Online shopping has grown exponentially over the last decade. Recent data shows that ecommerce sales are expected to reach around $6.17 trillion next year.
This will only continue to grow as many entrepreneurs adopt the wholesale business model on Amazon to grow their operations.
The advantage of wholesaling on Amazon is it provides young businesses with an opportunity to work with established brands without putting as much effort into branding and product research.
This way, you can reduce the risks (and costs) of advertising and manufacturing while allowing for easy scaling should the need arise.
In this post, we’ll discuss the following:
- What Amazon wholesaling is
- How to get started
- Tips for scaling your wholesale business and maximizing revenue
What is Amazon wholesale?
Wholesaling on Amazon is the process of buying goods or products in bulk directly from manufacturers and suppliers at wholesale prices and reselling them on Amazon.
Sellers can use two options for fulfillment through Amazon: Fulfilled by Amazon (FBA) or Fulfilled by Merchant (FBM).
By outsourcing fulfillment, sellers can concentrate on core business planning and marketing while Amazon takes care of picking, packing, and shipping the products.
Amazon wholesale depends heavily on searching for well-established branded products with a high return on investments and profitable margins.
More often than not, sellers choose this model because it provides safe, robust, and consistent brand-name products that are guaranteed to have strong brand identities and established customers.
Although sellers have less control, working with an established brand usually leads to more consistent sales and revenue over time.
The differences between wholesale selling and other strategies
Before we dig deep into how wholesaling on Amazon works, let’s first contrast it with some other popular ecommerce strategies.
At first sight, it would seem like wholesale is similar to other business models on Amazon. However, there are some significant differences between them as outlined below.
Wholesale vs. arbitrage
Arbitrage (also known as retail arbitrage) is a sales model wherein you buy products from retail stores or websites at a discounted price to resell on Amazon.
The main difference between wholesaling and arbitrage is that with the former, you’re buying products below the retail price but in bulk quantities, whereas with the latter, you may be buying a single product or small quantities at a discount.
Similar to wholesalers, arbitrage sellers buy branded products. However, wholesalers make bulk purchases from retail stores and negotiate rates with distributors and brands directly, whereas resellers buy discount products to sell via retail.
In other words, wholesalers are buying products to sell at a higher price while “arbitrageurs” are finding discounted products to resell.
So which is more profitable then? While there are thousands of arbitrage retailers online, implementing the wholesale model is more likely to generate higher profit margins.
It is, however, worth noting that profitability will always depend on your products, your marketing strategies, and the size of your business.
The downside of arbitrage is that you must constantly be on the hunt for new items. This can be a massive time cost, especially if you spend a day digging around without any good finds.
Depending on the products you’re buying, you could run into authenticity issues (especially with memorabilia) when fulfilling it through Amazon FBA.
Nevertheless, both methods are great but largely depend on your personality and how you want to run your business. Do you enjoy the thrill of the hunt, or would you rather strike up deals with wholesalers from the comfort of your couch?
Wholesale vs. private label
Wholesale sellers buy and resell existing branded products, while private label sellers create their own branded products to sell to Amazon.
While a private label brand helps you stand out, creating unique products essentially takes more time.
You’ll also need to learn a thing or two about manufacturing and assembly, and your cost per unit will likely increase since you will have to buy the materials for your products.
Moreover, since you’re not riding the coattails of an existing brand, you’ll need to spend more time and money on marketing your product.
The private label brand is undoubtedly a riskier business model, but if executed well, it has higher potential rewards.
You’ll have more control over the products you sell, margins will be higher, and customers may even develop loyalty to your brand.
This is the exact opposite of wholesale selling, where you sell already branded products to an existing customer base.
Plus, the time from start to launch with wholesale is less than with private labels since you won’t be building a brand from scratch. This also means assuming lower risks and increasing the likelihood of generating consistent profits.
Nevertheless, the choice to sell wholesale or private label boils down to your existing resources, investment options, and goals.
Wholesale vs. dropshipping
Dropshipping is another (very popular) way for merchants to sell their products on Amazon.
Dropshipping enables you to outsource shipping, order fulfillment, and inventory management to external parties, while wholesaling requires you to take responsibility for these operations yourself.
Although dropshipping has lower startup costs and lets you add more breadth to your product range, you will most likely experience lower profits since your drop shipper takes a major cut out of each sale.
Not to mention the fact that a lot of the packaging and customer experience are out of your control because you’re never physically touching the product.
Meanwhile, with wholesaling, you can offer branded experience since you have direct control over the order fulfillment process.
Interested in learning more about dropshipping? See the top dropshipping beginner mistakes to avoid.
How does selling wholesale on Amazon work?
Now that you have a general understanding of Amazon wholesale and how it differs from other strategies, you might be wondering how the process of selling wholesale on the platform actually works.
Selling wholesale on Amazon is a lucrative opportunity, but there’s a lot you need to know before diving in. In this section, we will provide you with a step-by-step guide on how you can get started as an Amazon wholesaler.
Step 1: Create a seller account
If you haven’t done so, create an account on Amazon to get started. You can use your customer account to start selling or create a new Amazon seller account using your business email.
Choosing to register as a professional seller will have a fee of $39.99 per month, while an individual account charges you a fee of $0.99 per sale.
In other words, if you make over 40 sales monthly, your best bet would be opting for the professional account so you can save money.
As if that’s not good enough, a professional seller account on Amazon also provides advanced seller tools like inventory management, buy box eligibility, and order reports.
Step 2: Choose the product you want to sell
The next step to selling wholesale on Amazon is to determine your niche and find a product to sell within that niche.
Niche market research is a topic that deserves a post all its own, but here’s the gist.
Use the Amazon category browser to dig deep into particular categories you’re interested in selling.
For example, if you want to sell tents, you’ll want to research the “Sports & Outdoors/Outdoor Recreation/Camping & Hiking” category.
This will give you an idea of the competition you’re up against as well as what kind of product features and prices are popular in that particular category.
Usually, an excellent best sellers ranking and a sufficient amount of positive customer reviews are both good signs of demand.
You can then move to Google and start typing in keywords relevant to that product or niche. This will help you gauge the competition and see if there’s enough demand to move forward with that particular item or niche.
Assessing product demand
When selling wholesale, always keep in mind that the best items are the ones you can make a profit from. You may have a supplier offering products at a discounted rate. If there is no demand for the item, your business won’t get off the ground.
But how do you find products to sell wholesale on Amazon? Although there are no hard and fast rules when it comes to this, you can start by purchasing from a reputable wholesale source.
Using this method, you will buy products directly from the manufacturer or distributor and receive a purchase invoice thereafter. This is important because Amazon usually asks for an invoice before selling a particular brand to ensure legitimacy.
Other than that, you can also take into account the items in one of Amazon’s best-selling categories when finding products you want to sell.
Books, games, toys, jewelry, shoes, clothing, and electronics are usually the categories that generate the highest revenues because they provide the shopper with many branching sub-categories.
After narrowing down your product according to market demand, the next thing you should do is to determine the competition.
Every Amazon wholesale business aims to sell products that are in high demand. The challenge is to find items that everyone will patronize in a saturated market.
Unlike demand, competition is far more challenging to determine, but you can start identifying how many sellers are advertising.
That said, creating a comprehensive Amazon strategy can spell the difference between success and failure. An in-depth Amazon advertising strategy will help you stand out from competitors who are not using Sponsored Products.
Speaking of competitors, it’s essential to do a deep study of their product listings.
Do they use attractive images and videos or perhaps have favorable ratings? How do they rank within your niche? These things will determine how easy or challenging it will be for your brand to stand out.
Profitability and cost estimates analysis are also essential parts of deciding what wholesale products to list on the Amazon marketplace.
You might come across a low-competition, high-demand item, but it won’t do much if it cannot generate revenues. It is not uncommon for most Amazon wholesale sellers to fall prey to these schemes.
With the price competition being so intense, wholesale sellers often fall into the trap of picking a product that will prompt them to choose between driving revenues and generating sales.
An excellent way to curb this mistake is to opt for a pricing scheme that matches your product category to ensure profitability.
When creating a pricing strategy, you have to take into account the associated costs. It is worth noting that the real expense of selling wholesale items is beyond its price.
There are several expenses to take into account, and they will rapidly add up if you do not monitor them from the start.
Conduct an in-depth profit analysis that takes into account fulfillment, inventory management, relevant taxes, shipping costs, and other Amazon fees.
Moreover, you may also want to find lightweight and small products. Even when you do not opt for FBA, light items have economical shipping fees and do not take significant space to keep.
This way, you can save considerable financial resources and increase your profits. After creating a list of your desired wholesale products, the next step is to estimate the expenses associated before deciding and moving on to the next step.
Step 3: Source the product
Step 2 was a doozy, but now that you’ve found your niche and the products you want to sell, the next step is sourcing your suppliers.
Like it or not, sourcing suppliers in the wholesale business is not as straightforward as being in direct retail. It involves a significant amount of money, and you have to conduct your due diligence to prevent any mishaps.
The best way to establish trust is to meet the supplier in person. If that’s not possible, consider opting for video calls as the next best alternative.
When you have direct communication with your supplier, it will be easier to explain what you need, and they can understand your objectives better. This way, both of you can build a good working relationship from the start.
Once you have a strong rapport with your supplier, the negotiation process will become more natural, and you can haggle for the best deals.
But where do you even start in finding suppliers? Depending on your wholesale business, you can start by reverse outsourcing.
Reverse outsourcing is where you start with a single product and find wholesalers that carry it.
With reverse outsourcing, you can eliminate the risk of spending time and resources choosing products only to find that there’s either no market for them or no manufacturer from which to source them.
That’s the key: you start with products that you already know are selling well.
So how does reverse outsourcing work in Amazon? A good place to start is by going to the Best Sellers list and exploring different categories.
You can narrow your search by department depending on what type of products you are interested in. Look for products that are in high demand or not well-represented with options from a few sellers.
Other than that, you can also monitor brands and do a little Google sleuthing to track products back to their supply source. From there, you can contact the supplier to see if you can purchase the product in bulk or perhaps request a sample and place an order.
During the negotiation process, be sure to ask suppliers about their timelines with manufacturers for distributing and receiving products. You’ll also want to get good expectations for how quickly you’ll receive your orders.
Also, don’t forget to ask your wholesaler about their returns process. Like it or not, you are going to have to deal with customer returns at some point when running a wholesaling operation on Amazon.
Finally, watch out for hidden costs and fees related to minimum order quantities, cost per unit, and membership dues.
In most cases, the more you order, the lower your cost per unit. Keep in mind that your goal is to spend enough to receive the complete advantage of a wholesale account but not a penny more.
For instance, if you want to buy 30 items but the price break occurs if you purchase 200 products, seeking out other deals might be a good idea (especially if it’s a high-ticket item or you’re not confident in the attainable market).
Step 4: Add your product to Amazon
After receiving your inventory from your suppliers, the next step is to list your product on Amazon.
Simply go to your Seller Central Account and click the “Add a Product” icon under the “Inventory” section. You will then be able to search for your item by ASIN number or by name.
Most often, your product will already be listed on Amazon. In such cases, just select it from the list in the search results, and you will be added to the existing listing for that item.
However, there are specific circumstances where you find that your product is not listed on Amazon. If this is the case, you will need to create a new listing for your product.
When creating a listing, make sure to use high-quality photos. Ask if your supplier can provide you with some images you can use.
You may also want to perform keyword research to determine which keywords people most often use to search for your item and include them throughout your description.
Amazon has a particular algorithm known as A9, which ranks different product listings based on their likelihood to sell.
By performing keyword research, you can ensure that your listing has as much accurate information as possible.
Besides keyword research, pricing your products right is also another critical component you should keep in mind when listing your Amazon products.
While you want your price to be lower than other sellers, you also do not want to operate at a loss. Take advantage of Amazon’s match low feature to find the lowest price of a particular product on the site.
You can compare your product based on handling time, feedback rating, fulfillment method, and listing condition to come up with a reasonable price.
Step 5: Manage your inventory
Sales forecasting, cash flow, and order volume all assume a critical part in ensuring success when wholesaling on Amazon.
As a seller, you need to study the whole process to keep your search ranking on Amazon and turn in a profit.
One of the most effective ways to do that is to take advantage of inventory management software plugins for Amazon on Seller Central.
You immediately scan data related to your listings on Amazon and perform fundamental adjustments when you visit the Seller Central. Other than that, you can also do the following.
- Check for different types of listings
- Change item descriptions and images
- Upload new items to your store
- Edit pricing
- Edit the quantity of products available
- Monitor FBA shipments
- Create comprehensive sales reports
If you are managing a large inventory, you can edit and update your inventory using the bulk upload plugin.
The Seller Central also allows you to use inventory order lead times. In doing so, you can overcome the challenges that come with over-ordering or ordering too late.
This is because inventory lead times allow you to continuously monitor your existing inventory levels and sales volumes while helping you balance this against your lead times for new inventory shipments.
As you are selling your products, you need to keep track of your inventory constantly. Unlike other retail situations, being out of stock in Amazon can have a serious and adverse impact on your selling privileges, rankings, discoverability, and future rankings.
The bottom line is that the process of inventory management in Amazon will heavily rely on several factors.
By placing data-backed restock orders, taking advantage of inventory management software platforms, and controlling cash flow, you can ensure an efficient inventory level.
Other tools that you can use to succeed in the cutthroat environment of wholesaling on Amazon are the following:
Zonguru is a robust toolset for Amazon sellers that pack 14 features focused on helping you grow your sales. These features include inventory management, analytics, listing optimization, product research, and a comprehensive business dashboard.
AMZScout is a powerful product research tool designed for Amazon sellers, which can be accessed as a program expansion and a web application.
It helps Amazon sellers generate accurate estimates, get data and insights on products, and keep up with the product inventory and trends.
Similar to AMZScout, Profit Guru is an Amazon product research tool. It aids in helping Amazon sellers in monitoring their competitors and finding suppliers.
It also comes with powerful features like a brand database, a sales estimator, an FBA calculator, and a product database.
AMZBase is a free Amazon product research assisting tool. It helps wholesale resellers obtain the ASIN number and title descriptions of Amazon listings.
You can also use AMZBase to find the historical prices of products and check listing information on other retailing websites.
Pros and cons of wholesale selling on Amazon
In this section, we will discuss the positives and negatives of wholesale selling on Amazon.
Pros of Amazon wholesale selling
1: You work with established manufacturers and brands
Selling products by an established brand has the massive benefit of mitigating the costs and risks of building a brand from scratch.
Your customers already know and understand what to expect in terms of price and product quality. As a wholesaler, your responsibility is simply to ensure that the products are processed, packaged, and shipped on time.
2: Lower risks
Risk is an inevitable component of running an ecommerce business.
When you sell as a wholesaler, you assume less risk regarding advertising and manufacturing since you are already working with a known brand.
This means you no longer have to worry about production or manufacturing expenses as well as employing staff for these processes.
You will also no longer have to worry about introducing your products to a target audience since there is already a significant following for your products.
As a result, sellers can concentrate on expanding their business and better optimizing their day-to-day operations.
Cons of Amazon Wholesale selling
The benefits of Amazon wholesale selling are endless. However, you also have to evaluate the critical side before deciding. Here are some of the setbacks you may experience as a wholesale seller on Amazon.
1: Niche and product selection can be tough
Although the Amazon marketplace can be a godsend for wholesale sellers, one of its glaring disadvantages is trying to find a product to sell that is not already being sold by a dozen other sellers on the platform.
Amazon is so well-established as an entry point to ecommerce that many other sellers will likely have had the same idea as you.
The more sellers that flock to Amazon to sell their products, the more challenging it can be to snag your piece of the pie.
2: Higher upfront costs
Since you will be buying goods in bulk, wholesaling is inevitably more expensive than other Amazon selling strategies like dropshipping or retail arbitrage.
There is a very real risk of investing a ton of money into a product and getting no sales, either due to poor market research or logistical complications.
That’s why it’s so important to take your time and make sure you are getting into a niche with products that have high consumer demand and low competition.
How to make money selling wholesale products on Amazon
So let’s talk turkey. How much money should you expect to make when diving into the world of Amazon wholesaling?
According to Jungle Scout, the highest percentage of Amazon sellers make anywhere between $1,000 to $5,000 per month.
Even if you start this wholesaling thing as a side hustle, that’s nothing to sneeze at!
Of course, your potential earnings will always depend on the products you choose to sell and how well you market them.
In this section, we will provide simple yet effective tips that you can use to make money selling wholesale products on Amazon.
Find a product in the sweet spot
Finding a good product to sell on Amazon is more than choosing the ones that are in high demand.
You also have to ensure that your chosen products are not sold by a private label seller or by Amazon itself.
Unlike you, Amazon can afford to lose money on a sale. As such, they have the flexibility to price their products lower than many competitors, which makes it even more challenging to compete.
Look for established brands, preferably those within small to medium-sized business circles. That means staying away from the Apples, Samsungs, and Microsofts of the world.
Small to medium-sized companies are right in the sweet spot of wholesale selling.
At the same time, remember that the most important part of wholesaling is riding on the success of established brands.
Conduct extensive product research
If you come away from this post with one thing, it’s this: do not skimp on product research.
Good product research can singlehandedly make or break your wholesaling experience.
You have to understand your target audience, what needs and wants they have, as well as how much they are willing to pay for your product.
Use the research tips mentioned above on multiple different product types and categories. Once you have a good understanding of what sells and what doesn’t, you can start to focus your efforts on finding products that will give you the best chance for success.
Establish an inventory management system early on
An inventory management system is a key to scaling your wholesale business. And it’s much easier to build on a foundation of a good inventory management system than to try to retrofit one to a chaotic process.
You need to be able to track your inventory, know when you need to order more, and automate as much of the process as possible.
The last thing you want is to get stuck with a bunch of excess inventory that you can’t sell.
Linnworks equips ecommerce businesses of all sizes with the tools they need to streamline and automate the entire logistics lifecycle, including multichannel inventory management, forecasting, and integrations with all your mission-critical tools.
To learn more about how Linnworks can help grow your wholesaling operation, check out our features page, or if you’re ready to see the platform in action, sign up for a free demo.