Selling wholesale is a common business model offline. You will be in constant negotiation with your suppliers and then in turn in negotiation with your buyers.
You are a part of the supply chain and seeking to take your ability to mass purchase products and offer a service to those who want to sell on your products.
There is a lot of similarity between what happens offline to the process of using Amazon wholesale.
Here we offer you a detailed guide.
What Is Amazon Wholesale?
Two million people sell products through Amazon.
Of this number, 26% choose to sell products using a wholesale business model.
When you choose to buy wholesale, you are purchasing bulk branded products from a manufacturer, supplier or distributor and then reselling there to a consumer or other seller.
You are using your buying power and your ability to cope with a massive inventory to demand cheap prices and therefore offer cheaper onward prices.
There is a lot of money to be made selling wholesale via Amazon, especially in electronics, kitchenware and toy.
However, there is a lot to learn if you want to avoid some costly mistakes.
How Wholesale Differs from Retail Arbitrage?
Wholesale is not retail arbitrage.
Arbitrage is where you seek out products from retail sites and then sell these on using Amazon.
While you are looking to buy at a discounted price and then sell on cheaper than your competitor, you are not buying in bulk.
While you may be selling branded products, just like the wholesaler, the retail arbitrage models work in such small numbers.
As a wholesaler, you would be going to the suppliers and manufacturers directly.
You will take up the product early in the supply chain and so cut some costs in the negotiation with these parties.
Due to the negotiated lower price, you are able to see products at a discounted price.
Notice that the wholesaler sells branded products, so again this is not the process of setting up a private label.
You are still acting as a port for products made and supplied by others under their name.
Amazon Wholesale Pros and Cons
Before we look at how to set up as an Amazon Wholesale seller, you need to understand the threats and opportunities of using this model.
Here we explore the pros and cons.
- You have the opportunity to sell established brands where there is an obvious demand. Therefore, you are not responsible for establishing the brand and all the marketing is done for you.
- It is a business model that is quick to establish, as easy as arbitrage retail but on a much larger scale. Most businesses report being able to set up within six weeks.
- It is a model that is also profitable. Surveys suggest that wholesalers turn a profit within 3 months whereas private label sellers take 6 months to establish the business.
- You will face extensive competition from other sellers. You will not be the only one selling this branded product and the only mechanism you have to differentiate yourself is the price. Therefore, there is a tendency for the price to fall and fall until the margins are unreasonable.
- It will take a lot of time and a lot of work to differentiate yourself and establish a positive reputation with encouraging positive reviews.
- The initial costs are huge. As a reseller or dropshipper, your initial costs are minimal. However, your model relies on you selling in bulk. This means a massive investment in stock and the storage and management of this stock.
- It takes a lot of time and commitment to research the best products and negotiates the appropriate price. You will likely research hundreds of products and follow up on dozens of these before finding the line you will run with.
How to Find Amazon Wholesale Suppliers?
When you know your product, your next challenge is to find the right supplier.
You need to look for the manufacturer of the product using the ASIN and a package like Jungle Scout.
You can then look through a supplier’s database and choose who you are going to approach.
Contacting and negotiating with these manufacturers and suppliers is a challenge in itself.
You need to be sure what you are offering them to be able to demand the best price.
You are giving them another sales channel, and why are your sales channel such a positive over others.
Be prepared for some hard selling and be prepared to demonstrate your credentials in your know-how on the call.
The ultimate challenge is to find the product that is not yet sold on Amazon.
This is the golden chalice of deals. You should look at startups first, they may be desperate for a wholesaler and you could take a risk for a big return.
You could check Facebook ads, where people are attempting to distribute this way.
Also, you can try to become an avid reader of lifestyle and consumer blogs, to see what the current trends seem to be.
To find cheaper wholesale suppliers, you can source products from China.
There are a lot of wholesale websites for you to look for reliable Chinese manufacturers.
Check the following list of some of the most popular websites:
You may also check another of our guide here: Amazon Product Sourcing Tips: Top 11 Websites for Finding Suppliers
How to Start Your Wholesale Business on Amazon?
Before setting up your business with Amazon wholesale purchases, you will need to know some basic info, like what are the challenges, and how to start from the beginning to the end.
Challenges of being a wholesaler
Setting up as a wholesaler, while profitable and with considerable opportunity for speedy success, is challenging.
First, you need to make sure that your product is not sold by a private label seller.
You will never compete with Amazon in the wholesale market, so there is little point trying.
They can choose to lose money on an item if it means they maintain customer loyalty.
While you want established brands where you will need no marketing, you also need one where there is an opportunity for profit.
You want to ride on the wave of success of that brand where there is the chance of making a margin of profit.
As you can see, choosing the perfect product is certainly challenging.
You want to be competing for the Amazon Buy Box. Therefore, you want your price to be within 2% of the best price offered.
The Buy Box is the price possession on the site, as it is the widget that sends your product to the buyer’s cart.
However, if you are not within the realms of being the cheapest, you will be listed on a separate page and your product will not be found or bought.
Another challenge is finding a profit margin even when there are substantial fees attached to holding an account with Amazon.
The best way to work out if there is any money to be made is by using Amazon’s FBA calculator.
Determining profitability is an essential step in the process and one that will see you showing interest in products and then dismissing them.
You need to understand your expected sales to be able to calculate your turn rate.
In short, how long will the stock of products stay in your inventory and cost you for storage?
How many units you can turn around will dictate how many you buy wholesale and how much profit you will ultimately make.
Any estimations here will be educated guesses based on your research – however – you need to be prepared to have estimated too high or too low and have a plan in place.
You really only want to keep stock in storage for two months, a maximum of three. Therefore, finding the right balance can be difficult.
Steps to set up Amazon Wholesale business
There are a series of steps you should take to set up your wholesale amazon account.
- You need to set up a seller’s account. This means signing up with Amazon and choosing your package: Professional Selling account or Individual Selling account.
- Do your product research and find your product niche
- You then need to source the high-demand products that you want to sell.
- List your listing on Amazon and optimize this listing so it stands out against your competitors – this means getting your image just right, the information provided professional and persuasive, the perfect price point, and more.
- Launch and promote your product, using social media and the offers on Amazon to make your mark in the market. Find a way to generate reviews to garner that positive reputation that will help you stand out amongst your competitors.
- Then, grow your business by managing your inventory and your sales and ensuring you are constantly working to market the product.
Amazon Wholesale Strategies and Tips
Selling on Amazon, there are some restrictions and mistakes that you need to be aware of and try to avoid.
Tip 1: Be aware of brand restrictions
Third-party sellers need approval before they can sell certain brands on Amazon.
You will need to apply for a license to sell some brands and others are completely restricted.
You will not be able to sell the likes of Apple, Bose, Adidas, and some others.
Therefore, you need to be aware of these restricted brands before moving ahead and those brands that require you to be licensed.
You need to know though that if there are restrictions on a brand the only way you will ever be likely to sell them is through a wholesale model which is negotiated with the manufacturer.
A retail arbitrage model will not cut it here.
Tip 2: Consider working with restricted brands
If you are going to be communicating directly with a brand anyway, why not target those that put restrictions on sellers!
This means that if you get the approval you are going to be part of a much smaller group of sellers with less competition.
To prove yourself as a respectable seller to these brands, you need to up your professionalism and make yourself look like a valid outlet on Amazon.
You will need a business plan that models the future growth and strategy of your business.
Tips 3: Choose the right fulfillment services
The important thing about Amazon wholesale is that you can decide how you want to fulfill your orders.
You can either choose Amazon FBA or FBM. Both methods have their advantages and disadvantages.
If you have the time and resources to handle your own distribution model, then Fulfillment by Merchant (FBM) would be an ideal choice.
However, if you start to receive a large number of orders, but your logistics cannot cope with the sales volumes, then FBA may be a wise choice.
Let Amazon take responsibility for everything for you!
Tips 4: Look for profits and reliable suppliers
Before contacting the supplier, it’s better to make sure they are not selling on Amazon. If so, they may be less interested in providing you the products.
Once you find your product niche and get in touch with the supplier, you need to be well prepared for the negotiation to get profitable prices and discounts.
If you want to find a supplier in China, you need to verify the supplier’s qualifications and business licenses.
You can use a Chinese supplier audit service: Guru Eagle to help you do the investigation so that you can thoroughly know your suppliers and then decide whether it is worth establishing a long-term business relationship.
How to compete on Amazon as a wholesaler?
If you want to succeed on Amazon as a wholesaler, you need to be process-orientated and not results-orientated.
You won’t get it right from the start, so you will need to reflect, evaluate and then iterate.
In other words, constantly seek to improve the process of selling through this platform.
You need to see yourself as a company – as an entity with an identity that can be trusted and respected.
Customer loyalty will become your friend, and this will only happen when the customer knows who you are to search you out.
Everything about succeeding as a wholesaler is about numbers.
You will need to get good at puzzling out the margin and the costs and the turnover and more.
It is the balance of these elements that results in a successful and profitable business.
Investing in a package that helps you analyze these factors is going to be the difference between success and failure.
To get more sales quickly, you will need to gain more reviews and ratings for your products, especially the positive ones.
Maintaining the Amazon Buy Box is extremely important. You know that most of the buyers will purchase items directly from the seller who wins the Buy Box.
They don’t even bother to see if there are any other sellers available.
To achieve this, you need to have a lot of good product reviews that can help you take up the Buy Box and affect customers’ purchase decisions.
Using an Amazon review tool like AMZFinder can easily help you obtain more reviews and maintain your store’s reputation.
Finally, do not rely on a single supplier. This will make the foundations of your business rocky indeed.
You need to know that if one supplier drops away that you have other streams open to you.
As a seller, you will need to get good at talking to these suppliers and listening to their promises and their know-how and professionalism.
You will rely on their ability to fulfill their promises and realize that you deserve good service as you are a valuable sales channel for this company.
Therefore, demand the best from them – then you will be able to offer reliability to your consumers in turn.
Conclusion
There is a lot of money to be made by becoming a wholesaler using Amazon.
The platform is becoming more and more professional and sellers are having to compete at the highest levels.
Therefore, when approaching your new venture as a wholesaler make sure your numbers work, make sure you have the right permissions, get your foundation of suppliers in place, and set up a professional front to your business.
Remember that finding the right product is the essential ingredient to success as a wholesaler.
Also, remember, if you cannot afford the upfront costs of buying in bulk, then you are likely better suited to a retail arbitrage model of business.
Related Posts:
How To Find Suppliers and Import from China for Amazon FBA Sellers
Best Strategies on How to Promote Amazon Products to Boost Your Sales
How To Ship Product To Amazon FBA Warehouse
Your Newest Guide to Amazon FBA Fees in 2020
Step-By-Step Guide to Start Amazon Private Label Business in 2020