. Thus, in 2018, it accounted for 48% of all online sales in the U.S., compared to only 38.3% in 2016. The larger the share of an online store, the less it is dependant on partners (affiliates).
As a member of the Amazon Associates program, I regularly receive letters of reduction. For example, in several categories: shoes, watches, bags, and jewelry, we now receive only 4% of the total amount, not 7%, as it was before May 1, 2019.
Add to that the growing competition, the ever-increasing complexity of Google’s algorithms, and the toughening rules of Amazon itself.
And the best part is that Amazon can ban your account forever without any reason.
“Under the terms of the Operating Agreement, we may terminate your account at any time, with or without cause.”
The history of affiliate accounts bans also includes a lot of well-known bloggers among the victims – not an exception.
Thus, I think, the golden time for affiliates (2014-2017), when the competition was acceptable, Amazon is already quite popular, and its commissions are high, has passed.
What is the possible way out of this?
Affiliate Marketing and Amazon FBA, when combined, can be a very powerful model that I believe is overlooked by a lot of people.
6-Figure Amazon FBA Seller AMA
We asked our friend who is doing pretty with the strategy well to do the AMA. Even though he wants to stay anonymous, below is his proof of results.
My net margin is around 30-35%.
Did you have a business partner going into FBA? If not, how did you manage all the tasks (marketing, branding, product design, etc) yourself?
No business partner. While I’m in charge of this alone. But that doesn’t mean that I don’t have people to do some work for me. For example, I outsource photos, graphic design, etc. Because these are things that are vital to my product/brand, and I don’t know how to work with them.
Most Amazon vendors do this on their own until the theater grows up enough (say, $100k/mo), and then they can hire assistants to do some tasks or even research on the product. All tasks are not as complex as they seem. It’s difficult when you have a full-time job at the top of Amazon, but you learn how to manage your time effectively.
What methodology do you use for finding suppliers and choosing products?
I usually send out a standard letter with questions regarding the product I am looking for as a source. You can find the standard templates online, but be sure to change them for your specific product needs. Generally, you understand which suppliers will be winners and which will not. You need a person who can communicate clearly and know your goals with regard to the product.
The choice of products is a complex subject, but in general, I tend to look for something with a 50% margin that can be differentiated (necessarily), not too competitive (3 sellers in the Top 3 with less than 50 reviews), the top 10 sellers make at least 3000 units of sales per month in total. Check out the example of a scout in a million-dollar jungle. They describe everything you need to know, from finding the source of the product to launching it on Amazon 🙂
Do you feel this “private-label thing” is sustainable?
I think it’s acceptable if you consider it as a long-term business model. The ultimate goal for most vendors should be to move away from Amazon onto their own platform, where they will have full control. So I started to generate traffic in my niche through the affiliate site. I plan to create my own shop and then maybe develop my own products. All this is part of the business life cycle. I really think Amazon is a great way to start. And while you’re smart, using external traffic, I think it’s a very rational model.
That’s how I feel about Amazon associates. It’s a great way to start affiliate marketing, but there are plenty of other possibilities besides Amazon. I’m glad you’re doing well. The diversification of revenue streams is always great.
Do you believe amazon US is too saturated?
No. It is too saturated for products that come from Alibaba and do not bring any added value to the consumer. Find out what your customer wants before you launch your product, and it will be much easier for you to compete. Amazon’s success in the future will depend on offering customers something new and relevant. Fast money is dead in Amazon. But she’s been dead for several years.
Also, if you’re not lazy like most Amazon sellers, you can explore marketing tactics that will put you so far ahead that other sellers won’t be able to touch you, like FB marketing and social media marketing. You can also use an amazon data scraper to keep up with the competition and their respective prices.
If you are currently dropshipping, how would you integrate an Amazon FBA to improve service? Get a supplier to go to a warehouse in the Amazon?
Hey, actually, I don’t do dropshipping. I send my goods directly from my supplier to Amazon. I find the dropshipping model a bit difficult to turn into a viable, long-term business. My products are branded.
What if your items are high ticket/heavy items (like sofas for example). Would FBA be good for a product like that?
High ticket/heavy item prices can be a great opportunity, as most courses teach you to look for small, cheap and medium-sized items. This leads to saturation in many product categories. If you figure it out, I don’t see why not. You need to check Amazon’s income calculator to calculate the FBA fee associated with an article as large as this one.
How much capital would you recommend for someone starting out?
$5k should be enough for a PL product. I started with $10k capital. Cash flow tends to be a tough point on Amazon. I know this is even the case for me. But I have a Line of Credit to help with new product launches.
How do you combine Affiliate Marketing and Amazon FBA for the most success?
It is desirable to have an affiliate site in the same niche and give preference to your own products in your best articles. Direct traffic to your ads and you have them. But you can go even further, by developing your own email list and bringing your own products to this audience in the mailing sequence.
If you want to get even more creative, you can redirect yourself to people who buy out offers from FBOs and create a similar audience. Start by clicking on the FBI’s advertisements to attract even more visitors.
I also know someone who started at AM and began increasing traffic to their own Shopify store. There are so many possibilities, once you have a traffic jam and the right funnel.
What do you wish you knew from the beginning?
As for Amazon as a whole, I would like to say that I would like to have known how much COD would have affected the value of my products. And besides, I would say that I would look for a different product. Like Google, Amazon is based on keywords. I would like to immerse myself more in long keywords instead of focusing on large volumes and extensive keywords.
I have always had a business attitude and a strong drive. In public school, I had my own lawn care business, and in high school, I started doing OD. I don’t think that the university taught me anything fundamental to change my life. The biggest thing I learned was how to create intercultural relations. The university has also created a way of thinking, which I think has helped me. It taught me to be more analytical, while also looking at situations and problems from different perspectives.
After university, I went back to college because I still didn’t know what I wanted to do. I was indecisive and was stunned by the immediacy of life to find the 9-5 routine. I thought I had wasted 6 years of my life and still didn’t know what I wanted to do. Then the universe pushed me onto the path of entrepreneurship. I lost sight of this path at school. Society was preparing me for a traditional role in the office, and I was blinded by it. Luckily, I was back on a path that I liked very much and that I thought would take hold of me for the rest of my life.
I hope this article has inspired you to start affiliate marketing on Amazon.
Author’s bio to give you a bit of context: after working on eCommerce solutions for several years, we set out to create a new and innovative repricing software for professional Amazon sellers. In 2016 we founded Seller Snap – The Game Theory Repricer For Amazon Professional Sellers.