How Many Products does it Take to Make a Living on Selling on Amazon?
It’s a good question, and one to think about when starting out:
How Many Products does it Take to Make a Living on Selling on Amazon.com?
The short answer is: it depends on the type of products your selling.
The long answer is…
If you have expensive items in your inventory, then you may not need very many items that you need to sell.
Searching Amazon.com, you’ll find a lot of expensive items. If you’re selling a few high-priced items, you don’t need tons of items to make it work.
Hold on here, it’s easy to get confused when people start slinging works like products, items, and SKUs.
SKU is short for Stock Keeping Unit. If you have one product your selling (say a computer mouse), that’s one SKU. Even if you have hundreds of the same computer mouse in your basement that you’re selling, you have but one SKU, one item, one product.
“Units” is a good term for identifying how much of each SKU you have in stock. For example, you have 120 units of SKU Computer-Mouse.
When working your business the smart way, you set up one listing on Amazon (or eBay if you like) and sell multiple units of that same item. Just like the big box stores do.
That way, the time and effort you put into the setup of the item gets paid back over and over again with each sale.
So, back to how many products it takes to make a living:
Starting on the low end of the pricing scale…
If you’re average item price is $10 and you want to gross $100,000 for the year, you’ll need to sell 10,000 units of product. Those units could be all from one product (or SKU) or lots of different products sold over and over again. Sounds like a lot, but when you break it down, it’s an average of only 27 units a day.
But, thinking in averages can be dangerous when trying to plan in retail because 50% of those 10,000 units will probably be sold during the last three months of the year.
Why? It’s the holiday season, and almost all products get a tremendous lift during Christmas.
That makes for a lot of work if you’re shipping those items yourself (not something that I recommend anyway).
How about more expensive items?
If you reach for a higher price point, which is what I recommend, your stats will be a little different as well as your effort of work.
If you’re average item price is $100, then you need to sell only 1,000 units. That’s only 3 a day to reach $100,000 in gross revenue per year.
But it’s possible to do much, much better.
The sky’s the limit. So how many products does it really take?
Not all your products will be good producers. Some will be part of the “Long Tail.”
The Long Tail is what make the Internet so amazing.
There are millions upon millions of people shopping and spending money online every day.
For an official explanation of the Long Tail by Wikipedia:
The Long Tail or long tail refers to the statistical property that a larger share of population rests within the tail of a probability distribution than observed under a ‘normal’ or Gaussian distribution.
The term has gained popularity in recent times as a retailing concept describing the niche strategy of selling a large number of unique items in relatively small quantities – usually in addition to selling fewer popular items in large quantities.
The Long Tail was popularized by Chris Anderson in an October 2004 Wired magazine article, in which he mentioned Amazon.com and Netflix as examples of businesses applying this strategy.
Anderson elaborated the concept in his book The Long Tail: Why the Future of Business Is Selling Less of More (ISBN 1-4013-0237-8).
Long Tail. (2011, February 4). In Wikipedia, The Free Encyclopedia. Retrieved 06:55, February 5, 2011, from http://en.wikipedia.org/w/index.php?title=Long_Tail&oldid=411896307
A bigger population and exploding Internet access mean that there are enough people seeking to buy the same obscure things that you can make a living selling those “obscure things.”
That’s just one way to do it though…
Since Amazon.com has the world’s largest product selection, it’s the perfect place for the Long Tail, and the perfect place for you to sell your products (obscure or not).
If most of your items are in the Long Tail, you’ll need a lot of items to sell, and you’ll see a few sales of each item here and there.
Once added up, however, you can make a good income.
What mix of Long Tail and Super Producers should you have in your product selection?
It’s interesting, but that old 80/20 rule seems to pop up everywhere, and it’s true from what I’ve seen.
20% of my items are high producers while 80% are part of the Long Tail of my product line.
It’s somewhat relative. All of my products could be considered part of the long tail if compared to a super item like the Kindle, but within my own product mix, 20% of my items are regular, everyday producers.
My best producing product from the last 6 months of last year took almost 8% of the total volume for the period. The next item was about 7%. So no one item was a major super star.
Having your whole business hinging on just one item is a very dangerous situation.
When I started out, I worked hard to get a good number of items going so I wouldn’t be dependent upon any one if something happened.
Challenges do pop up, such as a supplier deciding not to carry a particular item anymore (just so happened to be an item that did well for me at the time…bummer).
A good mix of producers and Long Tail items will help guard against that risk.
All of this assumes that you’ve done your homework and selected products that will sell at least marginally well and that you’ve created killer item descriptions pages, and have marketed your items correctly…all of which are a lesson for another day.
So, down to real numbers, could you make a full-time living with only 30 products? Sure you can. It’ll depend on how expensive those items are and how fast you can sell those products, but it is possible.
If you expand your inventory a little bit more, you’ll reduce your risk if you start to have quality, supply, or demand problems for any particular item or brand.
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