The Basics of Selling Wholesale on Amazon – A Comprehensive Guide
The Amazon sales platform has proven to be one of the best options for finding profitable wholesale accounts. The selling price on the hundreds of millions of products is competitive for all the customers. Wholesalers also conduct plenty of trade shows. An Amazon seller has access to a couple of million third-party sellers from across the world. A lot of these sellers, like 1/4th of them, use the wholesale model, a staggering figure.
What is wholesale FBA business?
In wholesale, you have to purchase products of different brands in bulk that you can procure from suppliers, distributors, or manufacturers to sell to the customers. Many popular items fit into the wholesale FBA model from categories like kitchenware, electronics, and even kids’ toys among others.
For you to sell on Amazon, please do discover how important and profitable wholesale FBA can be. But, the learning curve needs some serious respect and you need to evaluate the advantages and potential limitations before you can jump into this AMZ business model. This guide will provide you all the details you require to make that leap in a timely yet efficient manner for running your business in the world’s biggest online retail market.
Understanding the Nature of Wholesale FBA on Amazon
There are some basics steps that you need to follow before we can start selling as wholesales on Amazon.
Step 1 – Account
Make sure that you have properly set up your account on Amazon.
Step 2 – Finding the Right Products
Always look hard to find the products that have a hot demand and customers are lining up to buy them.
Step 3 – The Sourcing Part
Make sure that you find a cost-effective source.
Step 4 – Listing Optimization
Always do a competitor analysis to see what kind of Amazon product listing text they have written. Accordingly, make your listing and optimize it for your customers. Expert Amazon virtual assistant services can guide you on optimizing your product listing to maximize organic traffic.
Step 5 – Launch and Promotion of the Product
It is time to launch your product and make sure that once it is life, you promote it on an active basis.
Step 6 – Business Growth and Management
Once you have promoted the product, it is time to ensure that you keep on adding the inventory on a timely basis and look after sales on a proactive basis.
Please also ensure that you abide by the principles set by AMZ to do your wholesale FBA. It means adhering to the practices set by Amazon. You will need to have a wholesale license and also have a business license. You may also need to fill the tax-exempt form depending on the type of business entity and from where you are operating in the US (state). Always carefully go through the wholesale licensing requirements so that you can fulfill them while also keeping your country’s or state’s laws in perspective.
How is the wholesale FBA business model different from others when it comes to selling on Amazon?
From selling domestic B2B products wholesale process is a bit more than just buying and selling bulk. An Amazon vendor has to understand the various business models. Let us have a look.
Arbitrage VS Wholesale
In wholesale, the wholesalers negotiate rates directly with the manufacturers or suppliers up in the supply chain. The resellers or arbitrage involves procurement of discount products at retail to also sell on retail.
The arbitrage is a process for procuring products directly from the retailers at discounted price for selling on Amazon. Examples include the resellers and wholesalers buying products to sell on AMZ. Wholesalers work differently in the way that they buy products in bulk and sell them individually.
Private Label VS Wholesale FBA
Private label sellers create their own unique brand identity for selling their branded products on Amazon. Private label sellers have their new brand and need to create the listing to sell on Amazon.
Wholesalers do not need to create a product listing or own a brand. They just add their offer to an already running product listing on Amazon.
Drop-shipping VS Wholesale
Wholesalers have their inventory and they can fulfill the orders themselves without relying on any third party.
Drop-shippers on the other hand need to list goods on Amazon. Once a customer purchases their product, they place the order with the manufacturer or supplier of the product. That particular third-party manufacturer or supplier fulfills the product.
Why Wholesale FBA?
Scalable Business Model
Wholesale on Amazon is such a business model that you can easily scale on it. You can focus on the growth for the time you are investing o it. It is easy to manage the day-to-day operations instead of focusing on building a brand from scratch and you don’t have to worry about protecting your brand online and handling reputation issues all the time.
FBA wholesale is a business model where you do not need to wait for 8 to 10 months or even a year to start making your first profits. More than 50% of the wholesalers that become successful, start making their profits within the first two to three months. In six months they have already seen a tremendous amount of growth for their business.
Easy to Start with No Barriers to Entry
After retail arbitrage, wholesale FBA is the second-fastest Amazon business model to start and you can easily make it up and running in no time. Many types of research and studies show that wholesale Amazon sellers take between one to two months to get their wholesale business up and running.
High Product Demand
You can get access to and choose from the most well-established brands with already having a high sales volume. So you do not have to spend a lot of money on marketing.
Already Established Listing
The listing is already established so you do not need to worry about writing and optimizing it.
Cost Effective Launching and Ranking
There is no cost of bleeding money on PPC since you are just selling on an already established listing. In Private Label, you have to do all the hard work.
Greater Choice of Products Available
As a wholesaler on AMZ, you have more choices of selling those products and going into such categories that offer greater profitability to their customers.
Easy Exist Strategy
Private label is an excellent business model on AMZ, still, it is not easy to get out of this model if it doesn’t turn out to be the success of an Amazon business you were hoping it to be. In wholesale FBA, you just need to sell your inventory and you are out of it. The losses for a failure on the other hand on a private label can be immense.
Requires A Lot of Research
You have to continuously scout for the new and exciting wholesale products to sell. There are many dozens or hundreds of opportunities available but it is not easy to know which of the product will have easy to find the suppliers or distributors for.
You Need to Pay Upfront Costs
Since you have to make the purchases in bulk, there involves a big cost up front that you need to pay and it can become expensive when compared to the drop-shipping business model.
High Degree of Competition
There is a lot of competition within the wholesale FBA space and there are multiple sellers. The only way to outcompete them is by dropping the price and that can lead to a significant decrease in profitability.
Practical Tips to Maximize Your Profits with the Wholesale FBA Business Model
Research Hard to Get Products that Can Deliver Bottom Line Results
Always try to find products not sold by the private label sellers or worse by Amazon. Amazon can just bleed money on PPC and rank its products at any cost that it may have to pay. It can also afford to lower the prices to such an extent that it becomes impossible for ordinary wholesalers to compete.
In some extreme cases, a private label seller can also block you from selling the products or offering prices on their listings. Make sure that you go after established brands and there is no point doing wholesale if you have to market the products. Wholesalers become successful if they sell an already established brand and do not waste money or try to compete with other private label sellers.
Make sure that you already see product demand using the different keyword tools for Amazon. You can use the Jungle Scout extension. There is also that Free Sales Estimator available for you to exactly estimate the sales figures on a daily and monthly basis. Try finding a product that is sold tends of times if not thousands of times daily to become successful.
Always Calculate Your Profitability
When you want to do wholesale FBA, the money idea is to earn money. For that, you need to calculate the amount of money you would earn as a profit margin before you commit it or make an investment. Always try to have a product that is priced within 2% of the Buy Box.
What is Buy Box?
It is a widget on the Amazon product page that lists pricing and it also has that bad boy button that all wholesalers yearn for “Add to Cart”.
Make sure that your price does not deviate more than 2% of the price given in the Buy Box. Typically, if you are offering the product at a higher than 2% deviation, the Buy Box is never going to display that product.
Estimate Product Fees
Always determine the kind of fee that you can expect from the product. Make sure that you know how to use the FBA calculator for Amazon to calculate that amount. Always enter the ASIN of your product, enter the details into the calculator, and review it before finalizing the amount you calculated.
You need to deduct the fees for Amazon as well as the cost of the product from your actual sales price. Make sure that you are positive to make some money. If you also know the expected amount of money you would make selling particular products, you can also calculate your profits using the sales figures and adjusting for the fee.
Always Know Your Monthly Sales for Your Wholesale FBA Enterprise
You can use the Jungle Scout Extension or the Free Sales Estimator for measuring or estimating your wholesale FBA sales. As a new seller, you must always keep an eye on the buy box to successfully sell large quantities of products. A closely watched wholesale FBA venture can only turn into a 7-figure Amazon. There is no other exact formula to accomplish it.
Always Know Your Turn Rate
For successful wholesale FBA, you must also strive to avoid any unnecessary storage fees on AMZ. Do not keep stock for more than 2 or 3 months. If you need to have 200 products to sell per month, make sure you do not own an inventory of more than 200 to 300 units. Keep monitoring the stock that you have and when will you require to place a reorder. There are many inventor management tools available by leading Amazon tool developers on the internet that you can use for this purpose.
Always Focus on High Potential Products
If you do not know which is the best niche for you to start doing wholesale FBA, the best way is to use the tool called Product Database offered by Jungle Scout that can help you sift through the different catalogs based on the criteria that you have provided.
Selecting the Right Supplier
There is a difference between finding a supplier for a private label venture when compared to wholesale FBA on AMZ. You can use the Supplier Database tool so that you can shortlist some highly reliable suppliers overseas or in China. On the contrary, when you want to do wholesale, preferably you would need to get in touch with the brand owner.
For you to successfully open an Amazon wholesale account, you need to get in touch with the owner of the brand. You can only sell after approval for placing the order and to start at the earliest possible. A few of the brands can also ship the product for you to Amazon.
You Don’t Always Have to Look to China for FBA Wholesale
You need to deeply understand the concept of Amazon when it comes to becoming successful at wholesale FBA. From purchasing the products to their delivery, you may be asking a supplier in China to deliver the best supplies. However, in some cases, you can directly buy from the distributors located in the US, in such cases wholesale saves time.
Cut the Time Required to Get Response from Chinese Suppliers
There are a lot of bottlenecks when you are trying to get products supplied from China. You can contact your supplier in the US to get a response the next day. There is no difference in business hours and no barriers related to the difference in language that you need to surmount.
No Need to Create a Brand from Scratch
When you are dealing in the wholesale FBA, you can use the Amazon FBA wholesale suppliers’ brand and do not need to create your brand from start. When you sell wholesale items, you do not need to spend money on traditional methods like influencer marketing, SEO, listing optimization, and social media to market a brand that you have created out of thin air. Amazon FBA sellers doing wholesale can save a lot of money on marketing.
Save Big on the PPC Cost That You Need to Incur on Your Brand!
When you are dealing with a wholesale product that has an established history on Amazon, there is no need for spending any money on introducing that product in the market. You can just sell a product that already has a strong demand in the market. Still, if you want to give an additional boost, a little PPC won’t hurt your cause.
What’s the Way to Find Brand’s Contact Information?
You can just Google and find the contact information of a brand. Once you have reached a brand’s website you can navigate to the contact section and get the wholesale information from the wholesale tab.
What do wholesale FBA brands want from their Amazon Sellers?
Now that you have successfully located the brand whose product you want to sell on AMZ, it is time to know the kind of expectations that they will have before you can open a wholesale account with them.
Register Your Business as a Legal Entity
You can either register your business as a legal entity or go on as a sole proprietor within the state of your choice. Here is an overview of the information that the brand owner will ask from you.
Your Resale Certificate
You need to have a resale certificate to have permission from the distributor, wholesaler, or brand that you wish to sell the products for. A lot of the brands do not allow wholesalers to sell their products without this certificate.
Get an EIN Number
You also need to have EIN or Employer Identification Number, also known as the Federal Tax Identification Number. It is the social security number that becomes the identity of your business. IRS (Internal Revenue Service) issues the EIN that you also need for your wholesale FBA business.
Contact Details and Negotiations with the Suppliers
An important element of your wholesale FBA business is your ability to prove to the brand owner what value you will be able to add. These big companies are concerned about a lot of the information and need assurance that their business and brand are represented positively and responsibly. It means respecting their patents, newly developed products, and global marketing initiatives.
You must ensure that you will represent their brand in a truly professional way and help increase their sales. Because if you give them the surety they would consider you over other wholesalers also trying to convince such brands to sell their products.
Ways to add value to a brand as a wholesale FBA business owner.
- Try to find those brands that are not actively selling their products by themselves on Amazon. You need to get in touch with such brands to try and find out the difficulties they had in the past. If you can convince such brands that you can prove to be a better seller of their products on Amazon as a wholesaler and can also cater to resolving their issues, they may consider giving you a chance.
- You may also help them identify and resolve any other problems that they are not able to solve on their own. Simple tasks to help improve their listing’s quality via images and better written sales-oriented and SEO-optimized copy can help bring a lot of improvements to their Amazon product listing.
- You can also provide them with examples of the different ways that you can use to make their products more attractive or directly address their pain points. Once you give them complete solutions to their issues, they may find this help a lot useful.
Even if your wholesale FBA business does not get considered the first time, you shouldn’t get disheartened. It may take some time to negotiate. You may keep following up unless you are told not to do so.
Here are some added points that you can consider when dealing with brands to sell their products on Amazon.
Keep Checking New Product, Lifestyle, and Consumer Driven Blogs
There are many influencers with YouTube channels that are covering the upcoming brands. Such influencers can give you hint about some awesome products that still haven’t materialized their true potential.
Have a Look at the FB Advertisements & Feed
Many entrepreneurs start to advertise their products on FB. Kickstarter is one such place where you can also try and find such entrepreneurs to establish your Amazon FBA wholesale business with a trustworthy brand. You may also offer your help in getting these brands’ products advertised on social media platforms.
Give a Second Look to the Kick Starters That Become a Huge Success
Kick Starter has products with thousands of backers when a product is introduced there. Such business owners may not always be Amazon-savvy and the benefits it can bring to their venture. You can purchase their products’ extra units to sell them on Amazon once they have started manufacturing their products.
How can you fulfill Amazon FBA wholesale suppliers in the USA?
When it comes to wholesale suppliers, you can always choose from the two methods. You can go for FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant). Even if you have the most awesome retail, choose the one method of fulfillment that suits you the best.
When the seller purchases products and follows the FBA (Fulfillment by Amazon) they would have to ship the product to the Amazon fulfillment centers for storage. Amazon understands the storage and unique business needs of each business they are providing fulfillment for. The benefit is that AMZ will deal with the picking, packing, and shipping of the product on your behalf. When you get help from Amazon, it takes a lot of pressure off you. You don’t need to worry about having to ship your products.
You can save money on the shipping cost when you opt for AMZ’s FBA fulfillment model. However, if you think the products you deal with are oversized or they are slow to turn, it is better to not go for FBA. You may consider the other option of fulfillment for storing and shipping your products.
If you choose to go for FBM (Fulfillment by Merchant), you need to do the fulfillment by yourself.
This blog is contributed by AmazinEcommerce.com. AmazinEcommerce.com assists entrepreneurs to start Amazon FBA (Fulfillment by Amazon) wholesale business by providing consultancy and virtual assistance.
AmazinEcommerce.com is a leading Amazon FBA consultant offering its services to clients across the globe. AmazinEcommerce.com is a premium Amazon FBA Private Label & Wholesale Consultancy assisting in managing your AMZ store including private label, micro-private label, listing optimization (SEO), product photography, 3D rendering, videography, EBC / A+ Content, PPC, Packaging, Design (including Store Branding), and reinstatement of suspended AMZ accounts.