How to Earn Your First $1,000 with Amazon Wholesale Business

February 5, 2021
Written by Nicasio Co III
amazon wholesale business

Aside from private labels and third-party sellers, Amazon offers another unique opportunity for sellers on its platform: Amazon wholesale business. Wholesale is a pretty straightforward concept. You purchase products in bulk and resell them to customers. If you’re a seller, then you may have purchased products from wholesalers. There’s actually a lot of opportunities, too, for Amazon wholesalers. If you want to know how to start an Amazon wholesale business, then read below. 

What is Amazon Wholesale?

Selling wholesale means purchasing products in bulk from a manufacturer at a wholesale price and selling the products on Amazon to gain profit. Under this model, you can be the only seller offering the product, or there can be many sellers. However, selling wholesale products is different from other business models.

Selling wholesale, in a nutshell, involves the following steps:

  1. Setting up an Amazon seller account
  2. Finding a product to sell
  3. Sourcing the product 
  4. Creating an optimized listing to rank against your competitors
  5. Launching and promoting the product 
  6. Managing and growing your business  

How Is It Different from Other Business Models?

The wholesale business model may seem similar to other business models, but it’s not the same as the others. We explain the differences below:

Wholesale vs. Retail Arbitrage

One of the most significant differences between a wholesale business model and a retail arbitrage model is the number of purchases. In a retail arbitrage, sellers purchase products from retail sites at a discounted price, while wholesalers buy in bulk, instead of individual purchases. Also, wholesalers negotiate the rates, whereas resellers (arbitrage) purchase discounted products. 

Retail arbitrage spends a significant time sourcing inventory since they have to pick whether they will purchase from online retailers or brick-and-mortar stores. With a wholesale model, it is easy to purchase inventory since wholesalers directly contact the manufacturer. Plus, it’s easier to scale a wholesale business since you can easily increase the amount of inventory when product demand grows. 

  • Advantage: You can negotiate with suppliers to give you access to the best deals and lower your pricing.
  • Disadvantage: You will need to have good negotiating skills to ensure you get the best deals for your products.
  • Pro Tip: You should practice your communication skills and take time to build rapport with your suppliers. Having a good relationship helps you source efficiently and achieve the most competitive deals.

Wholesale vs. Private Label

Wholesalers purchase existing branded products, whereas private label sellers create their own branded products. With a wholesale model, you can easily sell your products since you are selling a product from a known brand. However, a private label seller has to grow a customer base. Aside from marketing the products, a private label seller has to work with a manufacturer to develop, modify, and improve the product before launching it. 

  • Advantage: You don’t need to spend so much time developing a new product.  
  • Disadvantage: The success of your business depends upon the original product listing’s ranking. 
  • Pro Tip: Look for the right branded product.

Wholesale vs. Dropshipping

Dropshipping means listing a product on Amazon where you don’t have the physical inventory. Once an order has been placed, the seller will contact the manufacturer to ship the product to the customer on behalf of the seller. As for the wholesale model, the wholesaler owns the inventory and takes full charge of the fulfillment of orders.

  • Advantage: You are in complete control of your inventory, orders, and fulfillment.
  • Disadvantage: It can be time-consuming if you employ others' services to pack and ship the products. 
  • Pro Tip: Check out Fulfillment by Amazon. They handle the picking, packing, and fulfillment of your orders, as well as customer service. 

What are the Pros and Cons of Amazon Wholesale Business?

Before you try out Amazon wholesale business, you need to weigh the pros and cons of using this business model. So, let’s look at the pros and cons, so you can decide if this is what you want to launch and make a sale. 

Pros of Amazon Wholesale

  • You can easily create an Amazon wholesale business.

The process of creating an Amazon seller account and launching your product is quicker than those of private-label sellers. You can run your store within six weeks! This is possible because you don’t have to design and create a new product, unlike private label sellers. The only time-consuming part of the process is dealing with suppliers to acquire your stock. 

  • There is already an established customer base.

Since you are selling a product from a known brand, you can leverage from the existing customer base to sell your products. The customers already know your product, and there are already existing listings with customer reviews. Hence, they are more likely to buy from you. 

  • Amazon's wholesale business is scalable.

When an item is selling particularly well, you can increase your inventory to keep up with the customer demand, resulting in higher sales. It’s also easier for you to scale your business since there’s already an existing brand and listing. You’ll just focus on sourcing the products and growing the business. 

  • It’s less risky compared to other business models.

A wholesale business model is somewhat less risky than other business models because you don’t carry the risk of your product being copied by others. Also, you don’t have the responsibilities of manufacturing the product and creating a brand. Instead, you are focused on sourcing and selling the products.

You don’t carry the risk of your seller account being suspended due to product complaints since you just source your products from the manufacturer. You can simply send Amazon your receipts. As for retail arbitrage, you have the retailer as a middleman, so if there is anything unclear about the receipt, Amazon may not accept it, resulting in your account suspension. Plus, it’s easier to source inventory with the wholesale than retail arbitrage. Hence, wholesale is less risky than other business models. 

  • Customers can re-order from your shop.

You can have customers buy your products in bulk. This allows them to get discounted prices and establish a relationship with customers. They can turn you into their number one supplier. 

Cons of Amazon Wholesale

  • Amazon Wholesale competition is fierce.

When you list your wholesale product on Amazon, chances are, there are many of you selling it too. It becomes a competition on whose listing customers will click on and buy from. Hence, you need to improve your marketing to get customers to click and purchase from your listing. 

  • You’ll need a decent amount of capital.

Buying in bulks requires paying up-front. We’re talking a bare minimum of £1,000 to get started. To sell in wholesale, you need to have enough money to pay the suppliers and stock up. 

  • Choosing the wrong product can have a negative effect on your business.

Since your business model is wholesale, it means you have to buy hundreds of stocks for inventory. If you pick a product that isn’t profitable, you will be wasting money. Hence, you must conduct thorough product research and select products that are going to sell. 

  • Amazon has some ‘brand restrictions’ in place.

If you plan on purchasing products from distributors, there is a chance that Amazon won’t accept the paperwork you provide for them. This can result in your account being suspended. So, you need to purchase from the actual brand owners and build a good relationship with them. 

Steps to Start your Wholesale Business

After understanding the pros and cons of a wholesale business, you can now decide on whether you want to pursue this business model or not. If you do, then follow the steps below. 

  1. Choose the right product.

We mentioned earlier that choosing the wrong product can have a disastrous effect on your business. Hence, you need to conduct thorough product research. To pick a product, make sure that the product is not sold by Amazon or a private labeler. A private label blocks sellers from offering similar products. What you should do is to look for established brands and follow their lead. 

Some product sourcing tips that you can follow are the following: 

  • Go to Trade Shows

Trade shows allow you to have face-to-face conversations with brand owners and learn about the products that might sell on Amazon. Plus, you can learn a lot about what these brands care about, their experiences selling on Amazon, and what you can offer them as a seller. 

You can pitch to them why they should make you their exclusive seller. You can also promote them by using Amazon as a platform to expand their brand. If you can effortlessly present your ideas to the brand owners, they can turn you into their exclusive seller. Basically, trade shows allow you to get to know the vision of different brands and the products that have big potential on Amazon. 

  • Look at Best-Selling Products on Amazon

Aside from trade shows, you can check Amazon for the best-selling products. You can find inspiration from the bestseller list and find possible products for your store. Remember to avoid picking products sold by Amazon because they can negotiate a better price . Hence, it will be hard for you to compete against Amazon’s price. 

  • Research Brand Websites 

Search the internet for different brands that aren’t on Amazon. List their contact details and set-up a meeting with them. This allows you to look for brands and get to know them, just like the trade shows. 

  1. Calculate how much money you can make

After picking a product, check how much you can earn from selling the product. A tip you can use is to price the product within 2% of the Buy Box. Don’t price it higher because it may never be displayed in the Buy Box. 

Aside from pricing, you need to know the product fees you have to pay. Knowing your product fees will help you compute if you are profitable or not since you will deduct the product fees from the sales price. You can also create an estimated monthly sales where you set daily goals that you need to target. It would be helpful to use product prices and data where you can see, on average, the product price and sales volume. It will help you know if the product is profitable or not and help you estimate how much you will earn. 

  1. Find wholesale suppliers for Amazon.

Once you have picked a product, it’s time to find a supplier. One easy way to look for a supplier is to look up your potential product’s Amazon Standard Identification Number (ASIN) and use Jungle Scout’s Supplier Database to find the exact manufacturer of that product. A number of manufacturers will be displayed, and you can choose which of them you want to contact. Afterward, reach out to potential suppliers and make a deal. Another way is to contact the brands you met during trade shows. 

  1. Contact and negotiate with suppliers.

When you contact the suppliers, you want to show them how you can add value to their brand. Remember that these manufacturers are big companies, so you need to bring your A-game. Be professional and respectful to them. Learn to be a good conversationalist and highlight the benefits of partnering with you.

 It’s also a perfect opportunity for you to negotiate with them. Tell them that you can help them sell on Amazon. If they answer with a resounding “no” at first, that doesn’t mean it’s the end. Continue to follow up every month or so.

  1. Purchase the products

After negotiating with the suppliers, and they finally said yes, you can now purchase the products. Since you are buying in bulk, you can opt to negotiate for a discount. You can also try Fulfillment by Amazon (FBA) to help you store, pack, and fulfill your orders. If you choose Amazon FBA, you can simply ask your products to be directly shipped to Amazon’s warehouse. 

  1. Start Selling on Amazon

Once you are able to create an account, you can now start selling on Amazon! Market your products using Amazon PPC and social media ads. Amazon is the best example of how eCommerce app development should be. With the online marketing revolution in Amazon, it becomes possible for sellers to easily market their products to their target market. 

You can employ Amazon's different online marketing strategies, such as offering discounts and coupons during the launch. 

Conclusion

Starting your Amazon wholesale business can be a bit confusing and daunting. There’s so much stuff you need to do and handle that it can get overwhelming. It’s a good thing that here at Seller interactive, we have a group of professionals that can help you grow your business. Moreover, if you need an Amazon marketing services guide, then we can also help. Email [email protected]m to set up a meeting.

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