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.
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.
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.
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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.