Amazon easily leads the world market in online merchandise sales, supporting more than 2 million third-party sellers, not to mention its huge product catalog. Those who sell on Amazon most likely sell individual products that they made or purchased. About a quarter of those 2 million sellers take a different approach, called “wholesale.”
What is wholesale? You’ve practiced it whenever you’ve bought in bulk to save money. For consumers, this is common with necessities like toilet paper or detergent. For distributors like the sellers on Amazon, wholesale purchases can be lucrative for any merchandise. They buy in bulk from a supplier or manufacturer so they can sell each item for more profit. This could apply to everything from silverware to computers.
In 2020, when face to face interactions are being dropped in favor of more versatile online business endeavors, knowing the ins and outs of a wholesale selling strategy could be a lucrative business move. Read IO Scout's article to see comparisons between wholesale selling and other types, why you should get in on selling wholesale on Amazon, what the advantages and disadvantages are, and a step by step guide on how to start doing it.
How Amazon Wholesale Works
Amazon wholesale requires a few basic steps to get started. The first may require a little groundwork in terms of creating an Amazon seller account. You can’t figure out how to sell wholesale on Amazon until you know how to create an account.
This requires a little research. Wholesale licenses – which are required to create an Amazon wholesale account – include business licensing, tax forms, and other requirements that vary depending on which state (or which country) you’re selling from.
After taking care of those licensing requirements, you need to follow a few basic steps to start an Amazon wholesale business. These include:
- Create your Amazon wholesale seller’s account
- Figure out which popular product(s) you should purchase
- Find the right manufacturer or supplier to buy the product wholesale
- Research competition in this product and map out a ranking of their sales numbers
- Put the product on your store and start promoting
These 5 steps are the basics. After doing that, you need to manage your business. This includes managing your point of sale on the site, including deals and discounts you may want to offer, managing your inventory, creating a budget plan against your sales predictions, and more. Selling wholesale on Amazon is similar in a lot of ways to selling anything – a lot of the same marketing rules apply.
How does wholesale differ from other business models?
Wholesale may seem similar to other business models, however, wholesale for Amazon sellers has its own criteria that you need to understand in order to differentiate it from other business models.
Read on to see these comparisons so that you can buy wholesale and sell on Amazon more effectively.
Wholesale vs private label
A private label is exactly what it sounds like – a product that a seller brands to sell on Amazon. As an Amazon wholesale seller, you will be purchasing products that are already branded instead. What’s the difference in terms of your business model?
The difference is that when you purchase and market wholesale items to sell on Amazon, you may not create new product listings. This changes your relationship to your store since you are essentially appropriating someone else’s listing and not incorporating your own brand.
Wholesale vs dropshipping
Dropshipping is a completely different model for selling products on Amazon. It involves listing products as a middleman and then placing the order with the real supplier or manufacturer when someone buys one. In order words, dropshipping allows companies to sell products on Amazon without managing their own listings and it allows dropshippers to make money by running a company’s listings, marketing, and shipping other people’s products.
As a wholesaler on Amazon, you would not be selling other people’s inventory but buying, managing, marketing, and selling your own. The main difference is that Amazon wholesale sellers have to fulfill their own orders, while dropshippers send the orders to be fulfilled by a supplier.
Wholesale vs arbitrage
Arbitrage refers to visiting retails sites and scouting for discounts. After buying merchandise at a reduced price, you then resell it on Amazon for a profit. This is similar to those who buy wholesale and sell on Amazon, however, arbitrage sellers buy products at discounts one at a time. Wholesale sellers save money not by scouting deals but by buying in bulk.
This means that arbitrage sellers don’t have to negotiate like wholesale sellers do since they’re buying from sales rather than from suppliers. An arbitrage seller simply scouts deals. An Amazon wholesale seller by contrast has to haggle rates with suppliers through a supply chain rather than through retail. It’s a slightly different skill set.
Why sell wholesale on Amazon
There are a few reasons to get into Amazon wholesale. There are a few detractors as well: we’ll go over them both.
- Brand recognition : Since you’re not building and marketing your own brand but established brands from leading manufacturers, your products have the advantage of that brand recognition. Your Amazon wholesale store can focus all its resources on sales and not devote as much to marketing as a result.
- Ease of Entry : It takes an average of six weeks to get a wholesale Amazon business running, which in all the store types we reviewed is the fastest behind only arbitrage sellers, who get retail deals that don’t require any negotiation.
- Profitability : More than half of wholesaler sellers start making profits from their Amazon wholesale store within three months. The same sellers would statistically take twice as long to make a profit selling from a private label marketing their own brand.
- Business scaling : Since you don’t have to build and market your brand, being an Amazon wholesale seller means that you can focus on growing your team, optimizing your daily operations, and improving your turnaround time. You can skip the branding and listing procedures that other new stores have to go through before turning a profit.
- Higher competition : Since you’re not selling your own brand, your listings will be competing with others selling the same well-known brands. Multiple Amazon wholesale sellers will be trying to take your business. Price is your own bargaining chip, so the wrong brand can sometimes pressure Amazon wholesale sellers to lower prices below profitability.
- Research : Wholesale selling requires a lot of preliminary research to figure out which will play in your market, which is available from the supplier, and which can be obtained. This means that rather than pouring your energy into your own brand, you are going to be searching through hundreds of brands to find the one that works for you.
- Expenses : Becoming an Amazon wholesale seller will require quite a few upfront expenses compared to other types of stores. Reselling and dropshipping give you the ability to scout deals and buy items individually. Since wholeselling requires buying in bulk, you’re going to need a lot of money up front to get it started.
How to start selling wholesale products on Amazon?
If you now understand the definition of wholesale but are still wondering exactly how to sell on Amazon , here are our step-by-step instructions on what you need to do, from conception to completion, to get these products rolling out of your storefront.
Step 1: Choose your wholesale product
A lot should go into your decision to choose the right wholesale product to sell on Amazon. There are a few things you need to think about when reviewing the available products.
- Check Amazon’s listings : The first important thing to note is whether this product is already sold by Amazon or by a private label on their own store. If that’s the case, then you likely won’t be able to compete with Amazon’s prices. Their model prioritizes maximum sales over item-specific profits, so their prices will likely be so low that your wholesale purchases won’t profit. In addition, private labels will block you from purchases if you’re selling the same products.
- Aim for brand recognition : If you’re selling wholesale, your goal is probably to move popular products without having to establish your own brand. This means that you want to look for recognizable merchandise that will sell without you having to devote too much time to marketing.
- Focus on demand : You can use sales estimators online to do this. Focusing on demand in even a general sense is essential to choosing the right product for your wholesale store. Finding products with maximum daily sales rates that can allow you to take advantage of your bulk supply purchases is ideal.
Step 2: Work out your profits
You need to know how to maximize profitability before you buy wholesale items to sell on Amazon. Here are the tips you need to follow to make sure that your store is an investment in profits and not in wasted time.
- Know the Buy Box : Amazon has a widget on the righthand side of the screen called the Buy Box. It lists the going price for products on Amazon and allows users to “buy it now” or “add to cart.” This is where people will be shopping for prices. You need to make sure that the offer from your wholesale store is within 2% of what’s listed here, preferably below. If your products don’t display in the buy box, they won’t sell at a high volume.
- Know your fees : Amazon has an FBA calculator that allows you to input product numbers and calculate fees. Calculating these ahead of time and incorporating this into your profit margin is an essential part of any aspiration to buy wholesale and sell on Amazon.
- Calculate sales per month : You can download programs to help you estimate sales for a product. You then have to divide that number by the number of sellers competing on Amazon to move that product, including your store. This is a statistical prediction of your average monthly sales when you buy into a share of the total wholesale listings on the Amazon page. This is assuming, of course, that you stay within 2% of the Buy Box at all times.
- Consider the turn rate : For those that plan on joining the list of Amazon FBA wholesale suppliers, storage fees will be a major concern. They can wrack up quickly for Amazon wholesale sellers. To avoid these fees, you need to have a few months of estimated stock in advance and carefully manage your inventory.
- Estimate your profits : After you’ve done your research calculating exchange rates, stock, Amazon fees, and everything else listed above for the product you’re interested in selling wholesale, you’ll have an idea of what your profitability will be on your Amazon wholesale account. If you estimate that the storage, listing, and other fees will exceed the bottom line, you may need to pick another product.
Step 3: Use Amazon to choose the right product
Product databases like IO Scout can help you navigate Amazon’s catalog with preferences, minimum and maximum pricing, and other criteria to determine how specific items will pan out for your wholesale store’s profits.
You can use this information to predict consumer demand, as well as to examine your competition by itemizing the response to each product in terms of sellers and reviews. You need to find a balance between a product that people want to buy and one that has too much competition on the Amazon marketplace to be a reliable profit for your new wholesale business.
Step 4: Find a supplier
This step assumes that you’ve done everything you can to find the ideal wholesale items to sell on Amazon. After that, you need to find a supplier that works for you, who can get you this product at a discounted rate in bulk so you can sell it on the Amazon marketplace for a profit.
Using IO Scout or other supply databases again is an easy way to check the manufacturers of the products you want to move. This will give you their history and contact information, as well as their highest profile customers.
By sizing up not only your suppliers’ viability for your store but also your competition on that product through their records, you can make an informed decision about your supply, or go back to the drawing board and choose another product.
Step 5: Strike a deal
Suppliers want to know how you can improve their brand before giving you permission to represent their products on your store. Many of the companies you will be contacting will be huge names (you want that brand recognition, after all) operating on a global scale. They want you to help them increase their sales, but you need a pitch.
In order to negotiate successfully with your prospective wholesale supplier, here are a few tips.
- Look at their business model and listings and see if you can see areas for improvement that you could help them with. If their listing doesn’t use keywords effectively, for instance, or the products have generic-looking or low-quality photos and descriptions, you may use a promise to improve these features as part of your negotiation.
- Amazon isn’t for everyone. Some of these companies have Amazon stores but haven’t used them effectively or don’t have pages at all. You can often tell by the reviews whether a brand cares about its Amazon store page. Consider this as part of your strategy.
- The supplier will want concrete examples of how you can help them improve these things. Come up with actionable strategies on how your store can benefit their brand before you begin negotiations.
Amazon FBA wholesale suppliers
In order to find the right Amazon FBA wholesale supplier, you need to spend some time researching directories. Use the above tips to find the pricing, the marketplace presence, and the negotiation tactic that you predict will lead to a profitable arrangement. Choose from companies listed on supplier databases like ToyDirectory , Inc , 4WholesaleUSA , and Cleverwholesale .
Just these combined have thousands of supplier options for you to pick the one that makes sense for your store.
Amazon FBA Wholesale Tips
To be successful selling FBA wholesale on Amazon, there are a few basic tips that you should keep in mind, which should serve as a summary of all the above information.
This includes research into the price, demand, and availability of your wholesale product, the viability of your supplier, the history of their financial partners, and their current presence on Amazon. You can’t just know how the product should perform – you need to know how it’s performing already . The right competition could make your ambition to make it big in wholesale go completely wrong.
The price of the goods versus the discounts on Amazon’s store, combined with their seller’s fees and any other expenses, need to be meticulously calculated before you make any decisions. You need to estimate your profits to the letter to make sure that this venture is the right one.
Even when you’ve found the right product and supplier, there’s a lot of negotiating left to do. You need to calculate your rates and confront your supplier about what you can bring to their brand. Knowing your place in their business is the only way to have a strong position with them, which you need in order to compete in Amazon wholesale.
Becoming an Amazon wholesale seller requires a lot of planning and calculation. The product you choose needs to be researched based on its sales history, market viability, and its cost to you. Comparing it to Amazon’s current market requires the use of tools like IO Scout, which can help you find the right supplier.
The benefit of selling wholesale is its ability to move a lot of products quickly and take advantage of another company’s brand recognition to sell merchandise. Use this guide to choose a product and supplier to start your wholesale store on Amazon.
Do you need a wholesale license to sell on Amazon?
If you’re starting a wholesale store as a manufacturer or distributor, you need a wholesale license. Likely, however, you are simply a retailer or reseller and only need a tax permit.
How do I buy wholesale on Amazon?
You need to buy wholesale directly from a supplier or manufacturer and then sell wholesale on Amazon.
How to fulfill your wholesale orders through Amazon?
You can manually create and fulfill wholesale orders through Amazon’s seller portal. Amazon handles the shipping fees by the crate rather than by the item and ships your order to your buyer.
How to Set Up an Account with a Wholesale Supplier?
Use databases like IO Scout to view lists of suppliers, their highest-ranked customers, and their products. Once you’ve chosen one, use the tips listed above to begin negotiations for a seller’s account with their brand.
How to Evaluate Which Products to Buy to Sell on Amazon for a Profit?
Work out your profits using the above tips, calculating seller’s fees and turn rates to figure out what each given product would be worth to you on a monthly basis based on estimated demand.
How to Ship Products to Amazon FBA Warehouses?
From your Amazon seller account, you can ship your products to the Amazon warehouse near you by create a shipping plan, selecting your options, and individually packing the items as per the instructions on your seller portal. You can print the labels from the same system.
How to Keep Your Profitable Wholesale Inventory In Stock?
Consistent contact and negotiation with your chosen supplier is a must in order to keep your inventory stocked ahead of your product demand by about three months. Make sure to use your Amazon seller portal as well as your company contacts to maintain a steady supply.