Amazon Wholesale: All You Need To Know
Wholesaling on Amazon is both a lucrative and challenging opportunity for sellers. Wholesale sellers buy products in bulk for cheap and resell them to retail buyers for profit.
With the right product and supplier, you can earn tons of cash. Therefore, your task is to find them.
Keep reading to discover why you should go for wholesale, how it differs from other sales models, and how to make money with Amazon wholesale.
What Is Amazon Wholesale?
The profit comes from the difference between the wholesale and retail prices. When you buy products in bulk, the manufacturer or supplier will prioritize the order and offer the wholesaler a discounted price.
At the same time, this means that the wholesaler needs to invest a lot of cash upfront to purchase an order. Therefore, you should make sure that what you buy is a profitable deal that will sell.
In most cases, you won’t have to invest much cash in marketing and ads because you’ll sell a popular brand that already exists on Amazon. That means someone has already taken care of the promotion. Typically, you will not risk selling a brand with unknown sales history in bulk.
How Does Amazon Wholesale Work?
With the wholesale model, you’ll need to register a professional Amazon account, find a profitable product to list on Amazon, source it, and start selling.
Wholesale sales process step by step
Wholesaling starts with researching product ideas and ends up listing them on Amazon.
Step 1. Register a professional seller account on Amazon.
Step 5. After getting the final offer, recalculate profitability.
Step 6. Source a product.
How Does Wholesale Differ from Other Business Models?
The wholesale business develops a specific approach to sales. You don’t create your own brand, like private label sellers, but you resell the branded products. You deliver orders to customers (or outsource delivery to Amazon with Fulfillment by Amazon), but unlike dropshippers, you own the inventory. Finally, you buy products in bulk and resell them for the retail price and can get a high-profit margin compared to arbitrage sellers who buy lesser quantities and achieve lower profitability.
Wholesale vs. Private Label
With the private label product, you have way lower competition because your product is unique. But it takes time to develop and promote it. Wholesale has higher competition but a high-profit margin due to low wholesale prices from the supplier.
Benefits: You don’t need to spend a long time and effort creating a new brand and listing.
Challenges: You must knock at the supplier’s door and negotiate with the brand to get a profitable product.
Tip: Having brand approval to sell on Amazon protects you from IP claims and reduces Buy Box competition. You can even ask for exclusive selling rights on Amazon.
Wholesale vs. Online Arbitrage vs. Retail Arbitrage
With arbitrage, you’re reselling discounted products for profit. There are two types of arbitrage on Amazon - online and retail arbitrage. Online arbitrage sellers find their lower-priced products in online stores, while retail arbitrage sellers get them from brick-and-mortar stores.
Both wholesale and arbitrage generate profit from reselling. The major difference between them is the scale of sales operations. Also, the approach to finding product suppliers differs, while product research has a lot in common.
With wholesale, you have to find a brand or manufacturer of a product in demand on Amazon and convince them to offer you the best price conditions because you buy in bulk. Since popular product suppliers can already have an established distribution network, you need to find the right supplier.
With arbitrage you find a discounted product with a good margin and resell it fast on Amazon. You don’t need to buy a big batch of goods. You just resell what’s available from the supplier if you see there’s a profit in it.
However, due to higher levels in the distribution channel hierarchy, wholesale sellers get better prices and profit margins than arbitrage sellers.
Benefits: Wholesale sellers get higher profit margins - typically 30% and up compared to over 10% sellers get from arbitrage. Also, wholesale has good scalability potential, while arbitrage is hard to grow.
Challenges: You must invest essential money upfront and carefully account for all expenses. In addition, you need to optimize your large-scale sales processes to streamline them effectively.
Tip: To maximize your profit margins, get a good price from the supplier, thoroughly calculate all Amazon costs using FBA and FBM calculator, and optimize your sales processes.
Wholesale vs. Dropshipping
Dropshipper is a middleman that finds a profitable product, lists it on Amazon, and asks a supplier to ship it to the customer when they order it. The major difference with wholesale is that dropshippers don’t own any inventory. In turn, wholesale sellers own, store, and manage bulk inventory.
Benefits: Wholesale merchants control the whole logistics chain, even if they outsource some of it to Fulfillment by Amazon (FBA). They know where their product is at each shipping stage. Therefore, their customers get better service and reduced delay rates. Also, this reduces risks and delivery mistakes. Dropshipper can’t influence the delivery process.
Challenges: Wholesale involves sophisticated inventory management, timely restocking, sigh storage fees due to big volumes, and more. Dropshippers don’t deal with the inventory at all.
Tip: Using FBA can be a helpful solution regarding inventory fulfillment and storage of big lots. With this service, you can stock products at Amazon warehouses and have Amazon deliver them when the shopper orders. However, you have to account for all Amazon FBA fees.
Do you Need a License for Amazon Wholesaling?
You'll most likely need to apply for a business license and a sales tax permit. With those, you’ll be able to buy products tax-free and collect sales tax on behalf of your state.
To start a wholesale business, you’ll need:
- an employer identification number (EIN);
- a sales license (resale permit, wholesale license, or other name depending on the state where your business is registered);
- sales tax permit and sales tax ID for your state.
Pros and Cons of Amazon Wholesale
Wholesale is a market-proven model that offers moderate risks, good profit and scale potential, and predictable cash flow. However, it has both benefits and downsides.
Quick and easy to launch
One of the benefits of wholesale is that you can launch it very fast. It takes around 6 weeks to set it up. The most effort- and time-consuming process is finding a supplier for your product and negotiating with them. Also, there’s certain paperwork involved. Typically, you’ll be able to get your first money in 3 months.
Many wholesale sellers on Amazon gain a profit margin of 30% and up. This is because they get a good per-item price from the brand or supplier. This results in a great return on investment (ROI).
With wholesale, you typically resell a popular brand or product. Naturally, you’ll avoid what doesn’t sell. Predictable sales history gives a clue as to whether the product will last in the market. Therefore, you can estimate its lifetime. This lowers the risk of losing money with unprofitable items.
Selling brands and getting approval to sell
Merchants selling one brand can often get an intellectual property rights claim. In addition to dealing with the claim itself, this typically means that you must delete the product and stop selling it.
When you have an agreement with the brand as a wholesale seller, you don’t have this risk.
Predictable cash flow
Once you select a product and conclude the agreement with the supplier, you have a consistent deal. You can easily replenish and restock your products. Since you’ve ensured that the product is in demand, you just proceed to sell and monitor the item's profitability. It provides predictable cash flow.
Wholesale business is easy to scale. Grow sales volumes, order more, and diversify your product portfolio.
Since wholesalers typically sell an already existing product on Amazon, they’re not alone on the listing. If there are only a couple of them, that’s your day. Therefore, when you do product research for wholesale, your target is to find a product with low competition. Remember that you need to sell a lot.
Considerable upfront investment
Most brands you negotiate with have minimum order quantities (MOQ). Some large brands can set it as high as $20,000! Luckily, not all of them have such limits. Typically, MOQ is around $1,000-2,000. Therefore, you need to be ready to put money in.
Selecting an unprofitable product means losing a fortune.
For wholesale, product research is even more critical than arbitrage. If you lose money on a couple of products, this is unpleasant, but that’s not the end of the day. But if you lose a lot on wholesale, that may seriously hit your business.
It’s a time-consuming model
Both product research and negotiation with supplier takes considerable time. However, it’s compensated by high profit.
Brand restrictions on Amazon
Amazon has a long list of restricted brands. You must remember that when selecting a product and check that in advance. However, the fact that the brand is restricted doesn’t necessarily mean that every product in the brand falls under restriction. Also, you can ask Amazon to ungate a brand for you.
Select the Right Supplier and Negotiate Until They Say “Yes”
After you’ve done your wholesale product research, you need to find a product supplier – a company to source your product. Since you’d like to have the best possible price, that should be either the brand owner or manufacturer.
If you’re going to talk to a huge brand and ask them to open a wholesale account, that’s not going to be easy.
There are many reasons for it. First of all, the big brands rarely sell their products themselves. They typically have a rigid reseller network and are reluctant to add new suppliers.
Secondly, they’re interested in the sellers that trade through multiple channels besides Amazon, like other platforms or brick-and-mortar stores. This is because they’re interested in growing their sales and not the number of sellers on Amazon that will, in their opinion, just grow competition, not quantities, and will simply add paperwork signing agreements and sending invoices back and forth.
Also, they’ll require references, resale certificates, agreements, and other guarantees simply because they have no idea who you are and may consider it risky to deal with another unknown Amazon seller.
Therefore, it’s critical to convince a brand that you will add value to their business and grow their sales. Also, you need to be ready to prove that you have vast experience in Amazon sales and will be able to sell volumes. That means you need to create solid cooperation, which takes time.
Use your negotiation skills. Never take “no” as an answer. Convince and prove that you’re the best candidate in the world to grow the brand’s sales. When you’re in, discuss discounts and better conditions.
In addition, you must be ready with a lot of paperwork with agreements and other formalities.
Tips to Making Money Selling on Amazon Wholesale
Here are several tips that will help you start and grow a wholesale business:
- register a professional seller account on Amazon — you can’t sell wholesale on an individual Amazon account;
- do Amazon wholesale product research and analysis — profitable product is key to success;
- make sure the product has sufficient sales potential - low and stable Best Seller Rank (BSR);
- see to it that the item has an average rating of 4 stars and up and a low number of negative reviews;
- ensure it has a good profit margin and low competition level;
- check that product is sold by Amazon and Amazon is not in the Buy Box;
- use product research seller tools for better and more efficient results;
- when contacting a supplier or brand, show them the benefits of cooperation with you;
- order product samples and test them before sourcing in bulk;
- check product quality certificates, logistics, shipping duration, return, and insurance policy;
- carefully account for all costs.
Related: Amazon Glossary for Sellers
Wholesale sales are a profitable model with moderate risks, good margin and development potential, and predictable cash flow.
The start is easy and fast, but you must invest considerable money upfront. With the right product and supplier, you can earn good money and scale it.
Seller tools can help you with these processes.
Seller Assistant App can immediately tell you if a product has any sales restrictions or has led to problems with account health in the past. It combines an FBM&FBA profit calculator, Quick View, Stock Checker, and Restrictions Checker in one tool.
Try Seller Assistant Аpp now. Register for our 14-day trial. Grow your Amazon business with confidence.