There are a million courses, books, podcasts, webinars and self-anointed gurus out there who will try and tell you how to make passive income on Amazon.
People always want to talk about passive income. That’s the dream, isn’t it? Making money while you sleep, sit on the beach, or travel the world.
But it’s not as easy to make money passively as a lot of people will tell you – especially on Amazon. Passive income is not exactly a myth, but the idea of the Amazon passive income dream is close to it. Keep reading, and you’ll find out if passive income strategies on Amazon still exist in 2023, and if so, how to make passive income for yourself.
What is Passive Income?
Passive income is when you make money with little or no effort or day to day labor.
An example of passive income is an investment that pays dividends. You literally have to do nothing, and you get paid a consistent income relative to your investment.
The opposite of passive income is working a regular job, where your income is directly correlated to the labor you put out.
Many people have a dream to generate passive income and live off that income. We all want to make money without having to work for it. That’s why passive income strategies are always in hot demand online.
Is Passive Income Really Passive?
Passive income is a bit of a trap, or an idealized dream. Basically, it’s not as easy as it sounds.
To start with, passive income is never 100% passive from the start. There’s always some level of work you need to put in before you can generate income passively.
For example, a business that makes money passively still takes work to build. And even with an investment, which gives 100% passive income, you still probably need to work a lot to earn the money for the investment in the first place.
Also, a lot of passive income strategies seem like they can make money with zero work. But that’s assuming there are no competitors out there who will try and replicate your strategy and steal your market share.
Realistically, you’ll need to work to maintain your business.
Still, there are strategies out there that can, at some point, begin to earn passive income for you. They’re just not as straightforward as the “gurus” make it seem.
Is it Possible to Make Passive Income on Amazon in 2023?
Once upon a time, Amazon was the king of passive income. It was so easy to make passive income on Amazon. You’d just create an Amazon seller account, buy some product in bulk off Alibaba, list it on Amazon, and spend your day on the beach sipping pina coladas.
That dream is more or less dead. You can’t put up random, white-label products and expect them to sell without any work. Too many people jumped on the Amazon train, driving up competition and the effort needed to make money on Amazon.
There are still some ways to do it, though. It’s not as easy as before. Like we said before, they’re not passive from start to finish. You’ll need to work to set up these strategies, and generally dedicate at least a few hours per week to maintain them.
But it is possible to make somewhat passive income on Amazon. We’ll share how in a little bit.
What Does NOT Count as Passive Income?
There are a lot of ways to make money online, particularly through Amazon, that people will tell you are passive income strategies.
Then you start, and realize they’re not so passive after all, and actually take a ton of work. You end up making even less than you’d make on an hourly basis than you would with a regular job.
Take retail arbitrage or wholesale arbitrage, for example. Arbitrage business models mean buying products for cheap, such as at discounted wholesale prices or on sale from retail stores, and selling them at a profit somewhere else (i.e. Amazon).
A lot of people will tell you this is a good passive income strategy. These people are wrong.
While arbitrage can be a great side-hustle, and you can even scale it to be a legitimately profitable business model, it’s not a passive income strategy.
It involves a decent amount of work to source wholesale/retail arbitrage deals. There’s nothing passive about that.
There are other ways to make money on Amazon that can earn passive income. However they take more work to maintain than you might expect.
The point to take away is that just because something allows you to make money on Amazon, doesn’t necessarily mean it’s a passive income strategy.
How to Make Passive Income on Amazon
Passive income strategies on Amazon are far more difficult to set up than in the past. But it is still possible to make money with little ongoing effort or labor.
There are five strategies in particular that still work today:
- Merch by Amazon
- Amazon KDP
- Amazon FBA
- Buy or Invest in an Existing Amazon FBA Business
- Amazon Associates
All require some level of work to set up, or resources (i.e. money to invest). So don’t expect to start making passive income overnight.
But it is possible to earn money eventually with very little upkeep with these strategies, if done right.
Let’s look deeper into each one now.
Merch by Amazon
Merch by Amazon is probably the closest you can get to truly making passive income on Amazon. It lets you start earning passive income with very few setup costs, and doesn’t require a huge amount of work to build your income stream.
Merch by Amazon (known now as Amazon Merch on Demand) is a print-on-demand platform. You create designs, choose various merch products to sell with your designs (such as t-shirts or phone cases), and list them on Amazon.
When someone buys one of your merch designs, Amazon prints it and supplies it to the customer. You don’t need to buy or store any inventory, manage shipping, or anything like that.
You do only earn a fraction of the actual purchase price. For example, in the US, a new t-shirt sold for $15.99 will give you just $1.93.
This is the “royalty” – the amount given to the creator. Amazon gets the bulk of the sale, since they put up the actual inventory and do most of the work.
Still, it’s not a bad return for minimal effort and investment.
The non-passive part:
The parts of Merch by Amazon/Merch on Demand that are not passive are creating your designs, and marketing your designs.
You need designs that people want to buy. It doesn’t have to be Van Goh or Picasso. But you need more than a simple stick figure.
Then the other part is getting people to find your designs. People can find them by searching on Amazon, but it’s not especially reliable. If you want to make consistent revenue, you’ll want to run ads on a platform like Facebook, Google or TikTok.
This takes some work, especially to bring your cost per sale low enough that you still make a profit with the relatively low royalties. The good news is that after a bit of work you can often set these ad campaigns to run on autopilot.
If you’re able to reach this point, Merch by Amazon can generate income fully passively.
Amazon Kindle Direct Publishing (or KDP) allows you to self-publish and sell ebooks on Amazon.
This is another income stream that is actually passive, once it gets going. You don’t need to pay for stock or manage inventory, you don’t need to provide support. Just write, publish, sit back and earn.
As you can expect, like with Merch by Amazon, you need to pay Amazon a decent chunk of each sale you make. Same as earlier, you earn a “royalty” on each sale.
Royalties work a little differently with KDP. You can choose between two royalty plans:
- 35% – the standard royalty for KDP.
- 70% – available for books priced between $2.99 and $9.99 (also not available for all categories and locations).
There are a few other small details that come under pricing for KDP books, but the gist of it is that you can earn 70% of the sale if your book costs between $2.99 and $9.99.
That’s $6.99 per sale if you sell your book for $9.99.
Not a bad return, when you don’t need to cover inventory.
The non-passive part:
Obviously, the hardest part is actually writing a book that people are going to want to read.
You need an idea. Something interesting to write about. Then you need to write it, or hire a ghostwriter to do the writing for you.
Of course, there’s no shortage of ideas out there. You can write fiction, non-fiction, self-help books, biographies, autobiographies, anything in between. Still, coming up with an idea and writing about it is harder than most people think.
There’s also no guarantee your book is going to sell, even if it’s interesting and well-written. You’ll probably need to do some kind of promotion to launch your book, and to get some reviews for it to convince others that it’s worth reading.
Okay, here’s the big one: sell products with Amazon FBA.
Amazon FBA is what made a lot of people rich with passive income some years ago. Back then Amazon was not competitive. You could source products overseas, list them, ship them to Amazon, and essentially sit back and watch them sell.
All you’d have to do is re-stock every so often. It was more or less a passive income stream.
Sounds too good to be true though, and today, it is. It’s no longer that easy. Competition caught up, Amazon increased the requirements for marketplace sellers, and now it takes a lot more work to be successful on Amazon.
Yet you can still get to a point where you can earn money semi-passively with FBA. The initial work is much greater. But if you can build out automated sales funnels (such as external traffic and well-optimized PPC), and rank your products with Amazon SEO, you can build a revenue stream that operates with minimal upkeep.
The non-passive part:
It obviously takes a lot of work to build an FBA business that can run passively.
You need to choose the right product(s) to sell; source inventory from a reliable supplier; use keyword research tools to build your listing; launch and rank for your keywords; market your product; manage customer service; and work to keep pace with your competition.
It’s harder than ever to just sit back and earn revenue from an Amazon business as well, now. Not to mention that you’re going to have a lot of your profits held up in stock sitting in the Amazon warehouse.
Yet it is possible to get to the point where your Amazon store becomes a passive income stream. It’s not easy, but it is possible.
Buy or Invest in an Existing Amazon FBA Business
Another option, if you have the capital, is to buy an Amazon business that’s already making money.
This way, you can get in when it’s already reached the tipping point where operating it is more or less passive. There might be a team and processes already in place, and perhaps all you need to do is front the capital and pay the staff.
Alternatively, there are options today to simply invest in an Amazon FBA business, instead of buying one outright. You don’t need to do any work to maintain the business, and you earn a percentage of the profits relative to the size of your investment.
The non-passive part:
To buy or invest in a business, you need money, and that usually takes a lot of work (or luck). This is common in any industry – it’s easy to make money if you’ve got a lot of money to start with. The less capital you have, the harder it gets.
Also, when you buy a business, you’re not going to recoup your investment for some time. It generally takes at least a few years to earn back what you paid for it, if revenue and profit remains the same. There’s also the risk of the market changing and the business being worth less than what you paid for it in the near future.
That’s why most people buy a business with potential and try to improve it, to boost its worth. This is good business, but not exactly passive income anymore.
The final option to make passive income on Amazon today is not by selling your own products, but by promoting products from other Amazon sellers.
Amazon Associates, aka Amazon’s affiliate program, lets you earn commissions when you refer someone to Amazon to make a purchase. Millions of people around the world earn from the Amazon Associates program, using it to monetize their audience by giving product recommendations.
The most common way to earn passive income with Amazon Associates is by blogging. You write about products, get people to find your site in Google, they click on Amazon affiliate links in your post and you earn money.
The best part is that people don’t even have to buy the actual product you recommend. They can click on an affiliate link, and as long as they buy something – anything – within 30 days, you’ll get a commission.
Commissions vary by product category, and most, to be fair, are quite low. But there’s still huge potential for what you can make in affiliate commissions.
The non-passive part:
Like with FBA, you need to put in a lot of work to build an Amazon affiliate marketing business in the first place.
If you’re creating a blog, that means designing your site and creating a lot of content, as well as getting your site to rank in Google (or doing work to promote it in other ways, like on social media).
Also like Amazon FBA, the Amazon affiliate program is not as effective as it once was. Commissions have been steadily decreasing, and competition increasing. That means you need more traffic to earn the same amount as you would have a few years ago – which also means more work.
You can get to the point where Amazon Associates becomes a passive income channel, but it’s not going to happen overnight. Even then, you should still expect a little work – if only a few hours per week – to maintain your income stream.
Summing Up: Are Amazon Passive Income Strategies Still Viable in 2023?
Amazon is not the passive income goldmine it once was.
Both Amazon FBA and Amazon Associates have become watered down, and are less profitable and harder to stay competitive in than years gone by.
But there is still potential to make Amazon passive income work. You can get an FBA store or an affiliate site to the point where it becomes a passive income stream. You’ll just need more work to get there.
Merch on Demand and Kindle Direct Publishing are closer to actual passive income methods. There are creative barriers of entry to each – you need to come up with popular designs for Merch on Demand, or book ideas for KDP. But if you can do that, there’s a clearer path to earning passive income through one of these two methods.
You can also invest in Amazon businesses, though if your goal is strictly to make passive income, many would choose a market with lower volatility to invest in than the ecommerce space.
The summary here is that passive income on Amazon is possible, but you’ve got to be willing to put in the work to get there. But it’s worth the work – as passive income allows you to live a life of freedom, which many of us dream of.
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