There is not much information available on the Internet on Wholesale at Amazon. The interesting thing they tend to find is the debate about whether the wholesale business in Amazon is a profitable business venture. Well now, you’re about to know if you should definitely add wholesale to your Amazon FBA business. We’ll tackle about the basics first before venturing into the main topic.
Wholesale on Amazon – How does it work?
The wholesale sale on Amazon is a model that means that you buy items directly from the manufacturer and then you sell them as retailers on Amazon, to consumers.
This means that you are not launching a new brand, creating new lists or trying to add value to a product in a niche where there are opportunities. Instead, he is buying products from established brands and sells them as a reseller in the Amazon market.
In general, this requires obtaining a wholesale license. Establishing strong relationships when exercising their purchasing power and sales power to producers. Many wholesale companies will concentrate a lot of energy on the offer and form these relationships to scale the business.
So, why bother selling products that already have an established brand? Well, there are advantages and disadvantages to all business models. Let’s take a look at how this model differs from the other two popular ones, retail arbitrage, and private label.
How does retailing differ from retail arbitrage?
Retail arbitrage takes a lot of time and effort to get the products you will sell on Amazon. It’s still a viable business option, but it’s not as scalable because of the time and effort involved in finding products on the street. Online arbitration also takes a long time, despite cutting the amount of travel you might be asked to do.
How does wholesale trade differ from a private label?
As for retail arbitrage, private label has a different set of advantages and requirements compared to wholesale.
The main difference between private label and wholesale is that when you contact a manufacturer as a seller of private labels, you are looking for an appropriate manufacturer to make the idea of the product. In addition, we generally try to improve or add to an existing product. Then buy the inventory of the chosen manufacturer and send it to the Amazon store.
Many private label vendors typically use Amazon’s compliance services. While with the wholesale business model, it is often possible to find vendors that use FBA or manage storage and distribution.
Pros and cons of wholesale
Here are some pros of building a wholesale business on Amazon:
- Opportunities for scalable growth
- It is not necessary to create a list or brand from scratch
- You can form a team and free up your time as a business owner
- Keep control of your business in terms of storage, packing, and shipping if you wish.
- Producer prices do not fluctuate too much, so there is less competition for the purchase box.
- You can work with some big brands
And here are some of the obstacles that you might encounter:
- Find manufacturers who don’t sell directly through Amazon.
- Exercise the power of buying and selling as a new business. By getting an approval for wholesale accounts/
- Costs for the purchase and configuration of your warehouse if this is the path you take/
- Low margin products
- Order quantity super high
How to identify products with wholesale potential?
When you get wholesale products, you want to find products that:
- Have a consolidated history of the brand
- They are not sold by Amazon
- It is not a private brand product
- They have a high monthly sales speed
- Therefore, you are looking for products sold, you can return to the manufacturer and rearrange multiple stocks
- Of course, you do not want to sell a product that is at the end of its life cycle.
Supply – Start on Amazon
You can start by researching niches, competitors and browsing through Amazon’s categories and sub-categories.
As at the beginning of your search for products for private labeling, you just have to dive and not be afraid to dig. The main thing is that you have to take your criteria into consideration, so you know when you can find something that can generate opportunities. You also need a way to find out the estimated monthly sales, which will be really powerful to get all the data you need to make smart purchasing decisions.
Contact and negotiation with producers
The next step is to get approval and create an account with the manufacturer. These are some of the main tips we have discussed in the webinar on how to negotiate:
- Show how you can add value to the brand
- Identify any problems that could help them
- Show examples of how you can sell your products better
- Search for brands that are not interested in selling your products on Amazon.
- Let them know that it is not as strict as Amazon and, in the end, it will be easier to work on it.
- Make sure you let them know what additional benefits you can add, such as product photography
- If they come back with a resounding “no” at the beginning, that does not mean it’s the end.
- Remember that these manufacturers are big companies interested in developing new products, patents, global
- marketing initiatives, etc. So you have a fantastic advantage to negotiate here. You can help them sell on
- Amazon because they do not have the time or knowledge to do it on their own.
You are expanding your brand and increasing sales. You do not have to do a lot of work to do it. This is your advantage
Similar to selling with a private label model, or even to most e-commerce vendors, it is very important to manage inventory effectively.
Even if you are storing inventory in your warehouse, you want to keep costs to a minimum and you want to store the correct amount. Not much or little. This is another reason why your search during sourcing is so important. By calculating your average monthly sales, you can begin to estimate your inventory needs, even before you have a sales history for that particular product.