The global economy has declined greatly and jobs are becoming more difficult to come by. As a result, more people are delving into the eCommerce space and starting online businesses for passive income. Starting an online business post-pandemic is one of the best decisions anyone can make and Amazon has been rated as one of the best places to sell. This is not only because of the vast customer base but the ease of entry that the platform provides for aspiring entrepreneurs. AMZ offers several business models for sellers who want to join the marketplace and the Amazon wholesale business model is one of them.
Amazon has a large customer base of about 300 million customers and not all these customers are interested in the same kind of products. Some of them want to buy in bulk, while others just need a drop-shipper. The Amazon wholesale business model was designed to cater to shoppers who want to buy products in bulk without having to contact manufacturers directly. In this post, we will tell you all about this business model; how it works, and how you can get started selling wholesale on Amazon in 2022.
Let’s get right into it.
What Does It Mean To Sell Wholesale On Amazon?
Wholesale is a business model where sellers buy products in bulk from suppliers. After buying, wholesalers resell these products to AMZ shoppers. Some shoppers buy in relatively large quantities to resell (online arbitrage).
How Does Selling Wholesale on Amazon Work?
Setting up your Amazon wholesale business is not difficult. You can start and scale your wholesale business in no time with these steps.
- First, set up your seller account here
- Next, research profitable products for your store
- Once product research is done, source your products from genuine suppliers
- Create and optimize your product listings
- Launch and actively promote your products.
- Manage your business processes
Like every other business model, AMZ has some requirements that you must provide before setting up your wholesale business. These requirements include getting a business license, a tax-exempt form, or other documents. Be sure to find out what documents you’ll need, depending on your location and have them ready before setting up your account.
Scaling an Amazon wholesale business is not a walk in the park, especially if you’re new to the marketplace. Thankfully, most of the business processes can be automated using AMZ software. Choosing the best AMZ software for your business may, however, be difficult because there are several options. But there’s one that we recommend and if you read to the end, you’ll learn all about it.
How Does The Amazon Wholesale Business Differ From Other Models
There are so many AMZ business models available and most of these models seem very alike. So you should study these business models properly before deciding to use them. Many sellers assume that the Amazon wholesale business model is the same as retail arbitrage or dropshipping. Although these models have similarities, they operate differently. To clear your confusion, we have compared these business models and highlighted the differences. Here you go:
Wholesale vs Arbitrage
People who sell wholesale on Amazon buy in bulk from manufacturers. In contrast, arbitrage sellers buy in smaller quantities from walk-in or online retail stores. So, wholesalers have direct contact with the suppliers and they can negotiate prices while retailers have no contact with manufacturers.
In summary, wholesalers buy in bulk and resell to retailers while arbitrage sellers buy in smaller quantities and resell to individual customers.
Wholesale vs Drop-shipping
Drop-shipping and wholesale may sound alike but they have almost nothing in common. Drop shippers list products for sale on Amazon and have them shipped to the customer. In other words, drop shippers only serve as middlemen so they have no direct contact with the inventory.
In contrast, wholesalers are in charge of their inventory. Hence they are responsible for shipping orders to retailers who place them.
Wholesale vs Private Label
Wholesalers buy existing, already-branded products in bulk from manufacturers. In contrast, private label sellers brand their products themselves. Since wholesalers sell already branded products, they do not need to create new listings to sell on AMZ. Private label sellers, on the other hand, will have to set up new listings to sell their products on Amazon.
Pros and Cons of Using The Amazon Wholesale Business Model
Like other business models, the Amazon wholesale business model comes with its good and bad sides. So, if you’re considering setting up an AMZ wholesale business, you should take both sides into consideration. To make this easier, we have outlined the pros and cons.
- In-demand Products
If you decide to use this business model, you can leverage well-known brands. In other words, you can sell products that already have existing demand. Since these brands already have an audience, you will not have to spend too much on promotions.
- Restocking Inventory Is Quite Easy
With wholesale, you sell existing, in-demand products, so you can avoid running out of stock. You also won’t have to worry about manufacturing products back to back. The products have been manufactured, all you have to do is make new bulk orders when necessary.
- You Can Get Your Brand Approved On AMZ
Getting Amazon’s brand approval is not easy. But as a wholesaler, you can get this approval quite easily. This places a distinct mark on your brand and can attract buyers to your store. As a result, you can be sure of sales even if you increase your price.
- Easy To Set Up
Not all AMZ business models are easy to set up. Private label, wholesale, and retail arbitrage are the most used models. 67% of AMZ sellers use the private label, 26% use wholesale and 19% use retail arbitrage, and the wholesale model is rated one of the easiest business models to set up on AMZ.
- Easy To Scale
Amazon businesses can be very stressful to scale, but a wholesale business is relatively easy to scale. You can also automate the important business processes and focus on other aspects of your business. Also, you can maximize Amazon FBA for order fulfillment.
- Highly Competitive
Since the wholesale business model is easy to set up, many new sellers opt for it and as a result, the wholesale market on AMZ is highly competitive. Plus, you’ll have to dedicate a lot of time to product research if you want to discover profitable, in-demand products.
- Start-up Capital
As a result of the amount of inventory required, this business model requires huge capital investment and this can be risky for sellers who are unsure of the demand for their product. If you don’t make enough sales to recover your capital, you will have to bear the losses.
How To Scale An Amazon Wholesale Business
Research The Best Products To Sell
Do not compete with Amazon directly; if AMZ already sells a product, it is in your best interest to avoid selling the same product. This is because AMZ is a big brand and can be a threat to your business especially if you’re just starting.
Also, when choosing products for your store, try to avoid private label products because private label sellers also won’t let you list their products without permission. So, your best bet is to find new in-demand products with less competition. Consider selling wholesale of products from well-respected brands. If you do this, you won’t have to worry about creating awareness about the products.
Choose products with the following criteria:
- Least price of $20
- At least 10 sellers and 10 product reviews
- At least 300 estimated monthly sales.
To save time on product research, you can use AMZ software like ZonBase. Keep reading to learn more about ZonBase.
Determine The Product’s Profitability
The goal of selling is to make a profit, but making a wild guess and choosing a random product doesn’t guarantee profitability. If you’re serious about making a profit on Amazon, you will have to dedicate time to estimating products profitability.
Here are a few ways to estimate a product’s profitability.
- Fix your product’s price within 2% of the buy box, this will help increase your chances of winning the buy box. If your product is priced at a relatively higher mark, you may not be able to win the buy box.
- Take account of the fees involved. Amazon’s fees are quite unpredictable especially if you opt for FBA. So, ensure you make a good estimate of the costs involved. It’s best to use an FBA calculator for this.
- Estimate the product’s sales potential. You can use a sales estimator tool for this. One way to do this is to divide the figures you get from the tool by the number of sellers on the listing. So, what if a product does 2000 in sales per month and there are 4 sellers on the listing?
Here’s how the math goes: 2000/(4+1) = 400 sales per month. We added an extra one to the number of sellers as this will be the new total if you list the product for sale too.
Having done all these, how do you determine profitability?
First, subtract AMZ’s fees and total product cost from your sales price. If your numbers look good, then the product is good to go.
The next hurdle you will have to scale after picking a profitable product is to find a genuine supplier. This is a crucial step because if you do not source products from authentic suppliers, you may end up getting bad reviews or ratings. And bad customer reviews may lead to a decrease in sales and by extension, inevitable losses.
Now that you know how important it is to find genuine suppliers, how do you go about it? Use AMZ software that helps with supplier research. With ZonBase’s hot products tool, you can access a list of authentic suppliers for your product. Also, since you’re selling wholesale and buying in bulk, you’re more likely to get discounted deals. Some manufacturers will even ship to Amazon on your behalf.
Getting in touch with a brand after you’ve decided to stock their products is not so difficult, you can contact them by searching for their websites online.
Amazon Fulfillment Options For Wholesalers
After sourcing products, the next thing is to put them up for sales and ship orders as they come in. As soon as you have created your listings and optimized them, you can expect the sales to roll in. However, one challenge that sellers face once orders start coming in, is order fulfillment. AMZ has provided two fulfillment options to help sellers handle this aspect of their business, but it’s still up to you to decide which fulfillment option works best for you. You’ll have to choose between Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM).
- Fulfillment by Amazon
Using this option allows you to outsource some fulfillment processes to AMZ. Amazon will store, package and ship your orders. They will also provide 24/7 customer service and manage returns for you. This allows you to focus on managing your business and ensuring that your inventory doesn’t run out.
- Fulfillment by Merchant
Here, sellers are responsible for managing all business processes; storage, fulfillment, and customer service. So, if you choose this option, you will have to store, pack, and ship products yourself and the burden of customer service and return management will also be on your shoulders. You’ll also have to bear the cost of warehousing and shipping and this can drain your finances if you haven’t yet found your feet in the marketplace.
As a wholesaler, you will be dealing majorly with bulk orders. So, you will need a large warehouse to store your products. You will also need to ship orders promptly. This may be a bit costly because some retailers order relatively large quantities. So what’s the best option for you?
Since AMZ has a large warehouse and can afford to ship your orders quickly, using FBA is your best bet as a wholesaler especially if you manage other tasks. With FBA, you can leverage AMZ’s large storage space and fast shipping system. You also won’t have to worry about customer service and return management. The service is very helpful but it is not free, you will have to pay certain fees.
How ZonBase Can Help With Scaling an Amazon Wholesale Business
It is almost impossible to build a profitable wholesale business without adequate product research, keyword research, and listing optimization. All these business processes are essential but they can also be time-consuming. So, automating your business processes is important if you want to get outstanding results and free up time for other tasks. Using AMZ software is the best way to automate product research, keyword research, and listing optimization and still get great results.
There are several AMZ software available on the market right now, so it may be difficult to choose one. But you won’t have to struggle with this, here’s one that we can trust.
ZonBase is the best AMZ software for business automation. The software offers 14 tools for sellers who want to scale their businesses and these tools cover all business processes from product research to listing optimization. In addition to product research, keyword research, and listing tools, the software also offers a sales estimator, profits, and photo enhancer tool.
Apart from these mind-blowing tools, there is a mentorship package included. New and existing sellers who sign up for the mentorship package will have access to a team of AMZ experts who will provide expert guidance and assistance.
The software is available on a 7-day free trial after which you will have to upgrade to a paid plan. There are two paid packages available and the prices are very affordable. Sellers who are on a budget will get great value for money using ZonBase. Ready to scale your wholesale business? Sign up for a 7-day free trial.