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A key reason Amazon has become the e-commerce giant it is today is due to how accessible it is for sellers. The more people who can sell on the platform, the better the range of products (and price points) available to customers. Besides Fulfillment by Amazon, there are multiple business models available varying investment and earning scopee, including wholesale.
Today, almost one in four Amazon sellers opt for the wholesale business model. This selling approach is popular likely because of its quick lead time and ease of scalability. However, someone who sells “wholesale” on Amazon doesn’t operate like a conventional wholesaler.
In this article, we explore how selling wholesale on Amazon differs from traditional wholesaling and Amazon’s other business models. Then, we outline how exactly you can become a wholesale seller on Amazon.
The Amazon wholesale model works like a roadside store or e-commerce website that sells third-party brands and products. An Amazon wholesaler sources products from brands already in demand and then lists them on Amazon to sell. Just like any other seller on the platform, Amazon wholesalers can fulfill the received orders on their own or through FBA.
As mentioned above, an Amazon wholesaler doesn’t operate like a regular wholesaler. So, let’s set out the difference between traditional and Amazon wholesale first to avoid any confusion throughout the article.
Amazon Wholesaler: An Amazon wholesaler is essentially a retailer that buys products from a manufacturer/brand at “wholesale” rates and then directly sells them to consumers via Amazon.
Regular Wholesaler: A conventional wholesaler acts as a liaison/middleman between manufacturers and retailers. They buy products in large quantities from manufacturers and distribute/sell them in small quantities to retailers.
You can also become a conventional wholesaler on Amazon by joining its B2B program Amazon Business and you can even buy things wholesale through the same program. However, this program only caters to businesses/sellers and doesn’t entertain B2C transactions.
A wholesale seller," PConline365," won the Buy Box of a Dell Laptop for an order placed from a customer in Truckee, California.
With Amazon's wholesale model, sellers source items directly from the manufacturer/brand at a discounted rate and sell them at retail price on the marketplace.
When a branded product is already being sold on Amazon, you compete for the Buy Box of that product. Winning the Buy Box depends on various factors, including landed prices, fulfillment method, shipping time, order defect rate, etc.
We have included a diagram below to show the steps involved in selling wholesale on Amazon.
First and foremost, you have to sign up as an Amazon seller. Pick the professional seller plan since it offers better pricing for high-volume sales.
You need to search for products that are already popular in the market and offer reasonable margins. Moreover, you need to ensure that the product doesn’t belong to an already saturated niche and category. We will discuss the art of wholesale product research in detail in the coming sections.
After settling on the product, you have to contact the relevant supplier or brand to get their approval for operating as an Amazon wholesaler of their product.
Once you get the approval from the brand, you have to finalize the terms of procurement. It includes deciding the Minimum Order Quantity (MOQ) and negotiating the price for the bulk order.
After the procurement of the products, you have to list them on Amazon at a retail price. You can either fulfill the orders yourself or go with FBA (Fulfillment by Amazon).
There are several key differences between selling wholesale and other Amazon business models like private label, retail arbitrage, and dropshipping. By knowing how wholesale is different from these other models, you will be able to make an informed decision regarding selling on Amazon.
The primary difference between Amazon wholesale and private label is the status of the brand/product that sellers list. First, a private label seller has to introduce their own (propriety) brands and line of products. Then, they need to create a product listing from scratch and promote it for relevant shopping queries.
Meanwhile, an Amazon wholesaler sells an already branded product, i.e., Reebok, Dell, Samsung, Wrangler. Also, they usually sell products with existing ASINs, which means they don’t have to create listings. Instead, they just add their offers to the existing listings and try to win the Buy Box.
Both wholesale and private labels are almost on par with each other on the scale of investment and returns. However, a private label seller may need a bigger upfront investment than a wholesaler in some cases. In terms of fulfillment, both can use Amazon FBA or take the FBM route.
Wholesale and retail arbitrage sellers share one common trait–they both sell branded and/or popular products as a third-party seller. However, apart from this, these business models are poles apart. For instance, retail arbitrage sellers buy products, in small quantities, from retail outlets (online and physical ones) at discounted rates and then resell them on Amazon.
On the other hand, wholesalers source products in bulk from manufacturers and brands instead of other wholesalers and distributors. An Amazon wholesaler gets in direct contact with the brand or its authorized distributor, negotiates the price, MOQ (Minimum Order Quantity), and then places their orders.
Dropshipping is an entry-level selling option on Amazon as compared to other selling models. A dropshipper acts as a contact point between manufacturer/supplier and customer. They list items on Amazon, receive orders from customers, and convey them to the manufacturer/supplier/brand. Then, the brand fulfills the order in the name of the dropshipper.
With Amazon wholesale, a seller has to buy products from the supplier/brand/manufacturer and then list and fulfill on their own. Since you don’t buy products in dropshipping, it involves significantly less investment than wholesaling.
If we dissect the core operations of Amazon Wholesale, they can be classified into three distinctive parts: Product Research, Sales and Profit Estimation, and Supplier/Brand Negotiation. Once you take care of these aspects, you will sell them on Amazon just like any other seller: You will list items on your chosen marketplace and ship them to customers via FBM or FBA.
Since core components of Amazon Wholesale demand further explanation, we’ll discuss them in separate sections.
Product research is the first and most crucial part of your journey as an Amazon wholesaler. Choosing the wrong product subsequently makes profit estimation and supplier hunt futile. Therefore, a wholesaler must always start strong and carry out well-thought-out product research to identify a branded item they want to sell on Amazon.
You need to factor in demand, competition, seasonality, price, and brand popularity while exploring and shortlisting the products you want to sell. Let’s see how to go about these five components of product research one at a time.
The key to wholesale success is to choose a product with high demand in the market. For instance, clothing, electronics, baby items, pet accessories are some of those product categories that witness high customer traction all year round. Therefore, the good idea is to pick any popular product category and look for the most popular items in that niche.
There are multiple ways to do that. For starters, you can scan through product category pages of Amazon and check their BSRs (Best Seller Ranks). It will give you a fair idea of what brands and products are hit among consumers. Then, you can also use a product research tool to get more precise results.
Here, we’ve used the Niche Finder of ZonGuru to look at what’s happening in the Home & Kitchen product category. The tool returns the niche keywords with niche scores that show their business viability. Moreover, the niche score of a keyword further branches out into four parameters (demand, competition, investment, revenue potential). This breakdown gives a clearer picture of how certain product types or brands perform.
Through this data and manual research, you can identify the products and brands that are in good demand in any given niche.
After shortlisting products with high demand, you have to look at the competition. As a wholesaler, you face two types of competition. First is how your chosen product fares against other similar products. The second is how you fare against other sellers to make it to the Buy Box.
Here too, you can do manual research and use a tool to find the competition level of a product. The Niche Finder also gives you a competition percentage of niche keywords with inverse relation— the higher the percentage, the lower the competition. You can also look at listings of similar products of the same niche to gauge how much they match up against each other. This comparison will give you a fair idea of the competition level a product faces.
As a wholesaler, it is important to know how many sellers have listed the same item. One way to find that out is to open a listing as a buyer and change your delivery location. Do this 8-10 times and choose locations within the same region. If you see a new seller for every new location, this means many individuals are competing against each other as wholesalers to sell that product. You can also use ZonGuru’s Sales Spy to find out the number of sellers of a particular ASIN.
If you want to maintain a steady income stream through your wholesale throughout the year, you need to pick seasonality-proof products. For instance, crayons are more in demand near summer and spring break. In contrast, electronic accessories, female care products, pet supplies, etc are some of those categories that see more or less the same demand through 12 months.
If you’re operating with a tight budget, try to stick to products that don’t have sprawling dimensions, heavy weights, and hefty price tags as they spike your storage and shipping charges. Similarly, selling fundamentally expensive items entails heavy upfront investment and high risk.
Last but not least, you should always choose products with a big brand footprint. Amazon wholesale’s major edge over the private label is that you can leverage the reputation of an established brand and sell its products without needing heavy marketing investment. You can only leverage that edge if you opt for popular brands that are already household names.
After shortlisting the potential products you may want to sell as an Amazon wholesaler, you need to analyze them for their sales and profits. This analysis will tell you if you really need to proceed with a product and get in touch with its brand/supplier/manufacturer.
You primarily have to determine per product margin, monthly volume, and inventory turn rate to estimate your overall sales and profit. Let’s see how you can do that.
First, you need to calculate the estimated profit on each product. You have to consider two things while doing this. First, make sure the price you intend to set for a given profit margin lies within the 2% of the price mentioned in the Buy Box of the given listing.
For instance, if the price of a given product is $78 in the Buy Box, you have a $1.56 cushion above that price. Going above the price that includes cushion may rule you out from the Buy Box race. It is worth mentioning that 2% is an arbitrary number that we recommend after running many iterations and listing various products. The crux is to keep your price as close to the Buy Box price as possible.
After estimating profit while keeping it within 2% of the Buy Box price, take into account the selling fees you will incur per product. If you’re using FBA, you can use this free FBA fee calculator to estimate how much overheads you’re paying for each product. Then, take this amount and subtract it from your estimated profit to get the actual per-product margin you’ll have.
After estimating profit on a single unit, estimate your monthly sales and inventory turn rate. Here too, Amazon seller tools like Sales Spy by ZonGuru can come in handy. You can use it to find out the sales volume (monthly, quarterly, annual, weekly, etc.) as well as the estimated revenue and profit. It is best to set the time frame in Sales Spy to “annual” so you can get the monthly average over the course of the last year.
Suppose a product you want to sell has 300 monthly sales with nine sellers already selling it. If we consider even sales distribution among sellers including you, then every seller will sell 30 units per month. A good rule of thumb is to have three months of stock ready in Amazon fulfillment centers, which means you must have 90 units in stock all the time.
After factoring in profits with an inventory storage fee and a forecast of expected monthly sales, you can get a fair estimate of how much money you can make every month by wholesaling a product on Amazon and how much time it will take to recoup the investment.
Once you’re done selecting a product and calculating your revenue, you need to reach out to relevant brands and manufacturers. Some brands roll out their partnership affiliate programs for third-party sellers. You can search for them online, particularly on their websites.
Even if you don’t find any separate section for such programs, you can always reach out to them through their “Contact Us” page. Read a short yet compelling message in the Message box that conveys what you want to do and how it can bring any value to the brand.
Your message can go like that:
Hi,
I’m an Amazon wholesaler and want to scale your business further by listing your products in the [insert marketplace] region of Amazon. Would you please let me know about the requirements I need to fulfill for signing up as your wholesale affiliate on Amazon?
Looking forward to hearing from you
Thanks,
[Your name with Amazon seller name in parenthesis and the link to your seller page]
Besides picking a famous brand with a substantial market footprint, you must be mindful of a couple of things when you go on to find wholesale suppliers. For starters, make sure the brand and manufacturer for whom you want to sell on Amazon is known for its premium quality.
Remember that a famous brand may not necessarily be a premium quality brand. By picking a premium brand, you won’t have to worry about the quality of an individual unit you will deliver to your customers.
Secondly, it is always better to work with a brand that already has an affiliate program for Amazon sellers. Those brands have placed a robust mechanism in place to cater to Amazon sellers. Therefore, when you contact and negotiate with them, you reach a deal without much back and forth.
When you can connect with reputable wholesale suppliers, it automatically becomes easy to find wholesale products of high quality and reasonable prices.
Brands usually require you to fulfill these requirements to become eligible for selling their products on Amazon.
Before wrapping up this discussion on Amazon wholesale business, answering the following two fundamental queries is crucial.
Amazon wholesale can be a great business opportunity due to these pros.
With strengths, Amazon wholesale has its shortcomings. Therefore, you must be mindful of the other side of the coin as well.
Let’s quickly skim through the frequently asked questions about selling wholesale on Amazon and their answers.
An Amazon wholesaler can make anything between $1,000 and $250,000 per month in sales. Usually, a wholesaler that gets a good start begins to earn in the range of $1,000-5,000 per month.
Like private label sellers, Amazon wholesalers also get both options to fulfill their orders. They can go the FBM route and fulfill orders themselves. Or, they can sign up for Amazon FBA wholesale and let the e-commerce giant take care of their orders.
Yes, an Amazon wholesaler can start a private label. All they need is an Amazon seller account and have to enroll in Amazon Brand Registry, create their propriety brand, and start listing their private label products.
We hope that the above discussion helps you understand how to start your journey as an Amazon wholesaler and keep up with its good business management. If you have a reasonable upfront investment, pertinent tools to determine which branded products to sell and can strike a good balance between profit and competitive prices, you can win with your Amazon wholesale gig in your given niche and product line.
Whether you’re just starting your Amazon journey or been in the game for a while, ZonGuru has just what you need to improve your business. Sign up for a FREE trial today, cancel any time.
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