Want to Become Rich Selling Stuff on Amazon? 3 Hard Truths You Need to Know

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You've probably heard stories about people who make six figures selling items on Amazon while working just a few hours per week and traveling the rest of the time. It's painted as this untapped gold mine just waiting for you to come and claim your part of the wealth. But the truth is more complicated.

While there are some people who wind up with huge bank account balances while investing relatively little time into their Amazon business, there are many others who don't have the same luck.

Here are three factors you may want to keep in mind if you've been thinking about setting up your own Amazon shop.

1. Most sellers don't make very much money

You might expect that sales will be slow when starting a new business. That's normal. But for many, they don't pick up that much over time. About 48% of Amazon sellers earn $1,000 or less in monthly sales, according to a recent JungleScout survey.

The survey also found that 47% of small- to medium-size businesses have lifetime sales of less than $25,000. It's not clear from this data how long these businesses had been in operation.

A $25,000 profit might be pretty good for a business in its first year. But if you've been working at building your Amazon store for a few years, less than $25,000 in lifetime sales might be disappointing.

2. Profits are even less than sales

Sales refers to how much the buyer pays for the item, but that money doesn't all reach you. Amazon takes a cut as the facilitator of the transaction. You'll also have inventory costs you must subtract to arrive at your actual profit.

The JungleScout survey found that 12% of Amazon sellers report profit margins of 1% to 5%, while another 16% had margins of 6% to 10%.

To help you understand how this works, let's say you sell an item you picked up for $100. We'll keep things simple and skip the Amazon fees for the moment. If you have a 10% profit margin, you could sell that item for $110, giving you a profit of $10 on the sale.

Some sellers manage to earn higher profit margins, which means they can earn more on each sale. But a lot depends on what you're selling and the reputation of your store.

3. Starting a business isn't free

If you hope to launch a successful Amazon store, you first need something to sell. This could be handcrafted items you make yourself or items you pick up on clearance at a local store and resell on Amazon. In either case, you'll have to build up your inventory and that requires cash.

Roughly 58% of those JungleScout surveyed reported spending at least $2,500 to get started on Amazon. If you don't have that kind of cash, you may need to take out a small business loan to acquire inventory. And there's no way to know how long you'll have to sit on those items before you earn any sort of profit.

Is an Amazon shop the right business for you?

I don't share these statistics to discourage you if you're truly committed to opening an Amazon shop. But it's important to have realistic expectations before you invest your time and money into it.

If you only planned it to be a side hustle that provides you a little extra cash here and there, then the low average profit might not concern you. But if you were hoping that your Amazon shop might let you quit your day job, you may want to come up with a new plan.

You may be able to increase your odds of success by doing a lot of upfront research on the items you're selling, what competitors are charging, and how to market your products to draw in the largest customer base. You also need to be attentive to customer questions.

It's possible, but it takes a long time before you can get a business like this to provide enough income to live on. Start small and use those first few months as a learning opportunity, rather than getting discouraged if you're not instantly profitable.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy .