December 27, 2018

Business Strategies on Amazon: Dropshipping, Arbitrage, Private Label [UPDATED 2021]

Amazon provides sellers with really great opportunities to grow their business. The large pool of customers available to you is the just one of main reasons why you should consider this opportunity. You can sell products using a variety of business models and marketing strategies. Each variant of the business model has both advantages and disadvantages. If you want to be a truly successful, you must understand the specifics of each one.

In this Article, we'll talk about various business strategies on Amazon, from dropshipping on Amazon, to Retail arbitrage on Amazon. We'll take a look at Private Label and what Fulfillment by Amazon is all about. We'll also touch briefly on Amazon logistics. By the time you are done reading through, you should have a fairly good idea about the type of Amazon Selling strategy you want to adopt.

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Dropshipping is a direct sale of goods to the buyer, cutting out all traditional channels of distribution. Its main feature is delivering the goods directly to the customer from the manufacturer when the confirmation of the order has been received.

How does Dropshipping work?

  1. You search for a product you are interested in selling and get in contact with the manufacturer (for example, on eBay).
  2. Advertise the product.
  3. A customer places an order.
  4. You contact the manufacturer and ensure goods are delivered to the customer.

The reason why a lot of people find dropshipping so attractive and quite competitive is that it's very easy to do. It isn’t capital intensive and you don’t need to website to kick the ball rolling.

Using dropshipping on Amazon, you aren’t required to pay for your inventory until you don't sell it. It helps to eliminate cash crunches, overhead costs, slow-movers, and inventory risks. Thereby making it very easy for anyone to break into the market.

In most cases, people use the same kind of tools and applications to research top-selling products on Amazon. Once they are able to identify the product, they tend to source for a supplier. Sometimes this isn’t the best way to go about it.

Although this might go against normal intuition, but we'll suggest you to look out for suppliers and not the products. Rather than looking through a particular product, you should look through a wide variety of products. The rationale behind your thinking should be to come up with suppliers that you can expand with so you have multiple options at your disposal.

It will be better if your business is filled with varieties, rather than a couple of best sellers. After all, there's no need for you to invest in the inventory. This is why you need to spread your product across the board and reduce your risk.


  • Low starting investment.
  • No problems with the return of goods (it's the supplier’s concern).
  • No storage costs.
  • No need to engage in marketing and advertising.
  • You can work with any products that are sold on Amazon.
  • No need to be engaged in the description, creation of a photo, video of goods.

But such sales have some drawbacks.


  • Amazon doesn't like it and your account may be blocked.
  • You must have hundreds of products to earn really good money.
  • A lot of time will be spent on monitoring prices, availability of goods.
  • The starting price is formed by the supplier, therefore the margin may be low.
  • Answers to customer questions for each of the hundreds of products in your store are only your concern.

If you are just looking to try dropshipping on Amazon for the first time, you should start with products you know a lot about. This will make the whole process less stressful and more exciting. Although you should keep in mind that you have to get approval from Amazon before you can sell certain products.

You can find more info by reading this article.

Retail Arbitrage

The concept of Retail Arbitrage is to buy goods from your local stores during the period when they are on sale and sell them on Amazon marketplace to get a profit. For most people, their local stores are usually Home Depot, Target, and Walmart.

We know the question most people ask: is retail arbitrage profitable in this time and age? The answer is "Yes". There are businesses that record as much as $2million in revenue from retail arbitrage.

To begin selling on Amazon, you need to have an Amazon Seller Account. You can get one by checking Amazon Seller Central page. The Amazon Seller Account provides you with all tools and resources that you need. We highly recommend that you go for the Individual Seller Account Plan as this doesn’t come with a monthly fee and it's ideal for newbies on Amazon.

Once the Sign Up Process has been completed, you'll provide access to an Amazon Seller App which is available for free. This App helps you to figure out what kind of product you should buy. There are numerous apps used for retail arbitrage scanning. But we strongly recommend that you should use the Amazon Seller App for the first time.

For those who are wondering if Retail Arbitrage on Amazon is actually profitable: yes, it is. But you must know how and where to buy cheap quality goods and choose the right time to sell them for getting real profit. However, you always need to take into account shipping and marketplace fees.

For ideas on what to sell, you can also use information that is published annually for sellers - Amazon Trends. You can always find a few things that can become bestsellers in the list of the most popular products.


  • Minimum starting points.
  • There is almost no risk because before buying a product and investing money, you can assess how well it is sold on Amazon.
  • Quick start, cause it can take only a few days from purchase to sale.
  • It's convenient to run a business (using FBA).

What is Fulfillment by Amazon (FBA)?  This is a special program that allows you to shift storage, packaging, and delivery of products to Amazon. You just have to find the goods sold at a discount in the nearest store, buy them and prepare for shipment to the storage. The rest of the work will be done for you by Amazon.


  • The constant change of assortment, search for cost-effective products.
  • Taking care of the availability of goods. Stock is not always available, and the number of units available for purchase may be small to cover the requests of your buyers.
  • Small margin.
  • You need a permission to resell branded items.
  • Risk of purchase of a poor-quality product, outdated product.

Such a business option is difficult to scale, and the business model itself is less stable than Private Label. Do you want to grow your business using this model? Get ready to spend a lot of time looking for a product that can be profitably sold. If you give your business a lot of time, it allows you to earn a lot and remain a competitive seller.

Private label

Before we deep down into the gritty of selling Private Label products on Amazon, let’s explain what is it and how can you grow a successful Private Label business using Fulfillment by Amazon.    

Private label products are goods manufactured by third-party suppliers. They are sold under the Private Brand name which you'll choose. As the person responsible for the brand you decide on everything that has to be done with the product, from the way it's going to be designed and packaged down to the kind of label the product will be marked.

We are sure that a lot of you are getting confused here. Let us take a step back and try to understand what the Private Label by Amazon business works.

We all know that Uber is the biggest cab-hailing service in the world and it doesn't own a cab. AIRBNB is the biggest real estate company in the world and it owns no properties. The same thing is with Amazon. It is the largest online retailer but it does not own a single high-end store. You can actually own your brand without needed to have a factory. Private label and Fulfillment by Amazon make this very possible.

A lot of you will be wondering what is Fulfillment by Amazon? Fulfillment by Amazon began as way back as 2012 to make it easy to fulfill different aspects of your business. The details involved in running a business can be very tedious and time-consuming, from searching for warehouse space to receiving orders and shipping. Using Fulfilment by Amazon you really don’t have to worry about all these tasks as Amazon handles everything its own way. Amazon will pick, package, store, and ship your goods directly to your customers via Amazon logistics.

There is a list of steps below that you can take to ensure private label and the Fulfillment by Amazon model is a resounding success.

  1. Source for top-selling products on Be sure to consider niche competition and other parameters in order to choose the right product to launch.
  2. Design and develop a unique list of such products.
  3. Get top manufacturers to develop your product.
  4. Get samples to evaluate the quality and the price.
  5. Order your first batch and deliver it to the Amazon warehouse.
  6. Release your product on the Amazon store.
  7. Once your product begins to rank and sell very well on Amazon, you can decide to develop an e-commerce website where you can sell your products at a higher margin.
  8. Repeat steps one to six to design and develop two other products in the same forte for your created brand to expand your presence on the marketplace.
  9. At this stage, you should have a wider reach and more stores will be looking to partner with you. They will be willing to sell your products on their website. You can accept such offers and also look to find other stores that sell the same kind of product as your brand.
  10. You can build your brand around your private label with the help of Fulfillment by Amazon.


  • Total control over the production.
  • The ability to set the price.
  • Quick change of product characteristics depending on customer needs.
  • Business scaling, growth in the number of products of the brand line.


  • It's difficult to find a reliable supplier.
  • It’s hard to research a “gold” profitable product to sell.
  • Manufacturing defects.
  • A small profit in the first stage of launching Private Labe.
  • Difficult to win the trust of customers.
  • Tough competition due to the fact that the product is not unique in its kind.

Amazon is an ideal marketplace for the launch and development of a Private Label. However, launching products, it's important not only to choose the product that you'll sell but to find a responsible and reliable supplier. You need to skillfully engage in branding and marketing. Then your product will sell better in the selected niche.


Amazon's marketplace strategies might be ideal for some sellers while it might be terrible for others. There are several factors that need to take into account. Some of which include the type of product you intend to sell, the level of competition in that product category, restrictions, and marketplace fees. Amazon provides sellers with important tools that assist them to come on board and be a part of its seamless shopping experience for final consumers. However, a lot of your success on Amazon depends on the business model you choose and how effective your marketing strategy will be.