Want to sell on Amazon but not sure where to start? Check out this guide on everything you need to know before you start selling!
While many industries have suffered the impacts of COVID-19, one industry that has not slowed down is e-commerce and its industry champion, Amazon. Amazon has continued to grow and dominate the e-commerce industry despite the economic impacts of the pandemic. In 2020 alone, Amazon registered over 32,436 new sellers joining Amazon marketplaces, along with their 2.3 million active sellers and 9.4 million total sellers worldwide. On Primeday 2020, Amazon third-party sellers had over $3.5 billion in sales, a 60% increase from 2019. Many are turning to sell on Amazon as an alternative income and opportunity to enter the e-commerce space. This guide will provide you with tips for finding products to sell on Amazon and starting your own Amazon wholesale business.
Before getting into Amazon wholesale, it’s important to understand the four types of sellers on Amazon:
Dropshipping
Dropshipping is the first type of Amazon seller and is typically straightforward. Dropship sellers serve as a “middle-man” between consumers and suppliers. A customer will put in an order for a product on Amazon and will pay the dropship seller, who will then take the funds, put in an order, and provide the customer’s information to the supplier or manufacturer who will then ship and complete the transaction. The most fundamental part of this process is that Amazon dropshipping does not require the seller to handle or store inventory.
Arbitrage
Arbitrage is the second seller type and entails the process of buying individual items from one business at a discounted price and then reselling the item on Amazon for a profit. Amazon arbitrage can take place in traditional brick-and-mortar stores (retail arbitrage) or on the internet (online arbitrage). This process is extremely fast, taking as little as a week to turn over a product.
While Arbitrage may seem simple, it requires extensive manual product research for sellers to find the right discounted items to stock and sell. After research, arbitrage sellers have to source from retail stores and websites. Consequently, arbitrage selling is extremely manual, requiring sellers to constantly look for new items to resell.
Private Label
Private label selling is the high-risk, high-reward method of selling on Amazon, which requires sellers to buy large quantities of a product from a manufacturer, rebrand the stock as their own private label products, and resell it for a profit on Amazon. This is often done by building relationships with manufacturers, signing production contracts, and shipping the items to the seller who will then hold the inventory and mark up the price to be sold.
Similar to arbitrage, private label selling requires extensive manual product research to find the right product and manufacturer. Most private label sellers buy large quantities from international manufacturers and marketplaces like Alibaba. Unfortunately, this often leads to longer shipping periods and can take up to 3 to 4 months to launch a single product. If not enough research is done, private label sellers risk losing 100% of their investments if they choose the wrong product.
Logistically, private label selling can also be the most challenging and intensive to pursue. Private label selling requires sellers to abide by international and domestic regulations when purchasing merchandise overseas. This includes shipping costs, risk management, and cross-border transactions. Global Trade Management (GTM) provides sellers with tools to oversee the legal, regulatory, and business logistics that come with private label selling.
Wholesale
The last type of seller is through Amazon wholesale. Similarly to private label sellers, selling wholesale requires sellers to contact and establish relationships with manufacturers, purchase large quantities of a product, hold inventory, and resell it for a higher price on Amazon. Compared to the other forms of sellers, wholesale provides logistical and marketing advantages.
For starters, wholesale gives sellers more autonomy to control and manage their inventories compared to dropshipping. Wholesale sellers are no longer middle-men but the businesses fulfilling the orders themselves.
While arbitrage gives sellers a lot of autonomy, they are often limited or capped at their sales. This is due to the fact that they have to purchase individuals items from retailers instead of buying bulk supplies from a manufacturer. As a result, arbitrage sellers tend to have less inventory and cap out once that inventory is sold.
Although wholesale and private label sellers are similar, wholesale sellers have one huge advantage. Unlike private labels, Amazon wholesale businesses take advantage of purchasing established-name brand items instead of rebranding to a private label. As a result, wholesalers do not have to market their own brand and can utilize an established brands’ reputation to market to consumers. Wholesalers can source from U.S. based brands and distributors with proven products. This can shorten the launch period from 3 to 4 months from private labels to 2 to 3 weeks for wholesale.
Product Research: Using Data to Find “Winning Products“
Now that you have a better understanding of the types of sellers, the next question is, how do sellers know what items to sell? Amazon is one of the world’s largest online marketplace. According to Big Commerce, Amazon sells more than 12 million products and more than 350 million products across all marketplace and sellers. How do individual sellers find products to sell on Amazon? Should sellers target the “best selling products on Amazon” or should they try to find “niche products” for unmet demands? This is where product research becomes essential for Amazon sellers.
Amazon product research and product research tools allow sellers to delegate product research to a virtual assistant. By using these tools, they will sort through the millions of items sold on Amazon and determine what are “winning products.” Winning products are not always the “top-selling products” or the most “niche products.” Winning products are the items that are the most profitable products to sell online or that carry a ton of potential. Profitable products can include categories that you might not even think of, so it’s vital to utilize product finder apps and product databases that can help optimize profit.
If you are unsure of where to start and which tools to use, you can use check out Sellgo’s Profit Finder and Chrome Extension. The Profit Finder will scan, sort, and categorize all the items sold by a multitude of manufacturers and rank the profit, margin, and return on investment (ROI) potential. In doing so, sellers can immediately determine winning products to invest in. On top of identifying profitable products, sellers can then track the potential of other products, historical sales data, and inventory trends.
Product Sourcing: How and Where to Find Wholesale Products
The next challenge after identifying winning products is where to buy products and where to source products. To buy wholesale merchandise, sellers must contact manufacturers and begin building relationships and rapport. The Product Tracker is a great tool to identify manufacturers. Next to every product categorized, manufacturers will be listed under Source. Once you find a winning product and identify the manufacturer, all you need to do is find their contact information and try to work out a contract.
Manufacturers do not sell to anyone. Manufacturers want sellers who know the product, know how to sell, and can produce results! Remember that wholesale sellers are not just selling but building a business and relationships. By providing your own value proposition, manufacturers and suppliers are more likely to trust and value your relationship. Sellers also have the autonomy to choose which manufacturers they would like to work with. Whether it be international or domestic suppliers, wholesale sellers can pick the manufacturer that best aligns with their best interests.
Bulk Products: What is the product cost?
Here are some key terms to note when contacting manufacturers:
What is the Minimum Advertised Price (MAP) Policy?
MAP policies are a price minimum that is set by suppliers that wholesalers must abide by. These price points are usually agreed upon by both parties and will have huge implications on profit margins and return on investments.
Is there a Minimum Order Quantity (MOQ)?
MOQs refers to the minimum number of units the seller must buy for the manufacturer to agree to supply. Manufacturers very rarely sell items individually and more often than not require sellers to buy items in bulk. Higher quantities may lead to lower product cost per unit. The MOQ can also greatly impact inventory numbers, selling prices, profit margins, and more.
Start Your Own Amazon Wholesale Business!
Amazon wholesale provides new and experienced sellers with the opportunity to build and develop a business in the e-commerce space. While there are various methods of selling, wholesale provides the perfect mix of autonomy, marketability, and profitability.
If you would like to start earning with Amazon wholesale, check out Sellgo’s tools to find products to sell and start your Amazon wholesale business.
