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Selling on Amazon via FBA and KDP: Weighing In On Their Pros and Cons

6 Oct 2021
Welcome to Episode 6 of the Aspiring Entrepreneurs with Sophie Howard podcast!
Amazon has definitely become a major platform for doing business today. Among the various modes of earning money in Amazon, which ones will give a clear path to financial freedom?
 

In this episode, I introduce you to two models that you should really consider if you want to put up a profitable Amazon business - selling physical products through Fulfillment By Amazon (FBA) and selling books through Kindle Publishing (KDP).

I share tips on how to get started with FBA and KDP. I also cover the two models' various advantages along with some minor challenges and ways to overcome them.

Tune in now to find out which between these two will work better for you!

Episode Highlights:
  • Introduction [00:00]
  • The biggest positives of both FBA and KDP models [01:56]
  • The incredible cash flow FBA provides [3:47]
  • A downside on Amazon products and how you can cover it [6:54]
  • The fulfillment by Amazon and you [8:02]
  • What entails doing KDP with Amazon? [12:50]
  • The amazing difference between KDP and traditional publishing [16:03]
  • Some minor issues with the KDP and FBA [23:45]
  • Tips for getting started with KDP and FBA [27:33]
  • KDP vs. FBA: Which works better for you? [29:28]
Resources:
  • Thank you for tuning in! If you found this episode valuable, please be sure to subscribe so you stay updated whenever I post new episodes.
Podcast Transcript
Sophie Howard:
Hello, and welcome to this week's episode, which is all about different ways to earn money through selling on Amazon.
Sophie Howard:
Now there's a few ways out there that I'm very familiar with. And I think the top two that I'd love to compare and contrast for you today, are the pros and cons of selling Amazon FBA, or selling Kindle books on the KDP publishing platform. So over the years I've had lots and lots of experience launching over a thousand different products through FBA and a thousand different books on Kindle.
Sophie Howard:
So I've been very busy on both fronts. I started with FBA back in 2013, and I think the best way to stretch this discussion is to go through the pros of both platforms options. So the pros of publishing books and the pros of selling physical products through FBA, and then we'll look at the disadvantages of both options, and then we'll do a bit of a wrap up and discussion about what might be the best one for you. Or if like me, you decided to do both.
Sophie Howard:
Because what is just the best huge big plus for both of these opportunities, is that these are tapping into that flow of customers. So pretty much every business we ever build, we spend a lot of our time and budget and energy trying to find the customers to buy the product. But with Amazon and the beauty of their search engine, pretty much because Amazon is just a giant search engine, rather than a shopping platform, people turn up there knowing what they're looking for, they search for an item and they go and buy it. So we'll do a more detailed breakdown of all these different Amazon-related things in other episodes.
Sophie Howard:
But this is just a very high-level one because when you're comparing buying products or buying books off Amazon, the biggest positive that both of them have, is that there's a pile of customers every minute of the day, searching to meet their needs. They're looking for a physical product, for a gift, for some shopping, for food, for supplies they need for their office. It could be business customers. So the physical product side is great. Every hobby, all sorts of goods are just sold hundreds and hundreds a second, thousands a second are flying off those shelves and out to Amazon customers.
Sophie Howard:
So the FBA model we know and love, and I'll run through that. And then the book publishing one, again, it's very similar, it's driven by search traffic. So rather than having to optimize for Google or create lots of original content with keywords or paid traffic to see your listing, the number one advantage for physical products and books on the Amazon platform, is that there's people searching all day, every day, for all sorts of different keywords. And a really big positive for both, is that there's some great research tools out there to do that keyword research on, and from the Amazon ranking of the existing product selling, you can see how popular those products are, how many are selling a day. It's really easy to see the sale price, the features, the reviews, the description of those products that are selling really well. So we've got a style guide in a template in a proven model of what's working, which gives us some really great data before we jump into an opportunity selling our own products or books.
Sophie Howard:
So those are the two biggest pluses. And this is just the most attractive thing about Amazon to me, is that you've got customers all in one place with high buyer intent and we have great data on what's already working. So no flying blind, no drumming up customers if paid traffic or writing posts or doing social media. So that's certainly the biggest advantage of both.
Sophie Howard:
But let's compare and contrast the two different opportunities, physical products and books. So firstly, with physical products, the cash flow looks very different and the profit margins are a bit different too. So the way that the numbers work with physical products on FBA, we do our research and then we go off and buy our product up front, and we get the supplier who manufactures that product to ship it straight to the Amazon warehouse. And Amazon doesn't charge very much in seller fees for accessing this service. It's amazing access to their warehouse, their fulfillment and delivery out to the customer's doorstep. So that's a huge advantage. If you're ever going to do a product's business, it's pretty hard to beat that level of service. And they do charge for it in the form of fees after the product's sold, but that's nice for your cash flow, because you only incur those fees after the product sold, the shipping and handling.
Sophie Howard:
Now as the product sells, and say we've bought the product, just to give you some very rough numbers, we've bought the product for $2 and sell it for $20, Amazon will then take their fees from that $20 sale price. So say that could be, let's pick a round number $6 or $7, let's say $7, which then leaves another $13 for you. So you've got to recover your cost of goods. So you might have your $2 for the product. So we're down to $11. So in theory, without any other expenses, you're making $11 profit out of every $20 sale. So that's really, really good, because you've only had to buy that product at $2.
Sophie Howard:
So it's a great cash flow business, because Amazon pays you every two weeks and they pay on time. They don't seem to have any issues with being able to pay out. And I know with a lot of other platforms out there, we don't just assume that all money's owed are going to turn up on time. And certainly in business, if you're chasing up creditors and debtors each month that you've got that cash flow dependent on people paying bills on time, it can get pretty stressful and pretty lumpy at different times of the year.
Sophie Howard:
So we do have some cash flow challenges with Amazon, only in that if we're growing fast, we need more future inventory on order before we've been fully paid for the last lot selling. And as those product orders get bigger and bigger, the cash needed to put those deposits down with factories and to pay the balance and the shipping, that can get pretty big pretty quickly. I remember in my first year on Amazon, within about six months, I was starting to fill containers and it was this helter-skelter of bigger and bigger order sizes. The profit margins were great, the sales were steady, amazon was paying out every two weeks, but even with that, the rate of growth meant I needed to keep topping up the introduced funds into that business to keep up with the demand for the product. So lovely to have a product that's selling so fast, but it did gobble up a bit of cash as it was in that high growth mode.
Sophie Howard:
So that's one advantage, in that you can grow really fast. There's no cap on the number of customers who can find your product, but also you'll need to be able to fund the growth as you order more and more products, as your sales pick up. So the profit margins are great, potentially a third of your sale price, and certainly a really healthy return on investment on picking the product. Now, the good thing with a good product is you've got those lovely, healthy margins. But if you get the product not quite right, you've done your research right, but a bunch of other people turn up at the same time with the same product. And suddenly what you thought could sell for $20, the market's now only paying $10 or $8 for, what you would then do to get out of that product pretty quickly, because those aren't really good enough returns compared to better products out there, is that you would just drop your price and aim to break even, and just get out of there really quickly.
Sophie Howard:
So I've never lost a lot of money on any Amazon products, but there have been times over those thousand-odd products where the conditions in the market for the demand side, haven't been as good as I'd hope for, or something changed and it was best just to sell up and move on. But the really nice thing is because there's a market there looking for that product, if you are able to drop your price, you can, in my experience, nearly always at least recover the costs of that product that you ordered. So at least break even, even if it wasn't a brilliant product.
Sophie Howard:
So that's one thing I really like about Amazon, the upside's there, but you can also cover your bases by reducing your price quickly and selling it out if it's not going to be a product you keep on for the long term.
Sophie Howard:
So one of the other big advantages with selling FBA products, is that you don't need to handle anything yourself, you don't need to ship to customers, you don't need to process anybody's credit card or deal with their change of address, or... What else could we have to deal with? Just returns and refunds, Amazon handles all of that. So in terms of running a products business, it's wonderful to not need whole customer service teams and courier companies and storage services. There's a lot of moving parts of the logistics side of the business, which Amazon does for us, which is wonderful. We love that.
Sophie Howard:
I certainly know that you scrump and save and use third-party logistic warehousing services, which can sometimes be a little bit cheaper than Amazon on the surface, but I'm really happy to keep all my products in Amazon for most of the time when storage space permits, because they just make the sale process so easy, and my suppliers can just ship to one address. And it's just much, much easier for most people at most stages of their Amazon business. It depends, obviously, on your product and the scale of your business, but certainly for most people starting out, the FBA service is the way to do a products business.
Sophie Howard:
So we get some advantages with Amazon in that, as the reviews come in, the social proof goes up and new customers coming along can see that this is a popular product that gets quality feedback and they're then happy to buy in. And then maybe some customers see that people that bought this also bought that. And so you get a bit of data on your customers, what they're buying, you can see from your ad campaigns, which keywords people are searching for, then buying your product. And over time you can build a brand around that product.
Sophie Howard:
So it's easy to build a brand of interlinked products that customers who like this will also like that. And although we can't market to our customers directly with email or anything like that, Amazon holds that customer information pretty tight and don't really share it with us, we can get some really great data about what's working in the niche that we're in and making sure that we keep building our product range out over time and making sure that we just follow the trends, follow the market, don't get caught up by overstocking, don't get caught up by under stocking.
Sophie Howard:
So if we imagine, just back to that big picture, how this would generally flow, we could start for say, if we put in 10K into this whole venture, which has got seven figure potential when you get it right. I mean the top side of products is so big. I see 7, 8, 9 figure Amazon businesses for sale often, there's some huge, huge deals there, multimillion dollar Amazon businesses that have been built up over a short space of time selling one simple range of supplements or sports gear or grocery products, or million dollar-plus brands in a very short space of time. Because you can get that velocity of sales, you can get the cash flow. The supply chains only needs to be built once, which is wonderful. And then you just stay in stock.
Sophie Howard:
So if you put, say $10,000 into starting this opportunity, maybe put a chunk of that into getting some good education so that you've got a good strategy and templates and training to follow in order to know what you're doing, how to play this game, what mistakes to avoid, how to talk to the suppliers, and most importantly of all, which product to sell. You don't want to be figuring that out by trial and error. And obviously just to be completely open with you, I do have a training course in this Amazon product selection space. So I'll pop a link to that in the notes, but that's really just sharing what I've learned over thousands-plus different products on Amazon, and having sold a couple of those big brands myself as well.
Sophie Howard:
So my first Amazon business, I sold for over a million dollars, and that was a real highlight of my life to this day. I think it's going to be a hard day to beat that one, because that was pay off the mortgage, move to our dream location and hand over the reigns of that brand to an investor who saw that it was built, the supply chain was in place, the reviews were good, the IP and the branding was done well, but it was very simple, it wasn't a complicated business.
Sophie Howard:
So that's the big pro you can get into this huge flow of customers very quickly. Maybe out of $10,000, say half an education, a couple of thousand dollars on your first order, and a couple thousand more as a buffer to keep restocking as you start selling through. And if you do that right, you can really ramp up a big business, potentially. So the upside of the products is very high, but the risk profile would come in a little bit higher than the eBook and publishing business models.
Sophie Howard:
So let's move over to the big pluses of that, and then we'll, we'll circle back and wrap up on the downsides on these two opportunities and which one might be the best fit for you. But there's not really many downsides, we're really having to dredge the bottom of the barrel to find the negatives with these business models, just because Amazon makes so much of this so easy for us.
Sophie Howard:
So over to the book side, so there's a slightly separate platform. You log into Amazon Seller Central to sell physical products, and you log into a different platform called Kindle Direct Publishing or KDP in order to sell your books. So these could be eBooks, which get downloaded onto people's Kindle physical reader devices. They just get beamed out by Amazon when a customer orders and seconds later, it's either on somebody's app on their iPhone or it's on their Kindle reader. And for $2 or $3, they've got a great little book that you've sold to them.
Sophie Howard:
Now, when people imagine running a Kindle publishing business, they imagine that they'll be writing these eBooks or paperback novels themselves, but it's not the case. It's some really, really cool things about the KDP platform, which is where I'm currently spending a bit more of my time. I'm newer to this platform, but I've really sank a lot of time and resources into it over the last few years. And with over a thousand books now, I feel I can give you a really good side-by-side comparison of the two opportunities.
Sophie Howard:
So with the Kindle publishing, what we do is commission a ghost writer to write our books for us. And we do our book topics research in exactly the same way as choosing what kind of product to sell. We're looking for where there's demand. People are searching for particular keywords, and then creating a product for that market. So we know what the demand is, and then we make something that the market wants rather than create something in hope it sells. We've got great data, what keywords people are looking for and what they're buying books about.
Sophie Howard:
So you can either do non-fiction or fiction. And I'm going to do a whole separate episode in the podcast on the pros and cons and who might want to do fiction or non-fiction books to publish on Kindle. So there's keywords that customers search for, and then they go and shop for either an eBook or a paperback or even an audio book. And this is probably the biggest plus on the book publishing side of Amazon, is that you've got these different income streams, but you only ever need to create one digital asset.
Sophie Howard:
So I might pay just to pick a round number, a thousand dollars to produce a 30,000 word eBook about some topic that people are currently buying, say, potty training toddlers. And every day I'll get a bunch of sales of people buying the eBook on their Kindle, which will just get delivered wirelessly by Amazon to that customer. And that costs me absolutely nothing to deliver. I've only paid to produce that book once, and I could maybe sell that book for years and years and years. I've got a book in my account that has been selling 6K a month in sales for nearly 10 years, which is amazing. So that's an old book.
Sophie Howard:
There's different types of books you can publish. So I tend to do a mix of fiction and non-fiction. The fiction's a little bit more predictable. It's very much like searching for a physical product. People search for keyword, looking for a solution to a problem, or looking for some education around a topic. So they're really very precise in what they're looking for and they know what they want. And when they see a good book with a good cover, good reviews, a good description that reassures them, that's what they're looking for information on, then they'll snap away and buy it in one easy click.
Sophie Howard:
So they might choose the eBook format, or they might choose the paperback format. And this is where it gets really cool, because the old school publishing industry, the traditional way, would be that if you produced a book, you would then print thousands of copies at great expense, all paid for upfront. It would then sit in boxes that you have to pay storage for. And then when a customer orders, somebody has to post it off to them, or it gets shipped around bookstores or wherever. So very inefficient, very expensive upfront. But good old Amazon trusts them to nail the logistics again in another whole industry. And they basically print on demand. So if somebody orders a paperback book that I've uploaded digitally, Amazon will then print off the paperback copy of that book and post it to the customer.
Sophie Howard:
So they'll take care of the fulfillment of the order, delivering that hard copy of a book to the customer's doorstep. And they'll just charge me the printing costs, which might be a couple of dollars, say $5, and it's a $20 book. So the margins there are brilliant because all I'm paying for is the printing as needed, print on demand and the postage, the shipping out to the customer. But I don't need to pay to create that book ever again. The content for that book is a one-off investment that I hope will pay itself off in a couple of months, and then be a pure profit income stream forevermore.
Sophie Howard:
So when the profit margin on a physical product with FBA might be say 30%, Amazon still charges some commission for the sale of the books on their platform, which might be 30%, but you might be keeping 70% if it's an eBook, 70% profit margin with no ongoing cost of goods. Another really big plus, no ongoing inventory management. So you don't have the cost of replacing the product you've just sold because it's digital, it's just sitting there, ready to be duplicated online and sent out again to the next customer.
Sophie Howard:
The really nice thing is you also don't need to manage the shipping, which is an expense, and the work around managing that inventory. We're always juggling cash flow to stay in stock. We don't want to be overstocked because that's too expensive with products, but we don't want to be under stocked and run out and miss out on sales. So we've always got this fine line, we're working between our available cash flow, our confidence in the market. There's a lot to juggle with the staying in stock with products. It's not just the hard expense of replacing the stock, it's the money that's tied up while that order's being placed, while it's shipping. There's the hassle and stress of waiting for shipments to clear.
Sophie Howard:
And at the moment shipping prices are really high. So there's been a whole flood of people coming over to learn about Kindle publishing, especially while shipping prices can be really prohibitive on a lot of products that would normally be profitable, but right now just aren't. Or the shipping times are really slow, has been another thing. And also, during the COVID pandemic and a lot of factories around the world having been closed for periods of time, with different lockdowns, shipping being disrupted, a lot less aircraft flying around the world with passengers in that would normally have some cargo in too, the shipping rates have gone up. The production and supply chains have been really messy, and we're aligned on that factory being open, but also being able to get their raw materials in, and their workforce being healthy and the factory open and functioning at normal capacity. And then the shipping lines being able to pick up those orders of products, putting them on a ship, getting them through a port and getting them out to the Amazon warehouses for delivery to the customers. So that's been very, very disrupted.
Sophie Howard:
So one huge advantage of the Kindle publishing platform, is that it's a very recession-proof and pandemic-proof business model. So that's another big advantage. So we're up to quite a few big pluses on the book publishing side. The big one is that you only create the digital asset once and then have an ongoing revenue stream like a royalty stream, forevermore. Big, big plus there. We've got the improved profit margin, almost double the profit margin on a product. But there again, we're not going to charge hundreds of dollars for any one book. It might be a $2 or $3 book, but the percentage profit is a much higher percentage, generally.
Sophie Howard:
We've got the fact it's recession in pandemic proof. We can also do multiple formats. So we create the content of the book once using a ghost writer, which might cost only a thousand dollars. So a very low barrier to entry, much lower startup costs, no ordering physical products and shipping them up front, hoping you're going to sell them. We can start with a thousand dollars and have a book there, ready to sell really quickly. So very fast to market, much lower cost to get to market, much lower risk because it's low cost. But also, there's no risks with shipping or compliance or customs or some ingredients lists that the FDA wants to have a poke around in, or Amazon policy about stuff that suits life in their warehousing.
Sophie Howard:
So the fact that it's digital, is massively appealing. It's a revenue stream from the eBook format, which is a different customer from the people who would buy a hard copy of that book, maybe for a gift. And then there's another market again, a third one, which is growing really fast, which is audiobooks. So the audiobook market is delivered on Amazon through another platform called Audible. You probably no audible. I love audible, I get lots and lots of extra credits a month because I devour those audiobooks. Just go through hours and hours a week of them while I'm doing jobs, when I'm out running. When I'm on road trips, we go through lots of children's ones with family trips.
Sophie Howard:
So there's three revenue streams just in the English language for each book you produce. Then you can also go and get that book translated into Spanish for just a few hundred dollars. I've currently got some top-selling books, about $6,000 worth of income a month just from books in Italian. And that was the same book that I've published in English, paid a few hundred dollars to get translated. So you've got this kind of slicing and dicing of different formats, different marketplaces, different languages, all from one seed book that somebody else writes for you.
Sophie Howard:
So that is the beauty of the eBook business. It's very easy to scale up, very quick, very good profit margins. It really disrupts that old publishing model of having to do all the book printing up front. We've got great data on which books are selling. It's a really high-growth area because of all the popularity of podcasts. Audiobooks have really taken off, smart speakers, the Alexa and the Siri speakers from Amazon and Google, and Apple, obviously. They've really made it easy to listen to audiobooks so that market's absolutely booming.
Sophie Howard:
So I've been really excited by the growth and the lack of competition on the Kindle publishing platform. So since the pandemic started, and actually I started publishing books seriously when I had a lockdown in New Zealand in a week where I was meant to be in India at a trade show, sourcing products, and the trade show got canceled. I had a clear week in my calendar, which is a rare thing indeed. And so I thought, "Well, I'll spend a week looking into this Kindle thing." It's been interesting. I'd published a few of my own Amazon-related books on Kindle, and they'd been selling nicely without me doing too much, and that was easy. So I thought, "Well, what about this as a business opportunity?"
Sophie Howard:
So having done both for a few years and a few thousand launches, I have to say that the appeal of the Kindle business is that it's just, it's so much less pressure. There's a lot fewer moving parts. There's no shipping and invoicing and stock and inventory management and packaging to coordinate with factories. There's no surprise duty. There's no surprise out-of-stock situations. And certainly the cash flow's a lot, lot easier to manage. The total amount of cash invested at any one time's a lot less. And the only downside that I can see to Kindle businesses versus products, it's just that magnitude, just the biggest and most successful book publishing account, even if I gave it my full attention, it just doesn't have the dollars that are spent on products.
Sophie Howard:
So if you really want to build a big, big business like multi-millions, and you're really ambitious and you've got the funds to do so, then the products is a way to get to those really high levels, the multi-millions. I feel that with the eBook publishing, it's an easier start, but the ceiling's probably a bit lower.
Sophie Howard:
So I look at a lot of businesses for sale, and it's not uncommon to see a $50 million Amazon products business, but most of the Kindle businesses that are being sold might be a couple of hundred thousand dollars. There's been one or two that are seven figures that I've seen recently, but it tends to stabilize at a couple of hundred thousand, which might mean that the annual profit or the income for the owner coming off those businesses might be somewhere between 50 and a hundred thousand dollars, which I would certainly not sniff at.
Sophie Howard:
And that's probably very part-time hours for that owner to run that business. So you'd have maybe an assistant doing some uploading, you're outsourcing the writing. So very low staff headcount, very low complexity business, but it just hasn't got that really high, high that you can get when you really nail a physical products brand, where maybe people are buying repeat subscriptions of a supplement, and it's a high priced supplement with a high profit margin. And there's just buckets of the thing selling every second.
Sophie Howard:
So the books game is really fun, it's very accessible. It's just a much simpler model, there's just far less to do. So I really like that. I feel that therefore, I can just run a lot more books at once. I can invest in building different series or box sets. I can have a few writers engaged at any one time. And having got used to what it costs to run the product business and the size of some of those big invoices that I wire off to the other side of the world, hoping a product I think I'm ordering is going to show up one day, that's a big leap of faith. The amount to then put through Upwork or a local writing agency to commission a thousand dollars book seems very easy and a lot less pressure.
Sophie Howard:
So I still have high standards for the books and high expectations of how quickly they'll pay themselves off and how quickly they'll generate a nice, healthy profit stream or a royalty stream from each book I've produced. And it's been fun and easy. And I have to say, the feeling in the marketplace, the other sellers with the eBooks are much more relaxed, much more... They're much more passionate about their books. There's a lot of very seasoned, experienced Amazon marketers who pick over their Amazon product choices with a lot of rigor, a lot of budget, a lot of marketing tactics, and they hit those big opportunities hard, and they do a big launch and they crank sales, and the sales crank, but they've had to get a lot of things right to get that result. Whereas on the book side, it's a lot more forgiving. There's a lot of customers, but not so many experienced marketers. There's some quality books out there, but also a lot of very low-quality books.
Sophie Howard:
If you want to get onto page one for a book keyword, it's pretty doable. There's a formula to follow to get there, but with products you need to do everything right. And then you can really win big, but it's a bit less forgiving if you're just having a fumble around, trial and error, "I'll just order a few thousand units and see if they sell." That's not going to cut it in 2021 on Amazon FBA. There's so much research and data and different clever tools available to sellers. So I've had a lot of fun and I'm really pleased to have had a lot of success on both platforms.
Sophie Howard:
Right now, I think if you were about to start, the eBooks are a nice, easy way into learning how Amazon works, how the algorithm matches up a customer's search with a book that's a good match, how the customer checks out, how to write book descriptions is very similar to writing a product description, running adverts on Amazon's Pay Per Click advertising, is very similar to the product advertising. So there's a lot in common. If you're going to learn one, it's not a huge amount extra to learn to do both platforms at once. And that's what I do. I actually learned it the harder way around by doing products first, which has made books look really easy. But if you started with books, you'd have a huge advantage moving into products.
Sophie Howard:
And one really clever strategy you could do that, I don't see done by too many people, is to combine the two. So you might have a book about reading tarot cards, and then you might sell physical product of a pack of tarot cards. And maybe with the pack of tarot cards, they get a free eBook. And with the eBook, there's an affiliate link over to... Well, not an affiliate link, a link, sorry, over to your tarot card, physical cards, the deck that sells on the FBA side. So that was just a bit of a silly example. And a lot of my books are about quite weird and wonderful topics. But it could be anything. It could be a potty training book that comes with a potty, or it could be a cookery book that comes with recipes or vice versa. Any of those sorts of categories where there's education, physical goods or hobby supplies in a book that goes with it, or somebody learning a skill and they need tools to go with that skill.
Sophie Howard:
It could be a book on how to do container gardening and you sell a whole kit set for container gardening. So that would be a really smart strategy to tie the two together. And I haven't seen anyone really do that. So that would be a tip from me to encourage you to have a look at that. If you're serious about selling on Amazon, it's very easy to move sideways and move into different product types.
Sophie Howard:
And so I think the summary there, is that both have huge, huge advantages. Just by the fact you're on Amazon makes lots of your business very easy to run, and especially easy to scale. Then when it comes to potential, the product side's a bit higher, the book side's a little bit lower, just for total dollar value. And if you really want to build something for two years and sell it to retire on, that would be a big push on eBooks, but maybe more doable with the products. The barriers to entry and the ease of getting started, certainly the books is a lot easier. The day-to-day operations, books would be a lot lower maintenance and a lot less stress with things beyond your control, like shipping.
Sophie Howard:
The profit margins are higher with books than with physical products, only because you don't need to pay for shipping and you don't need to replenish inventory, which is a nice thing to have that royalty stream just from something you've created once. In both cases, you own the intellectual property and you build a brand. With an FBA product, you build packaging and a logo, and with a book, you build a pen name and an author profile and a buyer. I've got all these funny pen names that I own, but they're not my name. And so that's kind of a little bit creative. So both sides, you get to be a bit creative, but also have to be analytical and detailed-oriented enough to manage the numbers and keep the thing flowing smoothly. So similar skill sets, just the books is a little bit less complex.
Sophie Howard:
And then other things just to consider both of them can be run anywhere, but certainly the eBooks and book publishing is a little bit more pandemic and recession-proof. If things change in the world, if bookshops close, then your books keep on selling. So Amazon's bounced through amazingly through all the pandemic disruptions, which have absolutely killed other industries. But because of the nature of Amazon and the delivery service, they managed to keep going. It lurched through a little bit, space was a bit tight in some warehouses for some products for a while, but Amazon's grown massively. It was something like 44% for the last quarter, year on year. Really, really high growth happening on Amazon, across the board, products and books.
Sophie Howard:
So I think if you're going to start a business, you can't go wrong on Amazon. It's the place I would definitely start. You might diversify into other platforms later and we'll do other episodes about the pros and cons of that too. But I have to say, I'm really, really fond of my book business. And I'm really thrilled with how quickly it's grown, how easy it's been and how good those margins are, and how quickly I've built up a profit stream. I've got royalties of around $40,000 a month coming in off an eBook publishing business that's only about a year old. So really thrilled with that.
Sophie Howard:
Products have had 250K months, but they've taken a lot more work and effort and risk to get there. So everybody is wired differently around their ambition, around their risk profile. We've all got different budgets, we've all got different interests. If you never read a book and hate books, then maybe you wouldn't get much of a good feeling of running a book publishing business. Whereas I actually read a ton of books, I know what a good book looks like. And I really enjoy working with the authors and the book cover designers and creating books that people love. So it's a good fit for me, but it might not be a good fit for you. Some of the Amazon products are pretty competitive. So if you want to go full competitive mode and gun it for the very top tiers, you'll need your wits about you and some serious skills and training and good judgment to get that right. But when you get it right, it can be phenomenal.
Sophie Howard:
And as I said, I've sold an Amazon product brand for over a million dollars, which totally changed my life. And while there were days I was not sleeping because I was about to run out of stock before the next shipment landed, or I got a bad review in the early days, I got all upset about it. There's a lot of different things moving through a products business, and it's a challenging and very interesting line of work to be in. So both businesses have lots of great research tools to de-risk your strategy for what to sell. There's a whole industry out there of virtual assistance and services to make our lives easier, because it's such a huge opportunity.
Sophie Howard:
There's obviously other people who've gone before us. And I think there's something like 140,000 people are making more than a hundred thousand a year in sales on Amazon, which is phenomenal. And I think for the eBook side, there's maybe about a thousand people making that. So a fraction of the size, a fraction of the competition, but there's still people there doing it. And so there's this industry emerging, people to project manage, ghost writers, editors, proof readers, people doing ads, tools to track your accounts. All these sorts of things just emerge and evolve as the ecosystem around these seller communities evolve.
Sophie Howard:
So I've created two courses, one that teaches the Amazon, what I call the Blue Sky Method for finding in demand, but low competition FBA products. And then there's also the Kindle-publishing income course, which is something I'm really actively involved in at the moment, and keeping that up to date and testing out new strategies and really scaling up my own efforts there and teaching other people how to be successful publishers on the Amazon platform too. So you can take a look at both of those through the links below. I've had loads of fun with both, and I actually really enjoy running both in parallel, but there might be one of those that appeals more to you than the other, or maybe like me, you want to do both.
Sophie Howard:
So hopefully that gave you a little bit of an insight into the pros and cons and the differences between those two platforms. And, depending on your risk profile, your budget, your ambition, your personal interests, then maybe one of those is just right time, right place now for you to go and explore and look into getting started. So if you do, the very best of luck and look forward to hearing about your success, thank you.

 

About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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