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In the last ten to 15 years, selling products online has become a lucrative business for many people around the world. And it’s no surprise, since the demand is so strong, and since it’s so easy to do from just a laptop. Amazon alone supports more than 6 million third-party sellers worldwide. Of those sellers, an impressive 26 percent sell products using a sales model called wholesale.
Selling wholesale on Amazon in 2023 is potentially a lucrative opportunity, but there’s a lot you need to know before diving in. There are pros and cons with the wholesale business model and proven ways you can efficiently get your business up and running on Amazon. We also have tips on how to work with suppliers and distributors and even information about tax and business certificates. So read ahead to get the most out of selling wholesale on Amazon.
Wholesale is the practice of purchasing bulk branded products from another manufacturer, supplier, or distributor to resell to consumers. Examples include popular consumer electronics, kitchenware, and even popular toys. At first glance, wholesale may seem similar to the other business models on Amazon, but there are some pretty big differences. Here's how wholesale on Amazon differs from other models of selling:
Arbitrage is the process of purchasing products from retail stores or websites at a discounted price to resell on Amazon. Like wholesalers, resellers buy branded products. Unlike arbitrage, wholesalers make bulk purchases directly from the brand instead of individual purchases from a retail store. Wholesalers also negotiate rates with brands and distributors directly (i.e., earlier in the supply chain), whereas resellers (arbitrage) purchase discount products retail to sell via retail.
While wholesalers purchase and resell existing branded products, private label sellers create their own branded products to sell on Amazon. Because of this difference, wholesalers do not necessarily need to create new product listings. Instead, they add their offer to an existing product listing. Private label sellers must create their own product listings.
Dropshippers list goods for sale on Amazon without taking ownership of the product first. Then, when a purchase is made, they place an order through the supplier/manufacturer of the product, who fulfills the product on behalf of the drop shipper. Wholesalers, on the other hand, own their inventory and are in charge of fulfilling orders themselves or through Fulfillment by Amazon (FBA.)
If you are interested in selling wholesale on Amazon, there are a few things you need to know. Firstly, you will need to set up an Amazon seller account. This can be done by following the step-by-step instructions provided by Amazon.
Secondly, you will need to find a high-demand product to resell. This can be done by doing some market research to identify popular products in your niche. We'll go more into this below.
Once you have identified a product, you will need to source the product from the brand, manufacturer, or distributor. This is where your negotiation skills come in handy. You need to negotiate a good deal that allows you to make a profit when you resell the product on Amazon.
Finally, you will need to manage and grow your business, including inventory, sales, etc.
For all methods of selling on Amazon, sellers will need to follow certain business setup practices. For wholesale sellers, this may require you to get a business license and a sales tax permit or a “resale certificate.” These two items allow you to purchase products tax-free and to collect sales tax on your state’s behalf. Most brands you contact will require this information from you before opening a wholesale account. Make sure you look into what the wholesale license requirements are in your country or state.
Now that we have covered the basics of selling wholesale on Amazon let's take a look at the pros and cons of this business model.
Product demand: You can sell established brands that consumers are already searching for and purchasing. This takes the burden off your business for marketing.
Quick to get started: Behind retail arbitrage, wholesale is the easiest business model to get up and running. According to a study by Jungle Scout, 42 percent of wholesalers said it took them less than six weeks to get their businesses up and running.
Profitable: Also, 55 percent of wholesalers surveyed reported that they started to turn a profit in under six months. This is a relatively short time compared to other business models, such as private label, which can take longer to establish.
Scalable: Wholesale selling on Amazon allows you to focus your time on growth, even building a team to manage the day-to-day operations, rather than focusing on building a brand, creating listings, or other efforts that fledgling brands need to do.
Competition: Nearly all of the listings on which you place offers will have multiple sellers. And since the only “lever” you have to pull is price, it can sometimes become a “race to the bottom.” This means that you may need to sell at lower prices than you would like in order to compete with other sellers.
Up-front cost: Because you must purchase goods in bulk, wholesaling is more expensive than reselling or dropshipping. This means that you need to have enough capital to purchase the products upfront before you can make a profit.
Research: The most time-consuming aspect of wholesaling is research. You will have to explore dozens — maybe even hundreds — of product opportunities and ensure that you can get the product in stock from a supplier. This means that you need to be prepared to spend a lot of time on research before you can start making sales.
Cold outreach: Before you can begin reselling other brands on Amazon, you must be approved by the brand. This includes cold calling or emailing various companies requesting to open up a wholesale account so you can resell the products on Amazon. This can be a time-consuming and frustrating process, as many brands may not be interested in working with small-scale sellers.
Now it's time to learn how to find profitable wholesale products that will make your online business a booming one.
To begin a wholesale business on Amazon, it's important to find the right product to sell. It's best to avoid products sold by Amazon or private label sellers as they are priced lower and are difficult to compete with.
Look for products with multiple sellers that are either arbitrage or wholesale products. Established small to medium-sized brands are ideal, as large brands usually don't sell products at a wholesale cost. The product should also have high demand to sell tens or hundreds of units per day.
There are various ways to find wholesale suppliers that can provide you with the products you need for your business. One approach is to start with your local Chamber of Commerce, as they can provide valuable information about local wholesalers. Attending trade shows and subscribing to trade publications in your industry can also help you stay informed and find the best suppliers.
You can also reach out to other business owners in your network and ask for recommendations or search for wholesale distributors on social media, industry groups, and forums. Another option is to use online marketplaces such as Alibaba, eBay, and Etsy, which offer access to thousands of manufacturers, retailers, and wholesalers.
Alibaba is particularly useful if you're looking for overseas manufacturers. These platforms also have messaging features that make it easy to contact suppliers from anywhere in the world. If you're still having trouble finding wholesale suppliers, you can use a guide to help you through the process.
After compiling a list of possible wholesalers to work with, the next step is to choose the right one. To make the best decision, ask yourself the following questions:
Is the wholesaler reliable? Do your research and read reviews about the wholesalers you're considering. Look for patterns of negative reviews, such as consistently late deliveries, damaged goods, or not showing up at all. These are red flags that could harm your business, so eliminate any unreliable wholesalers from your list.
Does the wholesaler provide good customer service? Another factor to consider is their customer service. Are they responsive and helpful? You need to be able to easily communicate with them, so choose wholesalers that provide excellent customer service.
What type of merchandise does the wholesaler sell? Depending on the products you intend to sell, choose a wholesale partner that carries the products you want. You can work with multiple wholesalers to acquire the inventory you need, but make sure the wholesalers you choose have products that align with your store's brand.
What is the wholesaler's price point? The goal of buying wholesale is to maximize profits and buy in bulk. When choosing your suppliers, make sure they offer pricing that allows you to hit your profitability targets. Choose wholesalers that can provide you with the pricing you need to achieve your goals.
By answering these questions, you can narrow down your list of potential wholesalers to a few top choices. Choose wisely, and you'll be on your way to a successful wholesale business.
If you're interested in selling wholesale products on Amazon, it's important to know what brands and distributors will require of you; it's not just a one-way street, after all. First and foremost, you will need to register a legal business entity or do business as a sole proprietor in your state, as we mentioned above, as brands and distributors will ask for this information when you fill out a wholesale form.
You will also need a resale certificate from your state, which will allow you to purchase products tax-free for the purpose of reselling. Most brands and wholesalers will not allow you to purchase at wholesale without this certificate. Additionally, you should apply for an EIN number, which is like a social security number for your business.
After finding a suitable product, it's essential to evaluate its profitability. The product's price should be within 2% of the Buy Box, which is the pricing widget on the Amazon product page.
Calculate the fees involved using Amazon's FBA calculator, and subtract it from the sales price to determine profitability.
To avoid high storage fees, it's best to keep only 2-3 months of sales in stock, which can be estimated using the turn rate. For example, for a product that sells 300 units per month with nine sellers, one seller should have 30 units in stock to cover sales between orders. By considering these factors, sellers can make an informed decision and build a successful wholesale business on Amazon.
The traditional way of performing a task involves standardization and simplicity, but looking at it from a different perspective can bring about new opportunities. This is where the concept of wholesale reverse sourcing comes into play. It's a profitable sourcing strategy that Amazon FBA sellers can use to find hundreds of products waiting to be sold on Amazon at wholesale prices.
Finding profitable items to sell on Amazon can be time-consuming, which is where tools like Tactical Arbitrage come in handy. They help sellers to find regular wholesale suppliers and sustain their wholesale business. They have calculators to help you get ahead, too.
In building a wholesale business on Amazon, relationships with suppliers and brands are crucial to success. These relationships can determine whether you can open an account, access larger discounts, and obtain exclusive products.
Establishing a strong relationship with your supplier is the "secret sauce" that can give you a competitive edge. It is essential to use these relationships to your advantage, and doing so can make all the difference in your success as an Amazon seller.
When you contact brands to negotiate wholesale agreements, it's essential to demonstrate how you can add value to their company and products. In building a wholesale business on Amazon, relationships with suppliers and brands are crucial to success. These relationships can determine whether you can open an account, access larger discounts, and obtain exclusive products.
Remember that manufacturers are big companies with concerns about new product development, patents, and global marketing initiatives. You should be offering to help extend their brand and increase their sales. This is where you have a fantastic advantage to negotiate, as you can offer to help them sell on Amazon, which they may not have the time or know-how to do themselves.
You can identify any problems you can help them with, such as poor images or SEO for their listing, and show examples of how you can make their products more appealing or address customer pain points. If they are not interested in selling on Amazon themselves, you could offer to help them get set up on the platform and expand their reach.
When it comes to doing business with Amazon sellers, many suppliers and brands are hesitant. This was discovered by an Amazon seller who spent four months trying and failing to build a wholesale business on Amazon. He asked the suppliers and brands why they don't like doing business with online sellers, and here's what they said.
Firstly, communication is a major issue. While the wholesale business model hasn't changed much in the past decade, online sellers are more comfortable communicating behind chat or email and rarely make phone calls. This can lead to terrible communication between the parties.
Secondly, approaching a brand aggressively and placing smaller orders than expected is not a healthy way to start or maintain a relationship. Brands prefer to work with sellers who approach them respectfully, relative to the capital they have to spend.
Thirdly, it's important to maintain an open line of communication with brands and not go silent on them. Once a relationship has been established, brands want to stay in the loop and know how the seller is contributing to their brand and products in the long run.
Lastly, Amazon sellers are known for "breaking MAP" or selling below the set price, which creates friction with brands and suppliers. Following MAP can be turned to the seller's advantage, as listings are less competitive from a pricing standpoint. Sellers with a healthy relationship with a supplier are in a better position to negotiate an exclusive contract and lower pricing, which allows for more spending on PPC campaigns to grow sales volume without a loss of profitability.
If you're looking for ways to source brands that aren't yet on Amazon, you can check out successful Kickstarters or Facebook ads from entrepreneurs who may not know enough about Amazon to get started there. You can also follow lifestyle and consumer-facing blogs to find products that aren't yet available on Amazon.
Once you have established wholesale agreements with brands and distributors, you will need to fulfill your Amazon sales. There are two ways to do this: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM).
FBA allows you to ship your products to Amazon's fulfillment centers, and Amazon picks, packs, and ships the products on your behalf. FBM, on the other hand, requires you to handle the storage, picking and packing, and shipping of your products to your customers.
Despite the challenges, selling wholesale on Amazon can be a profitable and rewarding business opportunity. With the right approach and a little bit of hard work, you can build a successful business that allows you to make a living from the comfort of your own home. Remember, it requires research and good business acumen too, so be patient and informed and go well!
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