How to Earn Extra Cash from Retail Arbitrage – Our Second Sale on FBA

We may earn money or products from the companies mentioned in this post.

We made our 2nd sale using Fulfillment by Amazon (FBA). This most recent sale comes about two weeks after the excitement of selling our first item ever on FBA. Unfortunately, this sale was not met with the same excitement as our first.

As we are just starting to test out selling products online, we have decided to publish information here on The Money Sprout about our progress using Fulfillment by Amazon. A few weeks ago, we documented the process of listing our first inventory, preparing the shipments, and sending them out. Then we detailed our first ever sale and the profits we made.

Today, I would like to cover our second sale and what we learned the hard way about FBA fees.

Our Second Sale

Just about two weeks after making our first sale on FBA, we got an email notification that another item had been sold. It is a cool feeling when you are sitting around enjoying a long weekend to read an email that you sold something online without lifting a finger.

Well – I did put in a bunch of work packaging and listing the items on FBA a couple weeks ago. But that was all upfront work necessary to get these products in front of customers. Now that all that upfront work is done, the fun part is sitting back and letting the process play out while I focus on other income streams.

Our second sale was one of the craft items I detailed in an earlier post. We purchased 8 of these items at Big Lots for $3.20 (with tax) each a few years ago. The inventory had been sitting in my home office for some time – until I decided to finally list it on FBA about a month ago.

Unlike our first sale, the profits for this item were not all that great. We listed each of the craft items for sale on FBA at $8.99, which is what the first one sold for.

Here is a breakdown of the sale –

  • Sold 1 Unit for – $8.99
  • FBA Fees – $5.36
  • Cost of the Item – $3.20

The total profit (not including shipping and packaging) for this items was – $0.43. Ouch!!!

Paying $5.36 in fees to sell this low cost item on Amazon killed any profits we could have had. Unfortunately, I did not pay that much attention to how all the Amazon fees were calculated and assumed it was a percentage of the sale price.

As we found out the hard way, a portion of the FBA fees are based on the sale price but there are also other expenses that are not. This has been a good lesson learned for us and we need to study up on the FBA fee structure if we ever want to make this income stream sustainable.

Understanding FBA Fees

I have a confession to make. Before sending in our first FBA shipment, I didn’t have a good understanding of the FBA fee structure. I thought it was a percentage of the sale price – which is partially true. However, there are also fixed fees – which can eat away your profits on lower priced items.

Here is a breakdown of the different FBA fees we paid for our two different sales. It is important to note that both items were listed as non-media with a sale price under $299.

First Sale – Electronic Item

  • FBA Order Handling Fee: -$1.00
  • FBA Pick & Pack Fee: -$1.06
  • FBA Weight Handling Fee: -$0.96
  • Per-Item Fee: -$0.99
  • Referral Fee on Item Price: -$5.25

Total Fees: -$9.26
Percentage of Sales Price: 26.5%

Second Sale – Craft Item

  • FBA Order Handling Fee: -$1.00
  • FBA Pick & Pack Fee: -$1.06
  • FBA Weight Handling Fee: -$0.96
  • Per-Item Fee: -$0.99
  • Referral Fee on Item Price: -$1.35

Total Fees: -$5.36
Percentage of Sales Price: 59.6%

As you can see comparing the two different items, we paid almost 60% of our selling price on our second sale. This is compared to just over 26% on our first sale. Big difference – especially considering the second sale price was under $10.

The Order Handling Fee ($1), Pick & Pack Fee ($1.06), Weight Handling Fee ($.96), and Per-Item Fee ($.99) were all the same for both sales. That is a total of $4.10 spent for each item – regardless of the sale price. It was only the Referral Fee that was variable depending on the sale price.

There is a good breakdown of the FBA fee structure here if you are not familiar with it. I plan to keep this matrix handy in the future so I can analyze the anticipated costs for future sales.

Note – When looking at the matrix, also look at the type of item you are selling (i.e. media, non-media, oversize, etc.). The static fees listed above could also change depending on what you sell, so be sure to pay attention to these details.

FBA Inventory Update – First Shipment

Every time we make a sale on FBA, we will update the status of our first shipment. Our first shipment consisted of 11 items (3 different products) that were shipped to 3 different FBA locations. The total costs for this first shipment was – $66.81.

These costs included the price of the items to sell, shipping fees, and materials. No FBA fees were included in this total.

After out second sale, we now have a balance of ($37.45). If we were to pull the plug on our retail arbitrage experiment today, we would be in the hole just under $40.

The hope is to continue selling the remaining 9 units that we have at the Amazon locations and turn a slight profit. As we have just realized with the most recent craft item sold, we will likely only gain back the cost of purchasing the remaining 7 if they eventually sell.

This is a good lesson learned about what products to target to sell via FBA.

Conclusion

Every new sale that we make on Fulfillment by Amazon, we learn something new. For example, this past sale we realized that the product we sold was not a good candidate for selling on FBA. Even though we paid about 35% for the item compared to what it is selling for on Amazon – the associated fees are just too much to make any profit.

What we realized is that selling something for under $10 is probably just not worth it. Given that we made a profit of less than fifty cents from selling an item on FBA, that just isn’t worth our time. On top of that, if we broke down the cost of shipping and packaging per item sent to FBA – we likely lost money on this transaction.

If we plan to keep at this FBA income stream, then this will certainly be something we can learn from in the future. We are still trying to decide if selling on Amazon is worth the effort for us. As we continue to sell items from our first shipment, we will check back in with updates on our progress.

Do you have a profitable FBA income stream? What types of items do you sell? Have you ever broke even or lost money when selling something on FBA?

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