The Good, the Bad and the Ugly of Amazon Wholesale
Around 26% of merchants use Amazon Wholesale, according to JungleScout. This business model is only second to Private Label.
Amazon Wholesale is about buying items in bulk, at a lower price than if you were buying from retail stores. Then, you can sell the products as single units, but with a higher price tag.
It’s that simple, though it’s not always easy. That’s because Amazon wholesale is also about selecting the right products and the right suppliers.
Let’s explore the perks (and a few setbacks) that Amazon Wholesale can deliver for your business.
What is Amazon Wholesale?
Amazon wholesale is quite simple. Merchants acquire products from suppliers, and then resell them to consumers. Here’s the process in a nutshell:
- Research the market for high-demand, but low-competing items.
- Find a reliable supplier to source the product from.
- Buy your chosen products in bulk, at wholesale discounts.
- Handle storage for the bulk product pallets.
- Set a competitive price for the single items.
- List and sell your products on Amazon.
Suppliers reduce per-product costs when they sell in bulk. So, you’ll get great discounts for your stock. Then, you can sell it on Amazon at a competitive price.
That’s the key to Amazon wholesale! Alas, this is not a perfect business model. Let’s compare its pros and cons, so you may decide if Amazon wholesale is right for you.
The Pros of Amazon Wholesale
- Low Competition: There are fewer wholesale sellers than private label brands on Amazon. So, competition will be on the low side.
- Fast setup. You can set up a wholesale business in less than 6 weeks, according to JungleScout. This also means you can turn a profit almost 3 months after launch.
- Market demand. Work with suppliers to sell name-brand items with high demand. Customers are already searching for such products. That means less marketing and more sales for you.
- Scalability. As long as you find a supplier that can get what you want, there’s no limit to the products you can sell.
- Product stream. Let’s say you run out of a product to sell. In that case, re-order with your supplier to keep meeting customer demand. You’ll always have available stock.
The Cons of Amazon Wholesale
- Competition. Amazon wholesale is not as popular as Private Label. That said, competition is still fierce. That’s because other sellers may offer similar products at different prices.
- Up-front costs. You’ll need to purchase large items in bulk from the supplier. So, you’ll need to make a large investment for the products you want to sell.
- Excess inventory. The great risk of wholesale is getting stuck with low-demand items. You could end up with stationed stock, reduced storage space, and a low ROI.
- Time-consuming research. It’s key to explore as many products and suppliers as you can. Go with niche products, which also enjoy high demand from customers.
- Supplier trust. You can’t go with the first supplier you find. Make sure they have the right products, and that they can deliver them to you without delay.
Related content: Amazon 3P vs 1P Selling Models
Amazon Wholesale Best Practices
As we said, wholesale’s main trategy is to buy at a low cost and sell at a higher price. That’s how the profit comes in! And the more bulk products you buy, the more you can boost your margins.
But Amazon wholesale could turn into a risky endeavor when not done properly. So, what’s the best way to protect an Amazon wholesale business from such setbacks?
Let’s review what it takes to become a successful wholesaler on Amazon.
1- Research the Market for High-Demand Items
Your goal is to find products that are not on Amazon or sold by a private label brand. This is to eliminate as many competitors as possible (including Amazon).
Once you have a list of potential items, validate their worth. Ask yourself how each product can help customers solve a problem.
Here are some key tenets to conduct product research:
- Dive into customer reviews for a specific product. Find out what users are saying about the offer.
- Look for products with few sellers. This will eliminate offers from private label brands, and help you find unique offers.
- Use a product research suite to rate products by sales rate, pricing, and reviews.
- Avoid seasonal offers or ‘trend’ products. These items will lose sales value over time, or at specific periods.
Related Content: How to Research Products on Amazon
2 – Calculate Your Profit Estimates
Go for products that fall around a $15-$50 price range. It’s a sum that customers won’t think much about, so you’ll drive sales while making a profit.
Of course, that’s not all it takes to come up with a solid margin. You can consult the Amazon FBA calculator to get a better estimate of your potential profits.
The Amazon FBA calculator is also a great tool to determine the fees you’ll incur with Amazon for each sale.
Related content: Guide to the Amazon FBA calculator
3 – Find Reliable Suppliers to Source Your Products
The next big step is to source your items. To do so, you must find reliable suppliers.
You can start with a quick search on Google. Submit the name of the brand or product you want to sell. Then, write “authorized supplier” or “distributor”.
If you want more options, here are a few channels you can rely on – AliExpress, Top Ten Wholesale, or 4WholesaleUSA.
Now, once you narrow down your search, contact the suppliers to learn more about them. For example:
- Investigate their minimum order quantities.
- Find out the types of products they handle.
- Ask about the sale prices they can offer to you.
- Request product samples to review the item’s quality.
In short, conduct thorough vetting before committing to a supplier. And remember, you’ll be going into a partnership. Thus, the supplier also has to trust you.
So, share your goals. Let them know how you will help them boost sales, and drive value to their products.
The more trust you have in each other’s practices, the better for your long-term success.
How to Become an Amazon Wholesaler
You may know there are two types of sellers on Amazon. The first is third-party (3P) sellers, while the second is first-party (1P) sellers. The latter are also known as Amazon vendors.
Vendors do not offer products to customers. Instead, they sell products to Amazon, acting as wholesale suppliers to the marketplace.
Brands may consider becoming vendors for the following perks:
- Earn the “Ships from and sold by Amazon” badge.
- Automatic enrollment in Amazon Prime.
- Having storage and deliveries handled by the marketplace.
Some consider 1P an easier way to sell than 3P. But the thing about Amazon vendors is that it’s an invite-only program. Besides, vendors give almost all selling control to Amazon.
Here’s how Amazon vendors work:
- Negotiate purchase orders (POs) with Amazon.
- Sell products at wholesale prices.
- Send products to the warehouse.
- Transfer stock ownership to Amazon.
- Let Amazon set the selling prices.
1P Sellers lose control over pricing and branding. But they can also create a steady source of revenue with Amazon. The marketplace requests products on a regular basis, and vendors supply them for a flat fee.
Related content: How to Become an Amazon 1P Seller
Final Thoughts
Marketplace Pulse states that Amazon currently hosts over 6 million third-party sellers. And 51% of these brands are located in North America.
The majority of these brands go with Private Label to sell in the marketplace. But this model requires a lot of time, effort, and investment to take off.
So, there’s ample space for wholesalers to create a profitable Amazon store. It’s a bit easier to set up, and you may see profits in half the time.
The key is to select the right products and work with reliable suppliers. From then on, buy at low-cost, and sell for a profit. That’s the key to Amazon Wholesale.
Author
Esteban Muñoz is a content writer at AMZ Advisers, with several years’ experience in digital marketing and e-commerce. Esteban and the AMZ Advisers team have been able to achieve incredible growth on Amazon for their clients by optimizing and managing their accounts and creating in-depth content marketing strategies.
The post The Good, the Bad and the Ugly of Amazon Wholesale appeared first on AMZ Advisers.
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