Table of Contents
- 1 Wholesale vs Retail Arbitrage
- 2 Advantages of Amazon Wholesale Selling
- 3 Roadblocks in Amazon Wholesale Selling
- 4 Best Practices in Amazon Wholesale Selling
- 5 Final Thoughts
Online selling has become one of the leading systems to growing a small business. Furthermore, there are a number of online stores or platforms you can choose to advertise your products. One of the biggest competitors in the market is Amazon. An Amazon seller chooses the platform for plenty of good reasons. First of all, it has an unarguably large audience (millions of them!) and is thus a good place to start. Another Amazon advantage is the ease of using the platform for online transactions. These are only to mention a few.
Three of the most well-known business models utilized by Amazon sellers and drop shippers are the retail arbitrage, private labeling and the wholesale model. The first two models will be discussed briefly in this article to be compared with the latter. Yet, the focus will be on wholesaling. If this piques your interest, read through the article as you will be introduced to the advantages, challenges and best practices in selling wholesale on Amazon.
Before delving straight to the topic, let’s look at how different the wholesale model is to retail arbitrage and private labeling.
Wholesale vs Retail Arbitrage
Wholesaling simply pertains to the method of purchasing products in bulk from a manufacturer and reselling the items to Amazon consumers. Since the process involved is pretty straightforward, it is much quicker to replenish your inventory. The manufacturers are also known brands, thus, you have a reliable and consistent source of products. If the business improves because the demand grows, you can simply purchase additional items with more ease. This is where it mainly differs from retail arbitrage.
Retail arbitrage is different from the Amazon wholesale model as it demands more time in sourcing. Sellers find products either through the brick and mortar stores or from online retail stores which can take time and resources. The process doesn’t only take longer, finding products can also be hard as they may not always be available. Since the scalability is affected in retail arbitrage, many sellers opt to try to wholesale products once they become familiar with online Amazon selling.
Wholesale vs Private Labelling
Like wholesaling, the method of private labeling has strengths in the scalability and the inventory of products. Since the products are bought from established manufacturers, it is easier to find and restock products that you can later sell to Amazon. However, unlike wholesaling, you become the brand owner and not just carry over the name of a known brand. Therefore, finding the right manufacturer to create, improve or modify a product line can cause several challenges.
Foremost of all, creating your own private label means thinking thoroughly of a product idea and not just copying existing ones. Once the products are already manufactured, you will have to start from scratch in growing your own brand’s customer base. Sellers who fail to sell their products usually fall short of innovative ideas or lack the skills to manage their business.
One great thing about private label products is that sellers will no longer need to manage warehousing and distribution. In wholesaling, you’ll need to do the process yourself in addition to utilizing the Amazon FBA wholesale services to start running the business. In private labeling, your manufacturer does this and then sends the products straight to the Amazon warehouse. Once done, you can now sell your products directly to consumers through the platform.
Advantages of Amazon Wholesale Selling
Wholesale selling on Amazon thrives in the business for various reasons. Here are some of the advantages of this method that sets it apart from others:
The method of wholesale for Amazon sellers remain in demand because of its scalability. As business owners, you all aim towards improving your products in an attempt to grow the business. Once it does, you need to be prepared for whatever comes next.
Most evidently, you’ll need to have a larger inventory so the business can keep up with the demand. Since you are in contact with an established manufacturer this task is easier done. It’s also simpler to look for other manufacturer’s in the event that it is needed.
No need to build a brand from scratch
Wholesale businesses rid themselves of a major obstacle of having to build a brand from scratch. Because you’re selling a known brand’s product, you immediately have the brand’s reputation and customer base. If the brand is well known, you’ll have an easier time targeting potential customers.
Some products on Amazon already have an existing listing and product reviews too. If this is the case with your chosen products, you save yourself additional time and money in having to create one.
More reliable pricing and sourcing
While retail arbitrage sellers are technically dependent on the retailer’s pricing practices, Amazon wholesalers aren’t. This doesn’t mean that there is no fluctuation in terms of pricing, but at the very least, this happens less often and happens reasonably when it does.
Other than having more control over pricing, sourcing wholesale products on Amazon tend to be easier as well. Since you outsource your products from a single manufacturer, you can rest well knowing that you can source additional ones when needed. This is unlike retail arbitrage where you always run the risk of not having products to replenish your inventory.
Relatively less risky
There are a couple of reasons why wholesale selling is less risky than the other business models. The most obvious is probably the fact that you are not directly liable to the products since you aren’t the brand owner. Essentially, you are simply selling them via Amazon so the risk is still with the manufacturer.
In addition, wholesale selling saves you from complaints regarding the selling of inauthentic products on Amazon. If this happens, you can simply provide Amazon with evidence such as receipts to prove that your products directly come from a certain manufacturer. In retail arbitrage, however, it is harder to find evidence of authenticity since your retailer acts as a middleman- not the source of products.
Better control of your expenses
Although it can also be seen as a disadvantage, Amazon wholesalers decide the warehousing and packing of products in addition to the shipping processes. Since other business owners want to avoid the hassle, they opt for retail arbitrage and private labeling.
However, selling wholesale on Amazon also means having more control over these expenses as you decide who and where to resort to. You can choose providers and contacts depending on your budget. If you have extra budget, you can even build a team who will oversee the process while you wait for the products to be sold.
More efficient method
There is less to concern yourself about in wholesale selling on Amazon. The brand, the products, and the demand are already set. Some manual management is still necessary, of course, but the process is pretty much the same. This means once everything is put in place, you will be able to handle your business more efficiently.
Roadblocks in Amazon Wholesale Selling
Finding wholesale products to sell on Amazon is not as easy as it may seem. In addition to your skill in handling an online business, there are certain conditions to meet. Listed below are some of the challenges you may face as an Amazon wholesale seller:
Finding a unique and competitive brand
For you to get the best out of the available Amazon market, it’s best to establish yourself as a product’s exclusive seller on the platform. With this said, you need to find a manufacturer who isn’t yet directly involved in selling through Amazon. These days, this challenge is enough to discourage potential sellers as Amazon is filled with a variety of branded products.
Not only will you need to find a reliable brand, you also will need to secure a product that can successfully compete with the existing ones in the market. this is to make sure that you don’t eat up your profits while at the competitive pricing wars with other Amazon sellers. Finding the best wholesale business products that are both unique and competitive is getting harder by the day.
Getting product approval
Whether you are a new or an experienced Amazon seller, getting an Amazon approval for a wholesale account can be very challenging. This is especially true for new sellers who don’t have a track record yet. Even existing Amazon sellers can still face an uphill battle. In this case, finding the right product isn’t enough, you need to exercise both skills in buying and selling too.
Dealing with high order quantities
Once you have established yourself as an Amazon wholesale seller and gains favor from online customers, you’ll need to ready yourself with high order quantities. This generally is a good thing. Yet, you also have to think of the risk that comes along with it.
Not only will you have to increase your financial investment, you’ll also need a bigger warehouse (if applicable) and have to deal with high inventory levels. With customers placing an order of high quantities comes more profits- but also a heavier responsibility on your part as the seller.
Best Practices in Amazon Wholesale Selling
To be successful in this endeavor, it is important to note the following best practices:
Source out a product with a good wholesale selling potential
Key to starting a good wholesale selling business is to find a product that will sell and is easy to restock when needed. Probably the best place to start is on Amazon itself. Look for a product you’re interested in selling and investigate the competitors by digging around the platform. While at it, keep in mind the criteria you’ve set and found a way to uncover the monthly sales to make smart purchasing decisions.
It is also important not to choose products where sellers are at pricing wars with one another. Opting for their products and brands will only result in you eating up your own profits. Other products to avoid are those offered by Amazon itself. Needless to say, you are at a disadvantage in terms of negotiating a better price to customers as Amazon is very competitive at this.
Other than Amazon, you can also source out well by visiting trade shows. There’s so much you can learn from a face-to-face conversation with a brand owner. You can learn not only about the brand but also other sellers’ experiences of selling it via Amazon or other platforms. Best of all, you have the chance to share your pitch right then and there. Whether you’re targeting a brand with multiple sellers or one you hope to be an exclusive seller of, you can present your ideas better while having real conversations with the brand owner.
If there is no chance to visit tradeshows or the products aren’t yet sold on Amazon, you can certainly do manual research through the brand’s websites. Track down brand owners, get their contact information, and start a conversation to find out whether they’re willing to sell their products on Amazon. Though not a quick way of getting results, researching on the web can certainly work. This will especially be true if you deliver a thoughtful and compelling sales pitch.
Manage your Amazon inventory wisely
Among the most challenging roadblocks to wholesale selling on Amazon comes as you grow your inventory. Technically, it is easier to manage small quantities of products, but we really do not want to settle on this if we are to aim for more success in the business. As you start growing your Amazon inventory, however, it becomes more challenging to handle the cost of storage fees especially if you don’t have your own warehouse yet. This is where your skill in inventory management comes into play. Keep a close attention to managing your inventory as it is just as essential as finding the right product to sell on Amazon.
Learn from successful Amazon wholesale sellers
As with any business, it pays to learn from those who have thrived in using the Amazon wholesale selling model. After all, experience matters more than any knowledge you can have about the pros and cons or the best practices of it. Lucky for you, online sellers are becoming more generous nowadays as they share their strategies through podcasts, videos and other means on the internet.
Browsing through some of them, you’ll learn that having utmost interest in the product you’re selling should always come first. However, this passion should be coupled with knowledge of the product and in the business itself.
Don’t forget to optimize your product listings
Another important reminder for exclusive Amazon product sellers is to optimize their product listings. Amazon is a hub for great products with carefully-crafted product descriptions, quality images, and reliable product reviews. You don’t want to be behind the game just because of complacency to this matter.
It is also necessary that you have an automated system that can send emails to customers for a product that they buy. This way, you can ask them to leave a product review which can greatly aid in the growth of your Amazon wholesale selling business. Try to use SageMailer to automate sending emails to each your customer and ask them to leave a product review for your listing. You’ll get a free 21-day trial, no credit card required.
There are certain benefits one can reap when opting to sell wholesale products on Amazon. Aside from the scalability of the method, you also have more control over wholesale pricing than a retail price as the competition is less risky. Nevertheless, the method isn’t without roadblocks. Others succeed in using the method while others don’t. Amazon wholesale selling may not be for everyone. Still, it a proven method that brought success to many Amazon sellers who started retailing or private labeling.
Weigh its pros and cons and decide whether it makes sense for your business goals and resources. Only with careful thought can you make wise decisions over this business method.