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Starting Over: Niche Site or Amazon FBA?

Starting Over:  Niche Site or Amazon FBA?

I received an email from a reader the other day that asked me what business venture I would pursue if I was starting over.  In particular they wanted to know if they should be focusing on building a niche site or starting an Amazon FBA business.

Today I want to dive into that question and provide some of my thoughts.

Along the way, I'll share some of the pros and cons of each business venture and eventually leave it to decide on your own.

Both of these business opportunities have lots of potential; however, where should you start?

So, with that, let's jump right into it.

Business Potential

When I think about the business potential, or how much money can be made, both launching physical products through Amazon FBA and building niche sites have good potential.  My definition of “good potential” is making enough money to quit your day job.  

I know most people make less money than $100k per year, but let's peg the “good potential” dollar amount at $10,000 a month.

There are plenty of niche sites making over $10,000 a month and there are plenty of Amazon FBA businesses making over $10,000 a month.  So, when you look at the lower end from 0 to $10,000…both ideas have potential.

However, I will add that MOST niche sites are making less than $1,000 a month.  In fact, when someone has a site making over $5,000 a month it's considered a pretty big success…enough to brag about!  I see this all the time when someone on Facebook or internet marketing forums posts about a site making a few thousand dollars a month.  EVERYONE wants to pick their brain and know how they are doing it!

On the other hand, when someone posts that they are making $5,000 a month with Amazon FBA in an Amazon Facebook group…it's usually asking what they are doing wrong or why they aren't making more money.

As strange as that sounds, it just isn't considered doing very well if you are only selling $5,000 a month on Amazon.  The threshold where people start to get really impressed on Amazon FBA is $100,000 a month, rather than $5,000 a month.

So overall, both niche sites and Amazon FBA have potential.

But Amazon FBA has WAY BIGGER potential.  It's not unrealistic for people to make $50,000 or even $100,000 a month selling their own physical products.

Yes, there are always outliers…some niche sites can make 6 figures a month, but it's extremely rare.

Maturity and Saturation

How mature are the business ideas of niche sites and Amazon FBA?  In terms of all business ideas, they are both really new ideas.  Gold mining and oil exploration are some mature business…to give you an example.

However, in terms of internet years; building niche sites is much more mature.

Google was created in 1998.  So, people were building niche sites before 1998 (Google needed to have a bunch of websites before a search engine would be needed).

Amazon was created in 1994.  However, they didn't allow 3rd party sellers until 2006.  So, it's only even been an option to sell on Amazon for about 10 years…crazy.

In addition, the real magic is in how many prime members there are.  As an Amazon FBA seller, Prime members get free shipping on any of your products.  So, the more prime members there are, the easy it is for you to sell your products.

Take a look at the growth in Amazon prime memberships:

I started selling on Amazon in roughly March 2015, when there were about 44 million Prime members.  There are now over double that amount at 90 million!  Double in just over 2 years, astounding.

And I don't see it shrinking any time soon.

So, here's the real question.  Do you personally see yourself buying more or less on Amazon in the future?  For me, it's definitely more due to the convenience and selection.

In terms of maturity, Amazon FBA is a less mature business model than niche sites.

In terms of saturation, I also believe that Amazon is less saturated.  Let's take a look at an example.

If I go to Google and do a search for the exact match term of “best survival knife”, Google returns over 3 million results.

So, 3.7 million websites mention the term “best survival knife”.  Now as you know, that doesn't necessarily mean that all these websites are trying to rank for that term…but it does mean there are TONS of websites writing content about survival knifes.

When I search for the exact phrase of “best survival knife” on Amazon, I get 28 results.  Yep, just 28.

Obviously Amazon works quite a bit differently than Google, so looking at the exact phrase isn't really a fair comparison.  But even when looking at the broad phrase, Amazon returns 13,630 results.

And when you get to page 9 or 10, you start to get a lot of products completely unrelated to knives.  So, even though there are still a couple hundred knife sellers on Amazon, where is it more saturated?

I think clearly Google is more saturated than Amazon.  I'd rather compete against a dozen people (in lots of categories this is the case) on Amazon, rather than thousands (or millions?) of websites on Google.

I know there are lots of nuances here, but from a strictly saturation standpoint, Amazon is less saturated than Google by a long shot in my opinion.

Barrier to Entry

The reason that Google and niche sites is more saturated?  The barrier to entry is low.

Anyone that knows how to write can get a website up and running for about $20 (domain name and first couple months of hosting).  How many people do you know that have $20?  Yep, pretty much everyone.

So, starting a niche site has about the least amount of barriers to entry as possible.  Now, there are some SKILL barriers that might prevent people from being successful.  But these are skills that can be learned or readily outsourced (SEO, wordpress, content, etc).

Lots of people are not successful with websites because they don't fully learn the skills they need.  However, when looking at the business opportunity overall, the barrier to entry is almost as low as it can get.

Amazon FBA also has a low barrier to entry.  However, the investment required is definitely higher than niche sites.  This is of course both a negative and a positive for Amazon FBA.

You might need to invest at least a few thousand dollars to get your first product up and running.  This is a higher barrier for some people to get over.  This might keep you out of the business.

On the other hand, this is a good thing for people already selling on Amazon FBA.  If someone doesn't get into the business, that's less competition.

In terms of skill level, I would call it about even.  Both Amazon FBA and SEO/niche sites have their own unique skill barriers, but not so much that I would call it a high skill barrier to entry.

Investment Required

This can vary greatly depending on what you outsource and what you don't.  In general, $500 is plenty to get a niche site up and running.

However, $500 is not usually going to be enough to start an Amazon FBA business.  The total investment required for Amazon FBA is highly dependent on the product you chose to sell.  Perhaps you can manufacture something small for under $1,000 but other products might require over $20,000 to really get started.

I would estimate that an average investment for a new product is $3,000 to $4,000 on your first batch.

And if your product does well, the investment actually will climb quite a bit.  You will need to re-order a second batch before your first batch has sold out (and before you've recouped your initial investment).  So, if your first batch is $3,000 and it's going well, you might order a second batch that is twice as large for $6,000.  And you may have only recouped a $1,000 so far (just an example).

You can quickly run out of cash when running a successful Amazon FBA business.

On the other hand, niche sites are less cash intensive.  You can get started for $500 or $1,000 and not have to spend anymore until you are cash flowing the website.

Speed to Profit

Which business opportunity will push cash in your pocket faster?

Generally speaking, Amazon FBA is going to be faster.  

Niche sites can easily take 6 months to a year of hard work before they start to rank in Google and make money.  And as you saw in Niche Site Project 3, even after that time they might only be making a couple hundred dollars per month.

On the other hand selling physical products on Amazon can take off much quicker.  In my very first month selling on Amazon (with my first product ever) I sold almost $5,000 worth of product (about a $1,500 net profit).  After 12 months, I was doing 10 times that amount in both revenue and profit.

The reason is simple: people go to Amazon to buy.  If you have a good product offering and people see it on Amazon, there is a great chance they will be buying it.  

I love Google and SEO, but it does take quite a bit longer typically to start making decent money (especially if you are just an affiliate).

Best of Both Worlds?

Is it possible to have both the low investment benefit of a niche site and the high return potential of selling a physical product?  

One option is to combine the 2 methods.  For example, I built a niche site for my brand of physical products I was selling on Amazon.  I was essentially my own affiliate.

So, I launched products on Amazon which quickly started selling…but I was also slowly building rankings on Google to drive free traffic to my own listings (and make affiliate commissions on other products as well).

Another way to jumpstart your niche site is with social media traffic.  I'm currently in the middle of a social media project, where I'm experimenting with what can be done with social media traffic from Facebook, Instagram, Pinterest, and other networks.

The reality is that if done right, you can quickly build a social following and start driving traffic to your own site or your own products.

What Option is Best for You?

When it comes to business, there is no one size fits all.  You have to decide what sort of time and money investment you are willing to make and where your skill sets are.

In review, here's a quick breakdown of the comparison I've made between niche sites and Amazon FBA.

  • Most Business Potential: Amazon FBA
  • Lowest Maturity and Saturation: Amazon FBA
  • Lowest Barrier to Entry: Niche Sites
  • Lowest Investment Required: Niche Sites
  • Fastest to Profits: Amazon FBA

Overall, I love both business ideas.  You need to do what is best for your own business.

If I were personally just starting out and I had enough capital to get started with Amazon FBA, that is where I would start.  That could all change in a couple of years.  However, when I look at the current environment of both Google and Amazon, that's where I would go.

Hope you enjoyed the analysis!  If you have a comment, please leave your thoughts below.

28 Comments for this Post

  1. Michael

    Michael

    Hi Spencer, great post.
    When choosing something to sell do you find a product that is already sell well and just create a variation of it, or ???

    Reply
  2. Lashay

    Lashay

    Thanks Spencer. I needed to see this post. I literally was just asking myself this question and was stuck between continuing with my niche site or starting FBA.

    I totally agree. I think I’ll start with FBA and circle back around and use a niche site to compliment the organic traffic to the listing.

    Thanks for this article, came right when I needed it! 🙂

    Reply
    • Spencer Haws

      Spencer Haws

      Glad you enjoyed the post Lashay! Good luck with your business!

      Reply
  3. Diego

    Diego

    A couple of questiosn Spencer:

    – Would it be a feasible for a person that lives outside of USA, to try and start an FBA project?
    – You mention developing a product, so the idea is to sell something you invent, not to import and resell?

    Reply
    • Spencer Haws

      Spencer Haws

      Yes, someone outside the US can do FBA. I’ve not looked into it much (because I’m in the US), but I know people are doing it. Tons of sellers from China.
      No, I’m not inventing anything. I’m importing and reselling. However, I work with the manufacturers to make changes to existing products to meet my requests. So, I haven’t patented anything, but I do like to come out with slightly unique angles on products if possible.

      Reply
  4. Larry Seith

    Larry Seith

    Hi Spencer,

    The Amazon strategy you are referring to is “Private Labeling”. It is a great business with huge potential. However, it is not the only type of “FBA business”. Anyone can sell products via Amazon FBA (Fulfilled by Amazon) without having to manufacture their own private label products. You can purchase new products at thrift stores or buy products wholesale from companies and send them in to the Amazon FBA warehouses. So it IS possible to start an “FBA business” with much less capital than you mention in this article.

    Reply
  5. John

    John

    Have you been able to duplicate the success you had with your first FBA product.

    Reply
    • Spencer Haws

      Spencer Haws

      Do you mean first product or first Amazon business? I definitely replicated the success of my first product…my second was good, but then my 3rd product was much better than the first. My first 8 products were all under the same brand/niche…and I just sold that business for $425k on empire flippers (you can read about it here: https://www.nichepursuits.com/september-business-report/ ).

      I also have several other products that are doing well. I fully expect to grow my Amazon FBA business to a bigger revenue level this year than the one I just sold was at.

      Reply
  6. Gabby

    Gabby

    Are you concerned about how the impending repeal of Net Neutrality is going to effect either model? I want to get started, but it’s hard not to have that in the back of my mind. I would think it’s less an issue of us having to pay more to have our sites visible than it would be on the consumer end if their content is tiered they might just choose not to have the option to see smaller sites at all.

    Reply
    • Spencer Haws

      Spencer Haws

      No, this has never been a concern for me.

      Reply
      • Matt

        Matt

        Could you speak a little more about this, or perhaps write a post about? I, and a LOT of my friends who own niche websites, are very, very apprehensive about it.

        Reply
      • Will

        Will

        Spencer, do you think the removal of net neutrality will have an impact on small niche sites? I am working on a niche site right now but this net neutrality stuff is kind of worrying me. An article about the situation would be amazing.

        Reply
  7. Travis

    Travis

    Spencer:

    Great article and I agree with your analysis 100%. I have a long and experienced background creating niche sites but you nailed it on the head when you said most niche sites make less than $1,000/month. That has always been my frustration with niche sites – it’s hard to make “real” money with them.

    I love the concept of combining niche sites with Amazon FBA as you are doing. However, I don’t know jack about selling on Amazon. What resources do you recommend to get up to speed on Amazon FBA? Specifically, how does a guy get started? It all seems so overwhelming to me – not the least of which is finding a product to create and sell!

    Travis

    Reply
    • Spencer Haws

      Spencer Haws

      There are tons of podcasts and free online resources that some googling will turn up. But honestly, I listened to about 2 podcasts and then just started on my own. The best way to learn is just start. You can even start with retail arbitrage just to figure out how the process works. Spend $100 and sell your first couple items. Then build from there (manufacturing your own, etc). : https://www.nichepursuits.com/retail-arbitrage-amazon/

      Reply
  8. Steve

    Steve

    I bought 1 site using your brand builders affiliate link. I then had another custom built. So far after 4 months I am seeing organic keywords but of course no sales. They are both great looking sites but I have no idea how much they will make. There is also the cost of ongoing content formatted in the professional looking format. This is costly. Then if you pay for links it is super expensive with no real guarantee of return. If I had to do it over I would not have spent this money. Amazon affiliate programs also do not pay that much in commissions. Since I am invested already I am just going to keep developing as they are really nice sites and hope their niches grow and start to produce an income. Would have rather put my money into Bitcoin. LOL Would have made much more. Thanks Spencer. By the way if you are interested in buying these sites from me let me know.

    Reply
    • Dustin Montgomery

      Dustin Montgomery

      Sounds like you were looking for a quick buck. Sadly those don’t really exist – even with bitcoin.

      With some time and dedication you may still see some return on those websites.

      Reply
    • Spencer Haws

      Spencer Haws

      You are correct, affiliate sites can be a long slow process that takes alot of work.

      Reply
  9. Pete Lautenschlager

    Pete Lautenschlager

    I started out about a year ago and thought the Affilate approach was a good way to start out if you don’t know what you are doing. I plan in the future to implement FBA method. after I gain a little ground with my site and understand what I am doing.

    Reply
  10. ivon t hughes

    ivon t hughes

    Great comparison for physical products

    I am going to sell a digital product.When you have a moment,I would appreciate a similar comment.

    Best,

    Ivon

    Reply
    • Spencer Haws

      Spencer Haws

      You mean a blog post that compares selling digital products vs. physical products on Amazon?

      Reply
  11. Adams paul

    Adams paul

    Thank you for this article. I am outside the US and I was wondering if this is possible for people living in Africa.

    Reply
  12. John

    John

    Thanks for the article. How do you manage liability when you are selling physical products? Do you incorporate and/or purchase product liability insurance? Thanks

    Reply
  13. Goran Duskic

    Goran Duskic

    Hey Spencer,

    Thanks for giving so much quality content for free! Do you see any disadvantages in combining the two methods? From my perspective that could be lack of focus and much more work. Anything else?

    Also, I know this isn’t a topic in this post but I feel it’s somewhat relevant. Compared to these two options (Amazon FBA and niche) how would you rate starting a SAAS tool like Long Tail Pro? Is that like something in between, or not?

    Thanks for your time, I really appreciate it.

    Reply
  14. Montreal SEO Guy

    Montreal SEO Guy

    Great post Spencer! It is nice to see someone help affiliates understand how to set-up initially so they can get to see a profit. This is what type of clarification affiliates should get before spreading themselves thin.

    Reply
  15. Bigyan Ghimire

    Bigyan Ghimire

    Your search button on the top doesn’t work.

    Reply

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