You already know about the endless selling capabilities Amazon has on their platform. So are you surprised it supports wholesale selling too? Me neither. Amazon wholesale can be a very lucrative opportunity for third party sellers if they know how it works. If you want to be a third-party seller, I will explain why entering the Amazon wholesale market is a great option. I will tell you how to succeed at doing it too.
What is Amazon Wholesale?
First off, wholesale is the act of purchasing a product brand in bulk from a supplier and reselling the individual products for a profit. The profit is through buying in bulk. When you buy a large quantity of a product at once, you get price breaks that lower the cost of individual products. Then you’re able to resell individual or smaller sets those items at a higher price to earn a higher profit margin.
Sellers in wholesale are essentially the middle-man between the supplier and consumer. Suppliers can be manufacturers or distributors.
Amazon aids this process by providing wholesale sellers a massive target audience, credibility, and even storage. I will explain later how you can use this business model on Amazon.
Pros to selling on Amazon Wholesale
- High Product Demand. You have the ability to sell branded products through Amazon wholesale. You can find any brand that is currently popular on Amazon, buy bulk of that product, and sell it.
- Quick to get Started Up. It’s common for wholesalers to get their business functioning in less than 6 weeks. Set up is quite simple; it just takes some time to form a relationship with a supplier.
- Profitability. While wholesale gives sellers the opportunity to earn high margins, it is also a business model that turns a profit faster. For instance, many wholesalers can turn a profit in just 3 months. This differs from sellers who do the common private label business model and can profit in at least 6 months.
- Option to Sustain a Passive Income Stream. Relationships are vital for Amazon wholesale. Once you have done the research, built an efficient business, and have found a reliable supplier, you can honestly be hands-off during the process. This is if the product stays in demand. You would just need to place reorders and review sales. This is if you want to sell part-time only.
- You Have Control Over Costs. Control how much money you want to spend on your inventory and shipping expenses.
- Have Retaining Customers. If you stay in stock and the individual products you sell are still popular, the same customers will come back for further business.
Cons to selling on Amazon Wholesale
- Up-Front Capital is Needed. Bulk ordering means a lot of money needs to be paid at once to obtain all the inventory. The more money you can spend at once, the lower each unit costs you. But not everyone has that.
- High Competition. It is almost certain that whenever you place an offer as a wholesaler, you’ll be competing against multiple other sellers. It often turns into a price war. It’s really not a good thing to be the winner of a price war because profit is rarely the result. It usually results in a loss.
- Extensive Research Time. It is crucial to invest in product research because an ineffective bulk purchase is costly. It’s costly as it is an expensive purchase to obtain products in bulk with storage costs tacked on top of it. For this reason, wholesalers must do a ton of research to be confident that they chose the correct product. This research time can prevent sellers from being productive.
- Can be Risky. Adding to the previous bullet, it’s important to do that research because the business is risky. So you do not want to buy the wrong product. Just like you can turn a profit quickly in the wholesale business, you can be at a loss even quicker.
- Amazon Brand Restrictions. There are certain brand restrictions that Amazon requires you to fill out to be able to sell their product. Being unaware of this can possibly lead you to issues. To deal with this as a reseller, you can also contact the manufacturer for approval to resell their product.
A repricer is vital to the wholesale model.
While wholesale is about cutting costs to be more competitive in price, a repricing tool can boost your abilities to do so. Through constant market price analysis, the software tool will continuously change your listing prices.
Instead of viewing your pricing strategy as a stressful task, it can be your leading competitive edge. Think of a repricing tool as a necessity because all sellers notice an increase in sales, especially those in wholesale.
Aura Repricer can easily solve wholesale problems for you.
An Amazon Repricer is a software for Amazon sellers that will automatically reprice your product listings to win more sales against competitors. If you use this software for Amazon wholesale, you’ll quickly notice all of these benefits it offers:
Constantly compete in your market.
The repricer will measure current prices that your competitors offer products at. Then it will adjust yours to a lower price, so you can win the sale. Sellers in wholesale market have the ability to go very low in price because of the low cost they spent on the product.
Own the Buy Box more often.
Pricing is one of the biggest factors that determines which seller gets the Buy Box. The Buy Box is critical for wholesalers to obtain because over 80% of Amazon sales are made through it. So boosting the number of times you own it, you will heavily increase your revenues by as little as 30%. Aura increases the time of owning Buy Box by 65% of the time against other repricers.
Save your research time.
Time consumption is the most prevalent and common fallback for seller on Amazon wholesale, as I said earlier. Aura can change the quality of your life in this way. Its automation will do all the pricing research and will change the prices for you. Note that this all happens in current time too so you can always stay ahead of wholesale market trends.
Save money and boost profits.
Don’t lose any more profit in the wholesale pricing battles. Aura allows you to set price minimums, so you don’t sell a product so cheap where it results in a loss. If a price war dips below your minimum level, your listing price won’t drop any lower. You can set price maximums to increase profits. The automation will raise your listing prices when competition is low, so you can earn a wider margin.
Now you know how to maximize the pros of using Amazon wholesale while also minimizing the cons.
How Amazon Wholesale Works
1. Create a seller account – either FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant).
2. Research niche and in-demand products to sell.
3. Source the product.
4. Add the product listing to rank against your competition.
5. Promote the product.
6. Manage business operations and your inventory.
*Note: You may need to get a wholesale license off the start depending on the region or country you live in.
What makes a good wholesale product to sell?
- Established and successful brands are the best products to sell. You won't be creating and promoting your own brand.
- Don't sell a product that is also sold by Amazon. Simply put, Amazon will win the business over you because they have much lower costs. They will price lower than you to win the business, even if it results in a loss for Amazon.
- Do not sell a product that's sold by a private label seller either. Private label sellers can deny you from throwing in offers on their listings with alike products.
- It is about reacting fast to sell eligible products that are in-demand.
How to find the right supplier for your product?
You go and directly talk to the brand owner or the manufacturer about reselling their product. While this may be intimidating at first, you must be confident because you are offering the brand an extra revenue stream. A good tip is to reach a manufacturer that is currently having some difficulty selling on Amazon. Or you can present your offer to a manufacturer that doesn’t even sell on Amazon. Know that the answers will not always be a ‘yes,’ which is why I said that relationship building is vital.
What You Need To Start Sourcing
-A registered seller account
-Sales Tax ID Number
-Application for an EIN Number – the IRS can give you one for free
How does Amazon Wholesale differ from other common business models used on Amazon?
Private Label Selling
Private label sellers sell their own brand on Amazon, while you sell existing brands in wholesale. Because of this, private label sellers have to create product listings while wholesalers do not.
Sellers in arbitrage purchase discounted products and resell them on Amazon. Although branded products are resold by both business models, arbitrage seller purchase only one product at a time. More negotiating and relationship building occur in wholesale to decrease bulk costs. Arbitrage is retail rather than wholesale.
You really don’t own any inventory as a drop shipper. Dropshippers list items for sale on Amazon, then will place an order to their supplier each time an item is sold. The supplier will then cover the fulfillment. In wholesale, you own your inventory and control what you want to do with it.
Fulfilling Your Wholesale Business Through Amazon
Fulfill your Amazon wholesale orders through FBA or FBM. Through FBA, you can ship your bulk inventory to a designated Amazon warehouse. This is where Amazon will provide the service of packing and shipping your goods upon an order. You can actually save money on shipping costs if you do this rather than self-fulfilling.
But this isn't optimal for all type of products. If you are prone to slow product turnover or sell oversized items, you would want to consider using FBM. In FBM, you must self-fulfill your operations with Amazon’s set shipping rates.
Wrapping It Up
Amazon Wholesale can be a lucrative opportunity. While the information I talked about may seem extensive, most of the hassle occurs in the beginning stages. I am here to explain what the benefits and risks are to entering the market. Then I explain how support from Amazon and software, like Aura, can help you lower risks. Once you go through the beginning steps to establish yourself as a consistent wholesaler, you will notice how hands-off it can actually be.