Every time I look at my Facebook feed, I see a brand new business guru pushing yet another ecommerce business model. And while most of these methods of making money online are in fact legit, the sheer number of choices is pretty overwhelming.
- Should I start my own website?
- Should I sell on Amazon?
- Should I do retail arbitrage?
- Should I sell wholesale?
While I don’t consider myself a “guru”, I do get quite a few emails from readers asking for advice on what type of business to start.
But here’s the thing.
Every time I publish an ecommerce article that encourages my readers to start their own business, I find myself tiptoeing across a very fine line.
Certain business models are very “easy” to start but much harder to make money with.
Other models are extremely profitable but have a much steeper learning curve or upfront investment.
On one hand, starting an ecommerce business is simple, relatively risk free and doesn’t require a lot of start up capital.
But on the other hand, running a successful business requires a ton of hard work, perseverance and a little bit of luck.
The problem is that when I emphasize the enormous amount of work that is required to launch a company, I tend to turn people away from starting a business.
However when I emphasize the simplicity, people tend to harbor unrealistic expectations and expect a quick path to riches.
So what’s the right business model to pursue?
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All The Ecommerce Business Models Compared And Explained
What I hope to accomplish in today’s post is to discuss the pros and cons of 8 different ecommerce business models and let you decide for yourself.
Whatever you do, never pursue a business because of how “easy” it is to start. Instead, make sure you consider other factors like long term sustainability and probability of success.
Note: When I use the term “eCommerce business”, I’m referring to selling physical products online and not digital products
As you read about the various business models below, keep in mind that…
Some of these business models have low barriers to entry, low costs, low overhead.
Some of these business models are super competitive.
Some of these business models require a decent sized upfront investment.
Some require inventory. Some require a website etc…
Anyway, I’m going to discuss the pros and cons of all of the popular ecommerce business models based on the following criteria.
Each will be rated on a scale of 1-10 with 10 being the best.
- Ease Of Getting Started – How easy it is to launch your business. Does it require any technical knowledge? Upfront investment etc…
- Profit Velocity – How quickly you can make money?
- Sustainability and Risk – The defensibility of your business and its long term potential to create sustainable income.
- Level Of Competition – How hard is it to make money and can someone easily launch a competitor?
Now in case you haven’t been able to tell from reading my blog and listening to my podcast, I believe that the more work that you have to put in to be successful, the more sustainable your business will be in the long run.
In other words, if something is too good and too easy to be true, it probably is:)
Dropshipping With Your Own Website
The first business model I want to talk about is dropshipping with your own website.
For those of you out there who are unfamiliar with the term, dropshipping is when you put up a website to take orders online without carrying any inventory.
Instead of fulfilling products yourself, you send orders over to your vendor and your vendor is responsible for shipping the order to the end customer.
Dropshipping offers the following advantages
- No inventory – Because the vendor is storing all the goods, you don’t have to worry about inventory at all
- No order fulfillment – The vendor is responsible for shipping the product to the end customer
- Low start-up costs – All you need is a basic ecommerce website which can cost as low as $5/month.
- Simple to start – If you use a platform like Shopify, it’s straightforward to launch a website.
Here how it works.
First you must contact wholesalers directly to get approved as a retailer. Then once you are approved, you instantly have access to hundreds of products that you can list in your shop.
Because you’re selling everything on your own website, you’re in full control of your store brand.
But the downside of dropshipping is that your margins are super low because someone else is storing all the inventory and doing all the fulfillment for you.
Typically, the profit margins for dropship stores are anywhere from 10 to 30%.
Editor’s Note: To learn more about dropshipping from a dropshipping veteran, make sure you listen to this podcast episode with Andrew Youderian.
As a result, paid advertising becomes challenging because you don’t have enough profit margin to pay for traffic. Often times, you are limited to running Google Shopping campaigns only.
Furthermore, competing with other shops that are physically carrying inventory is difficult because your margins are less and you have less pricing flexibility (This can be mitigated somewhat by MAP pricing).
Also, because you’re selling other people’s goods, you aren’t in control of your product mix.
Let’s say your vendor decides not to carry a certain product any longer. Well guess what? You can’t carry that product either.
In addition, inventory and customer support can be a pain because you’re not in control of the fulfillment process.
Let’s say a customer contacts you to complain that they haven’t received their product. Because you are the face of the company, you have to take the blame and fix the issue even though it’s technically not your fault.
Sometimes vendors can be late and unreliable. And what sucks is that a poorly chosen vendor can destroy your store reputation.
Managing inventory issues can become problematic as well. Sometimes you might sell a product that is out of stock with your vendor so you have to make sure you are in sync with their warehouse.
Overall, what makes dropshipping fragile is that you’re heavily dependent on your vendors for your business reputation.
A vendor can cancel the arrangement at anytime. They can discontinue products. They can be unreliable with order fulfillment and because the margins are lower, search engine optimization becomes a huge factor of your success.
In other words, you will have to invest heavily in content marketing and depend primarily on Google for your sales and traffic.
Overall, here’s how I rate dropshipping on a scale of 1-10.
- Ease Of Launch – 8 – All you need is a website and wholesale vendors
- Profit Velocity – 3 – It can take quite a while to build up your search rankings and your margins are not sufficient to pay for most advertising methods.
- Sustainability and Risk – 6 – You own your own brand but you’re also at the mercy of your vendors and Google. Amazon sellers will also exert downward pressure on your margins.
- Level Of Competition – 3 – Lower margins and competition from other sellers selling identical product makes it a challenge to maintain profits.
Dropshipping From Amazon To EBay
The next business model I want to talk about is dropshipping from Amazon to eBay. This model is also known as EBay/Amazon arbitrage.
Here’s how it works.
First, you find products on Amazon that are selling higher on eBay. Then, you steal the images and the product copy from the Amazon product and post an eBay listing that is significantly higher in cost.
The reason this business model works is because people who shop on eBay tend not to shop on Amazon. And for some reason, there are lots of people on eBay who are not aware that they can buy the same goods cheaper elsewhere.
As soon as the auction closes on EBay, the seller then purchases that exact same product on Amazon and has it shipped over to the eBay customer.
In other words, you are leveraging Amazon fulfillment and the cheap prices on Amazon to make a quick Buck on eBay.
What’s funny about this is that the product usually ends up being delivered in an Amazon branded box which can confuse eBay customers.
Even though I absolutely detest people who do this, there are many attractive qualities to this business model.
- There are zero overhead costs.
- There is no website required.
- You don’t need to find vendors.
All you need is an EBay account and an Amazon purchasing account. In a nutshell, the process involves listing an item on eBay at a higher price and then buying that product on Amazon and having it shipped.
It’s very easy to get started but be aware. You may get nasty letters from brand owners because selling this way increases their support costs.
Sometimes people will purchase the item on eBay, receive an Amazon box, check on Amazon to find the same product at a lower cost and then complain to the brand owner instead of the EBay seller.
As a result, brands hate people who use this business model.
The other big downside is that you constantly have to be on the lookout for new products and you have to watch the prices on Amazon like a hawk.
In addition, because brand owners hate this practice, they can complain about image and copyright theft and potentially have eBay shut you down.
In fact, I’ve heard about several cases where EBay sellers have been banned for copyright or trademark infringement.
Overall, this business model is great for cash flow but has poor long-term business potential.
You constantly have to be on the search for new things and you’re not really adding any value at all.
Here’s how I would rate this model on a scale of 1-10
- Ease Of Launch – 10 – You don’t need anything.
- Profit Velocity – 2 – You can make sales immediately. However the margins will be low so you’ll have to make it up with volume.
- Sustainability and Risk – 1 – You are completely at the mercy of both Amazon, Ebay and the sellers you dropship from.
- Level Of Competition – 2 – Lower margins and competition from other sellers doing the same thing makes it a challenge to maintain profits. It becomes a pure volume game. There’s also an online course out there that is flooding the market with these types of sellers.
Retail arbitrage or RA for short, has become an increasingly popular business model in the last few years.
In fact, I had Jessica Larrew on the podcast and she was making 6 figures per year with this model.
Here’s how it works.
Most liquidation stores often sell products at rock bottom prices that are far lower than Amazon retail prices.
By buying up all of the clearance and liquidation merchandise from stores like Marshalls, TJ Maxx etc…, you can profit by selling these goods on Amazon FBA at much higher prices.
Editor’s Note: Online arbitrage is very similar to retail arbitrage except you buy merchandise from online stores instead of retail shops.
The reason this model works is because a lot of consumers don’t have access to liquidation outlets and are willing to pay full price on Amazon.
What’s nice about this model is that…
- You don’t need a website
- You can leverage Amazon’s huge marketplace for instant sales
- There are few startup costs except for your inventory.
But the major downside is that your business is 100% at the mercy on Amazon and you need to constantly find or go shopping for new goods to list on the platform.
This basically means that retail arbitrage is very difficult to scale because you end up spending most of your time hunting for bargains.
In addition, Amazon has introduced new rules that strongly discourage this business model going forward.
For example, Amazon has been preventing sellers from selling certain brands without express approval from the manufacturer.
So let’s say you just invested $2000 in a killer clearance sale of Legos. “Lego” is a brand that Amazon recently banned sellers from selling.
So guess what? All of a sudden, you’re stuck with $2,000 worth of inventory that you can’t get rid of because you can no longer sell on Amazon.
In fact, all it takes is one such incident to shut your business down and for that reason I believe that retail arbitrage is at great risk right now.
Amazon is placing more focus on supporting brands which does not favor those who sell other people’s products.
I’ve also heard that Amazon is charging a large upfront cost to sell certain brands on the order of thousands of dollars.
They are also enforcing GS1 barcodes purchased from valid outlets so your barcode must now match your brand.
Bottom line, I would probably avoid retail arbitrage for now until things settle down.
- Ease Of Launch – 8 – All you need to do is go shopping and sign up for an Amazon account
- Profit Velocity – 5 – You can make money right away but it’s not easily scalable
- Sustainability and Risk – 2 – Amazon’s new policies make this model risky
- Level Of Competition – 5 – Low margins and competition from other sellers selling identical product makes it a challenge to maintain consistent profits.
Dropshipping On Amazon
Dropshipping on Amazon is very similar to dropshipping on your own website. The main difference of course is that you are dropshipping the goods directly to Amazon customers.
Here’s how it works.
First, you must find distributors willing to dropship on your behalf. Then you list the item on Amazon as merchant fulfilled.
Whenever you make a sale on Amazon, you contact the distributor and the distributor ships your product to the end customer.
It’s important to note that this business model does not use FBA (fulfilled by Amazon) so you are responsible for filling the order in a timely manner.
Overall, this model is attractive because..
- There are no start-up costs
- You don’t need a website
- You can instantly have hundreds of products at your disposal that you can immediately sell on Amazon
Now the problem with this business model is that anyone can contact the exact same wholesaler and get access to the exact same product mix.
The other thing that’s extremely dangerous about this business model is that Amazon has very stringent requirements on seller quality and on-time shipments.
So let’s say it’s Black Friday and you sell a whole bunch of product. But when you go and contact the distributor, all of a sudden they tell you that the item is out of stock due to an inventory glitch.
Well guess what? Amazon is probably going to ban your account.
Anytime a shipment is cancelled or delayed, you run the risk of getting banned from ever selling again.
In episode 108 of my podcast, my friend John Rampton was making millions of dollars dropshipping on Amazon but lost his 7 figure business overnight.
You should definitely listen to the episode for all the details but basically he got banned because an inventory glitch with his dropshipper resulted in a bunch of sold orders that could not be fulfilled.
He literally lost millions of dollars in potential revenue overnight.
Overall, it’s really easy to start a drop-shipping business on Amazon and the profit potential is pretty good but this business model is just way too risky because you’re depending on someone else for your Amazon reputation.
The past has also shown that Amazon can be quick with the ban hammer because the consumer always comes first.
Here’s how I rate this business model.
- Ease Of Launch – 8 – You just need a dropship vendor
- Profit Velocity – 7 – You can make instant sales albeit at low margins
- Sustainability and Risk – 1 – An inventory glitch or late shipments can get you banned.
- Level Of Competition – 3 – Low margins and competition from other sellers selling identical product makes it a challenge to maintain profits.
Selling Private Label Goods On Amazon
Private labeling is the act of placing your own brand or label on a product that you manufacture yourself.
And the way this business model works is that you first have to find a manufacturer to produce products for you in bulk where they allow you to use your own brand. In most cases, this vendor can be found overseas or in China via Alibaba.
Once you’ve produced your product, you then ship your goods off to Amazon FBA and take advantage of Amazon’s huge marketplace to sell your goods.
Because you are manufacturing and buying your products in bulk, there is a much larger upfront cost.
As a result, I recommend that you be willing to invest a minimum of $500-$1000 on your initial inventory.
But in general, there are relatively few barriers to entry.
- You don’t need a website to sell.
- You don’t need to generate your own traffic because you’re leveraging Amazon’s Marketplace
- There are no inventory requirements
Overall, this business model is a bit more challenging than the others because it often requires interaction with a vendor outside of the country.
But what’s nice about private labeling is that you own your brand. You own your products and the margins are super high (>66%).
And because Amazon’s marketplace is so large, you can make a lot of money very quickly.
The main downside is that you’re dependent on Amazon and you are subject to all the negatives of selling on their marketplace
For example, any reasonably successful listing will attract piggybackers and hijackers.
You will also have to constantly monitor your products for negative feedback and product quality issues because Amazon could ban your products or your account at any time.
Also because you’re investing a large sum up front for inventory, getting banned on Amazon could cause you to get stuck with a lot of unsellable product.
I’ve been selling private label products on Amazon for a couple years now and because the market place is so cutthroat, I’ve also encountered many unscrupulous sellers.
And some of the these sellers have been downright low and despicable.
But overall, selling private label products is very attractive because you own the brand, you own the product and you have the option of selling on your own website.
Selling a private label product is by far the most sustainable way of making money on Amazon of any of the other models presented in this article.
- Ease Of Launch – 6 – You need to find a manufacturer and invest a decent chunk of change on inventory
- Profit Velocity – 10 – You can make instant sales
- Sustainability and Risk – 7 – There’s a possibility of getting banned by Amazon but you own the brand.
- Level Of Competition – 8 – Outside of product sourcing and niche selection, there’s not much to it.
Selling Wholesale Goods On Amazon
Another business model that is closely related to selling private label products on Amazon is Amazon wholesale.
To sell wholesale products on Amazon, you first must find distributors who offer a variety of products for sale and you can use these online arbitrage tools to help you find them.
Then, you essentially buy those products (usually from your home country with low minimums) and list them on Amazon using FBA. Margins are typically on the order of 50%.
Similar to private labeling there are very few barriers to entry. You don’t need a website and all you need to do is find wholesalers with large product catalogs who will allow you to sell on their behalf.
Once you’ve signed on with a few vendors, you can instantly have hundreds of products to sell at your disposal. Overall, the main advantage over private labeling is that you can often buy in extremely low unit quantities and the turnaround time is super fast.
In many cases, the minimum order is on the order of hundreds of dollars.
But the main downside to this business model is that you are selling the exact same product as other sellers which will eventually lead to eroding prices.
Sure, you could find a profitable product to sell on Amazon temporarily. But since everyone has access to the same products, it’s just a matter of time until your wholesale cash cow gets discovered and the prices sink.
This is exactly what happened to my friend Lars. For about a year, he was the only seller of a gardening product on Amazon. But as soon as it was discovered, it was only a matter of months before the prices plummeted reducing his profits to nothing.
Here’s how I rate this business model
- Ease Of Launch – 7 – All you need is a wholesale vendor and an Amazon account
- Profit Velocity – 7 – You can make instant sales
- Sustainability and Risk – 3 – Because your product portfolio is being sold my multiple sellers, your prices will plummet sooner or later.
- Level Of Competition – 3 – There are many courses pushing this model right now and it’s only a matter of time before it gets saturated.
Selling Wholesale On Your Own Website
Selling wholesale on your own website and carrying inventory is what most people think of as the traditional ecommerce business model.
The way domestic wholesale typically works is that margins tend to be in the 50% range and you sell using your own website.
You also need to handle your own inventory or use a 3PL(3rd party logistics firm).
Like selling wholesale on Amazon, you can contact a wholesaler and receive access to a bunch of products right away without a large upfront cost.
If your wholesalers are in the US for example, the minimum order is often on the order of $100.
The best part is that you are in control of your own store brand but competing with other shops selling the exact same item will be challenging.
Here’s how I rate this business model.
- Ease Of Launch – 5 – You need to find a wholesale vendor and invest in your own website.
- Profit Velocity – 4 – You must pay for ads and build up your own traffic. Margins are on the order 50%
- Sustainability and Risk – 6 – You are in charge of your own brand and shopping experience but under pricing pressure from other vendors and Amazon
- Level Of Competition – 5 – Finding a unique value proposition can be difficult. You will likely need to differentiate yourself with content marketing.
Selling Private Label Products On Your Own Website
Finally, the last business model with the highest long-term potential is selling your own private label products on your own site.
This involves manufacturing your own products and driving traffic to your own online store.
Along with selling private label on Amazon, this requires some upfront capital and investment but also carries the greatest long-term sustainability.
By having your own branded products on your own branded website, you are in control of everything.
You can set pricing and define your product however you want and you can never get banned by anyone.
So in the long run if you’re willing to put forth the work selling your own branded products on your own site, it’s the most secure way to run an e-commerce business.
- Ease Of Launch – 4 – You need to source your own goods and launch a website
- Profit Velocity – 7 – You must pay for ads and build up your own traffic. Margins are on the order 66%+
- Sustainability and Risk – 10 – You are in charge of your own brand and shopping experience..
- Level Of Competition – 9 – Finding a unique value proposition is much easier when you are in full control.
Putting It All Together
Now that you have an overview of the different ecommerce business models, it’s important to note that there’s nothing that excludes you from combining the different models.
For example, just because I run my own site does not mean that I can’t sell on Amazon as well.
Just because I sell my own private label products does not mean that I can’t drop ship a couple of products on my site too.
And just because I sell private label products on Amazon does not mean that I can’t sell wholesale products on Amazon too.
I suggest that you give all of these business models a try to see which one fits your personality.
Overall, I always recommend selling private label products both on Amazon and on your own online store. Because if you’re going to spend the effort launching an online store, you may as well choose a business model that is sustainable in the long run.
For our ecommerce business, we sell private label products on Amazon, we sell private label products on our own store and we also sell a few wholesale products as well.
In the past, we’ve also dropshipped a few items to fill out our store.
The key thing to remember is that the more effort you place on your business, the more defensible it will be.
If there’s one key takeaway here, it’s that you don’t want to be tempted into doing something quick and easy because chances are it won’t be sustainable.
With retail arbitrage, Amazon is already changing the rules by preventing any arbitrary seller from selling certain brands.
Just be conscious of your cash flow needs and decide whether you’ll be satisfied with temporary cash vs something built to last.
One of the main reasons I like running an online store that sells private label products is because the barriers to entry are higher.
Because I have to source products and establish relationships with vendors, that is one extra task that a competitor has to do in order to copy my business idea.
Because I manufacture many of my own products and control my own website, it’s much more difficult for someone else to carry the exact same products that I carry or to copy my site.
The additional barriers to entry means that once my business is off its feet, it has more staying power in the long run.
Editor’s Note: I cover most of these business models in my course on how to start a profitable online store. So if you’re interested in learning how to start your own ecommerce store, then
Click here to join my class today!
Want A More In Depth Explanation Of Every Business Model?
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Related Posts In Getting Started With Ecommerce
- Private Label vs Retail Arbitrage vs Dropshipping vs Wholesale – 8 Ecommerce Business Models Compared
- How To Start An Online Store Or Boutique In 6 Easy Steps
- How Long Does It Take To Start An Online Business?
- 3 Ways To Sell Products Online Without Inventory, Shipping Or Fulfillment
- How Much It Costs To Start An Online Store And Should I Dropship Or Carry Inventory
Steve Chou is a highly recognized influencer in the ecommerce space and has taught thousands of students how to effectively sell physical products online over at ProfitableOnlineStore.com.
His blog, MyWifeQuitHerJob.com, has been featured in Forbes, Inc, The New York Times, Entrepreneur and MSNBC.
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To stay up to date with all of the latest ecommerce trends, Steve runs a 7 figure ecommerce store, BumblebeeLinens.com, with his wife and puts on an annual ecommerce conference called The Sellers Summit.
Steve carries both a bachelors and a masters degree in electrical engineering from Stanford University. Despite majoring in electrical engineering, he spent a good portion of his graduate education studying entrepreneurship and the mechanics of running small businesses.
33 thoughts on “Private Label vs Retail Arbitrage vs Dropshipping vs Wholesale – 8 Ecommerce Business Models Compared”
You should put fear into people and make them realize it is hard. There should be a barrier to entering business and that barrier is being willing to work hard.
Folks who enter the business arena and give customers half ***ed products are really hurting the customer and the industry.
There are very few people I follow because most of the folks are hawking stuff and it’s obvious that their messaging is all about them and their product.
That’s why I follow your emails and read your articles. Obviously you have stuff to sell but largely your articles are step by step on how to help me.
Surprisingly with all the writing about the thank you economy and how effective giving is, very few people do it..
While I agree with your statement, there’s something to be said about encouraging people to give it try. As I mentioned, it’s a fine line:)
Recommending people “steal” images from Amazon is never a good idea 🙂
Did it come across as a recommendation in the post? I used the word “steal” on purpose and thought I expressed my disdain for this business model clearly
Yes, you did actually!
Thanks for yet another extremely informative post Steve!
Why did I think one couldn’t have a drop ship arrangement with Amazon?
I’ve been selling the cuckoo clocks I design and have made in Germany directly and through mail order businesses; the latter on a drop ship basis. My first design is extremely niche, but now with the second and third about to become available my marketing options are wide open. So, I’m off to dive into the possibilities of Amazon…
There’s no harm in listing on Amazon. Definitely give it a shot.
Got my first sale on Amazon!
It took less than a week which surprised me as it’s a $395 item.
Now I’m getting much better photos up and adding my second clock design which just arrived from Germany.
Great post, thank you! I agree with your assessment of the different business models. I believe manufacturing your own products and selling on your own website as well as Amazon and other third party sites is the best business model. Some of my products fall under the children’s product arena so I would caution new entrepreneurs who want to private label to make sure that they research all of the safety regulations for their product before investing. I received an email from someone the other day who planned to source baby blankets from overseas and ship them directly to Amazon and they had no idea that there were child safety and testing laws in place in the US.
Thank you for this article. I just wish i had read this last year. I tried out retail arbitrage and I ended up hating it because I didn’t want to spend my weeknights and weekends trawling Target or Walmart for possible clearance items that (from what you said) I may be banned from selling on Amazon FBA before I even send it out. I did manage to find some items, but I lost money in the end. I also wasn’t very good at finding private label products, and now I’m stuck with small lots of random items that I’m probably going to have to sell at a flea market, if I’m lucky.
I’m not mad, though. I’m still determined to build a sustainable business somehow, and you’re doing a great service by providing a much-needed reality check. Like another article you wrote, I remember to tell myself that most people don’t make it in business because they give up at the first sign of things being “not easy” or they haven’t made a million dollars by dinner time.
Tanisia, great response. You’ve been beating your brains like me. Tried all the models and competition is not even close to the right word when it comes to arbitrage and drop shipping. Steve is great! True tested pro with value. Niche is so tough and frustrating…..crazy how Steve and his wife succeed with a “handkerchief” and “linen” line….who would of thunk!… I am stuck….really stuck but will keeping pushing…..Steve, thanks again…for all the great info!
Totally enjoy reading your posts and listening to your podcasts. I’m still in the dreaming stage. I do think to myself, oh I should do that (dropship), no, maybe I should do this (sell on my own site.) But, then what I actually do is everything but. I do have vintage sites on Etsy and Artfire, and I notice I get out of them the work of listing that I put in. And, with vintage it is one item at a time, not a money maker for sure, but enjoyable just the same. So it comes down to making my own product on my own website to suit my personality and style, for that I would work hard to sustain and grow. But, there is so much more going on behind the scenes right now and always, that it becomes a matter of focusing on what is most important – relaxing in the sun. Did I say I was a dreamer? Anyway, thanks again for your posts and podcasts, very educational and entertaining as well.
Thank you for this post. It confirms my initial thoughts to sell my own private labeled items on an eccomerce site. I’ve never sold on Amazon but I will definitely give it a try as well after reading this. When you say you manufacture and brand your products are you ordering your products in bulk and then shipping them yourself or are you drop shipping your private label products as well. For example, if someone orders a customized handkerchief on your site are you sending the order to your vendor and having them ship straight to your customer? Thanks!
We actually do all our customized handkerchiefs in house in our office in CA.
Hi! This is very informative. I’ve been reading your articles since I started my e-commerce business. At first, I only gained low income, but with my advertising knowledge (which I learned from college) I started to market my brand in any way possible. Now my earnings tripled comparing to when I just started. BTW it took me just just 9 months to achieve that. I sell my private labeled products.
Excellent post! I really enjoyed this. I’m pumped to get started with my store. Thanks Steve.
Everything Im reading lately says Amazon FBA is getting extremely difficult. Amazon is greatly restricting inventory and easily processes returns for any reason from your unscrupulous buyers. You didn’t mention eBay very much. MY wife has a thriving eBay business which allowed her to quit her job as a nurse. eBay is not without problems, but at this point it works better than Amazon FBA for us.
What do you think about selling specialty foods online? Private label, sell other’s products, or subscription box?
I have been looking at and enjoying some of your videos, thanks for the great info!
I was about to start trying dropship from China to Europe, until I found out that the way most do it, is actually illegal and if you get caught you are in trouble. From my understanding, if you have an item shipped to you from China and it has a low value, then you will not get taxes or duty added etc. However, these rules only apply to consumers, not to companies who are dropshipping items to customers. Even though it is a direct shipment to a consumer, you as a seller have the role of importer, you bring the goods into Europe. Legally you are responsible for the items, and also have to declare it with customs. And as a company, you always have to pay taxes, and duties and what not + you are responsible for the declared value on the package. It should state the value you charged your customer, not the value you paid for it, or the value that the Chinese seller made up. Sure, you can do it the way everyone does…..but once you get checked out, you are busted and get big fines and can even be prosecuted.
I wonder if this is known, and how its possible that many here are doing big business, seemingly illegal, and can do so, without any troubles.
Would gladly hear your (or anybody’s) thought on this.
Awesome site! I’m saving up to be able to take your mini course! I come from retail and I’m actually wanting to start my own private label e-commerce site for baby-small children’s trendy clothing. I have been scouring Alibaba as my main source however soemtimes its hard to find trendy kids wear that’s for the upcoming months. My QUESTION for you is have you and your wife ever gone to wholesale trade shows as buyers? Have those helped as far as product goes?
I understand your site is pretty straightforward as far as what you sell and there’s not much effort to be put into the “trend” of handkerchiefs!
Yep. We’ve gone to several in the past. What’s your question?
My question is would a trade show or expo be a good place to find wholesale clothing where I can put my own private label on the items. ( From the research I’ve done most trade shows tend to be for designers trying to sell their own brand/collections.)
Thanks again so much!
Hi Steve, thank you for this well-written and informative article. I’m planning to build my private label too and this article basically seals the deal. Sadly I’m not from US so I can’t sell on Amazon. I will just make do with my own website.
Do you have an in-depth guide for private labeling from scratch to profitability?
Great question! So many $3-5,000 courses out there…man everyone is advertising there courses….have you noticed
A great eye-opening article on various eCommerce business models.
Currently there is a popular model based on arbitrage between one’s own online store and AliExpress using Facebook ads to send leads to the store (even Shopify provides trainings/webinars on this model). Profit margin looks pretty good as prices on AliExpress are pretty low even including shipping charge. What is your opinion on this model?
Thank you again for keep publishing so many informative articles and generously sharing your knowledge and experience.
Hey Steve – Great article which was a pleasure to read as always. I’d be interested to hear your thoughts on Amazon to eBay arbitrage? I’ve been working at it for the last 6 months or so with some good success however I’m struggling to scale the business past £100 per week in profit. When I increase the number of items I sell past 2,500 the ebay fees and platform fees seem to erode any additional profit I make. I spent some time writing about it here: https://www.thriftypence.com/retail-arbitrage-a-guide-to-amazon-to-ebay-arbitrage/. Let me know what you think.
I love this blog, and I’m actually in your Profitable Online Store course.
Is it possible to add the dates to comments, so that we can see how recently people have been experiencing issues with Amazon, or eBay, or anything else? I always find it helpful when buying things like software, for example, to see the dates of feedback. This feels especially useful in the case of Amazon, who appear to be changing their fules and requirements a lot since 2017. If we could see when people are sharing their experiences about selling on it, it would help clarify a timeline of Amazon’s practices and the general state of the marketplace.
Thanks for the reminder of why I don’t dropship!! Too risky for the long term!
Great article! I am a dedicated Table Tennis player, (Ping Pong) and I am in the process of creating an online distributorship of Table Tennis equipment. I have my EIN and LLC paperwork, and I have applied for a resale number.
I have been in contact with several vendors, both domestic and abroad. Almost all High end equipment is made overseas because of numerous trade secrets and licensing restrictions.
I don’t have very much money to put into it, but at present I have been talking to an investor who is thinking about putting 5K into it, but he wants me to do all the work while he stays in the background.
How does all you have said apply to my situation? I would really appreciate your input on this problem.
Please reply directly to my email if you can. I would appreciate your thoughts on the subject.
Thank you for explaining the different business models. Great article!
I appreciate the time you have put into your blog posts. You have an informative website. However, you might consider having a date stamp on your posts to improved user experience. Reading your posts without a date makes it difficult to ascertain the relevancy…was this true a year ago or is it true for the current year? Also, it would be beneficial if you answer people’s questions/comments more frequently.
Thanks for the informative article Steve! I’m looking into manufacturing a particular type of clothing and building a website, but so I don’t have to personally package and post individual items and don’t want to risk dropshipping etc I’m planning on selling to stores, perhaps a chain of stores. My product is also one that isn’t ideal for impulse buying online. Also the fact that the US laws are changing under Trump. Therefore the ‘selling wholesale on your own website’ is the optimum guideline that helped. I’m in the very early brainstorming stage and will meet with a manufacturer this week.
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