09/16/2022
PSA:
In the past few weeks I've met with several clients who started Amazon seller accounts or dropship websites in an effort to make some money on the side. I have clients who are successful with this, but I've spoken to multiple clients that have been scammed by marketing firms.
If you're considering one of these programs, PLEASE reach out to a knowledgeable accountant to make sure you are fully aware of what you're getting into.
The Amazon seller scam often involves a 5-figure fee that's paid to a partner company which is "refundable" if the seller doesn't make the guaranteed minimum over a 1-2 year span. The partner company does all of the work to set up the website or Amazon seller account and recommends goods to resell.
The issue is that based on the prices you pay for the recommended goods, it's impossible to make any money. In many cases, you end up losing money on every sale. In a recent example, the client was selling a product for $34 that cost him $25. After subtracting Amazon's 35% fee and the product cost, they would lose $3 for every item sold. There was also a percentage of the gross sales they were required to pay to the partner company. If the goods are priced high enough to break even on the sale, they'd be significantly higher than the next available item on the Amazon marketplace and would never sell.
I provide free consultations to startup business owners to help prevent just this sort of scam. Please speak to someone and understand your margins before you sign any agreements!
