Amazon offers many lucrative selling capabilities, including wholesaling. Selling wholesale products on Amazon is a good way to build a profitable e-commerce business and earn extra income.
If you’re interested in selling wholesale products on Amazon, you may be wondering how you can get started, how to choose products to sell on Amazon, and whether entering the that market is a good option.
There’s a lot you need to know before diving into wholesaling on Amazon. In this post, we will explore the ins and outs of selling wholesale products on Amazon to help you get started.
What is Amazon Wholesale?
Wholesaling on Amazon involves purchasing large quantities of a product directly from a manufacturer or supplier at a much lower price, and then reselling the product to retailers or consumers for a profit.
When you buy products in bulk, you’ll be able to secure discounted rates from a manufacturer or supplier and then sell those products at a higher price to earn a higher profit margin. Being able to secure discounted rates from manufacturers allows you to offer more competitive rates, which will translate to more customers.
As a wholesale seller on Amazon, you are essentially the middle-man between the manufacturer and retailers or consumers.
Here’s is an example of how wholesaling on Amazon works:
- A retailer orders 500 phone covers from a manufacturer, and the manufacturer or supplier charges $10 per phone cover.
- A wholesaler orders 50,000 phone covers, and the manufacturer charges $5 per phone cover.
- The wholesale sells 500 phone covers to the retailer for $7 per phone cover.
As you can see from this example, the wholesaler is able to get discounted rates as they are buying larger quantities of the product.
One of the factors that will determine your success in wholesaling on Amazon is your ability to store large quantities of a product. Having adequate storage for products will ensure you’re able to meet demand from multiple customers at a time.
The good thing about selling wholesale products on Amazon is that you have access to a massive target audience. If you choose the right wholesale products to sell on Amazon and find reliable suppliers, you can earn higher profit margins. Besides, finding wholesale suppliers is easy and straightforward if you know how to go about it.
How does Amazon Wholesale work?
In a wholesale model, the seller buys products in bulk directly from the manufacturer at discounted rates and then makes a profit by selling the products to retailers or consumers on Amazon. In order to sell wholesale products on Amazon, you must first open a seller account—either FBA or FBM.
The next step is finding in-demand wholesale products to sell and sourcing the products from a reliable manufacturer. However, finding reliable suppliers can be a challenge when you’re getting started. You may want to leverage product sourcing tools to find top suppliers from across different countries.
Some manufacturers or suppliers may require that you set up a wholesale account with them in order to access their product catalog. Keep in mind that a minimum order quantity may apply to your orders, and this can increase your startup costs.
Also, you may be required to obtain a wholesale license, depending on where you live. A wholesale license allows you to legally resell wholesale products on Amazon and enables you to be exempt from sales tax, but depending on where you live.
How Amazon wholesale differs from standard Amazon selling
First, let’s look at how wholesaling on Amazon differs from retail arbitrage.
With retail arbitrage, a seller simply sources discounted products from retail sites and resells on Amazon for a profit. This strategy doesn’t apply in selling on Amazon FBA wholesale. Rather than purchasing discounted products from retails stores, wholesalers negotiate for discounted rates directly with suppliers or manufacturers.
Selling on Amazon wholesale doesn’t involve dropshipping whereby a seller forwards an order to a supplier who then fulfills the order on behalf of the seller. With dropshipping, the seller is in control of inventory and fulfills every order on behalf of the seller.
In Amazon wholesale, there’s no intermediary between you and the seller. You are in control of inventory and fulfillment of orders.
As we’ve already highlighted, you may need a wholesale license to sell wholesale products on Amazon. But the standard Amazon selling strategy doesn’t require a license.
The advantages of selling on Amazon Wholesale
Selling wholesale products on Amazon comes with many advantages that you should know so that you make an informed decision before getting started. Here are some of them:
One of the great things about selling wholesale products on Amazon is the ability to scale your business if the product is selling well. Some business models may require you to build your brand from scratch, and this could take a lot of time and may involve a lot of hassles. But with wholesaling on Amazon, you won’t have to build a brand from scratch because that’s already done for you by the manufacturer or supplier.
Rather than focusing on building a brand, you can concentrate on attracting more customers, building a reliable team to manage your day-to-day operations, and growing your wholesale business.
You can sell high demand products
This business model allows you to choose a brand with a proven track record. Selling a product that’s already in demand means that you don’t have to worry about introducing your products to your target audience or spending a lot of money on marketing.
You get to enjoy the advantage of guaranteed consumer interest without having to invest in branding and marketing.
It’s quick to start
Once you find reliable manufacturers or suppliers, it becomes easy to set up your Amazon wholesale business. You can get your wholesale business up and running within six weeks.
The only time-consuming part of starting an Amazon wholesale business is establishing a relationship with a supplier.
If everything goes well during the set-up phase, you can expect to make a profit within three months.
It’s a profitable business model
Amazon gives wholesalers an opportunity to earn unlimited profits. As long as you have buyers and a dependable supplier with discounted rates, you can maximize your sales and generate more profits.
Aside from that, you can turn a profit within a short time. This is one area that Amazon FBA wholesale scores higher than private labeling.
The whole Amazon wholesale business model is easy and straightforward. You simply need to open a seller account, choose a profitable product to sell on the Amazon wholesale website, find suppliers and start selling.
This business model comes with lower risks in terms of manufacturing and advertising since you are not the owner of the brand.
The cons of selling on Amazon Wholesale
Requires substantial upfront payment
You’ll require a hefty amount to order products in bulk directly from a manufacturer or supplier. This makes wholesaling on Amazon more expensive compared to retail arbitrage and dropshipping. This can be a disadvantage for someone who doesn’t have a substantial amount to purchase goods in bulk.
FBA wholesale competition is fierce. When you list your wholesale products on Amazon, you’ll be competing with multiple sellers.
Due to the nature of competition in Amazon FBA wholesale, some wholesalers choose to lower their prices to stay competitive but this strategy often leads to a race to the bottom.
It’s not advisable to lower your prices because you won’t be able to earn a reasonable profit margin.
Here is a guide that will help with pricing your products correctly.
Finding profitable products & reliable suppliers can be time-consuming
You’ll be required to explore countless products and evaluate dozens of suppliers to find the best products to sell on the Amazon wholesale website and suppliers you can count on. This can be a time-consuming process. Luckily, there are product sourcing tools you can utilize and make your work easier.
Note that choosing the wrong product can result in serious losses, so you’ll want to take your time in researching profitable products to sell.
Amazon brand restrictions
There are certain products that you cannot sell on Amazon wholesale website without getting approval from Amazon. If you list restricted products without Amazon’s approval, your account could be suspended.
Be sure to do some research regarding Amazon’s restricted products to avoid problems down the road.
In case your seller account is suspended for whatever reasons, this guide provides you with tips on what you can do about it.
Amazon Wholesale vs. private labeling on Amazon
Amazon wholesale is all about purchasing products in bulk directly from a manufacturer at a discount and then reselling to retailers. With this model, you’re simply selling products from established brands with existing demand. This means you already have an established customer base, and you won’t have to spend money on branding and marketing.
On the other hand, private labeling involves purchasing products from a manufacturer and selling them under your own brand. With this model, you’ll have to grow your brand and customer base from scratch.
Tips for finding the right wholesale products to sell on Amazon
Attend Trade Shows
Trade shows give you an opportunity to meet with manufacturers and seek out new products that might do well on Amazon wholesale. Manufacturers hold annual trade shows in various countries, so you’ll want to stay updated on upcoming trade shows.
Look at Amazon’s bestselling products & pick clues
Amazon has a section on their website where they show the most popular items. By looking at the bestselling products, you can get a clue about products with significant customer demand.
NOTE: Avoid products where undercutting is rampant because price wars will eat into your profits.
Amazon Wholesaling Best Practices
Here are practical tips that will help you succeed in Amazon wholesaling:
Do Your Research
It’s important to choose a product that is not sold by Amazon or a private label seller because it’s nearly impossible to win against Amazon. For private label products, you won’t be able to source inventory from the manufacturer.
Look for recognizable brands and ensure the manufacturer is not already selling the products. Also, you want to check the product’s demand because you don’t want to get stuck with slow-moving items. Be sure to choose a product with high demand and low competition.
A good place to start your research is Amazon’s bestselling categories and products, although you should take care to avoid the following products:
- Seasonal products
- Trends that are likely to decline in popularity
Incorporate Amazon FBA into your wholesale strategy
Leveraging the convenience of Amazon FBA allows you to scale your wholesale business and reach more customers.
With Amazon FBA, you’ll enjoy effortless shipping and logistics, discounted shipping rates, efficient return management, customer service management, and quick delivery. This will help free up your time, allowing you to focus on growing your business.
However, if your products are slow-moving or they are bulky, the costs of selling via FBA may outweigh the benefits.
Here is a comparison between FBA and FBM to help you choose a fulfillment option that works for you.
Build rapport with suppliers
Ensure you take time to nurture relationships with manufacturers or suppliers to ensure you source products efficiently and get great deals.
Leverage Amazon’s Advertising options
In order to scale your wholesale business, it’s a good idea to utilize Amazon sponsored product ads, headline search ads, and sponsored display ads to gain an edge against your competition. It’s also to advertise your wholesale business outside of Amazon to drive traffic to your product page.
Final thoughts on Amazon Wholesale
Buying wholesale and selling on Amazon can be a lucrative opportunity. While most of the hassle occurs when you’re getting started, you can scale your wholesale business to great heights if you follow the best practices.
Before you invest your hard-earned money in Amazon FBA wholesale, ensure you do thorough research to find profitable products and reliable suppliers. Once you establish your wholesale business and have a significant customer base, you’ll notice how hands-off it can be.
How Emplicit can help you grow your wholesale business on Amazon
Whether you’re already selling on Amazon wholesale, or you’re considering joining Amazon wholesale as a seller, Emplicit can help you grow your business in various ways.
We have a team of certified Amazon brand management specialists who can help you scale your Amazon wholesale business. Fill out our contact form to get started on your Amazon success path today!
We are a full-service amazon brand management agency that offers a wide range of services, including Amazon PPC management, review management, product photography, Amazon SEO services, listing optimization, and many more.