What is Amazon wholesale?
Amazon wholesale is an Ecommerce business model where branded products are sourced in large quantities and resold through the Amazon marketplace. Amazon wholesalers sell popular brand name products like Adidas or Dove. Wholesaling is the second most popular Amazon business model behind private label, with 26% of Amazon sellers using the strategy, according to JungleScout.
How does Amazon wholesale work?
Amazon wholesale works by buying products in bulk to drive down the cost per unit of each product. Then, you resell those products on Amazon for the higher retail market price to profit from the difference. You buy in bulk to "buy low" and sell each unit on Amazon for the going marketplace price to "sell high". A wholesale business gets access to wholesale products by opening wholesale accounts directly through brands or through wholesale suppliers. Usually, the higher the quantity of product units you order from the wholesale supplier, the lower your per unit cost will be and the higher the profit margin you can earn.
What is Amazon FBA wholesale model?
The Amazon FBA wholesale model is selling wholesale on Amazon through the Fulfillment by Amazon (FBA) program. An Amazon FBA wholesale business outsources operational aspects like inventory storage, product picking and packing, shipping, customer service, and returns processing to Amazon. A wholesale business using Amazon FBA essentially only needs to worry about wholesale sourcing and maintaining inventory levels at the Amazon warehouse, and Amazon handles the rest.
What is Amazon Business wholesale?
Amazon Business wholesale is another Amazon wholesale meaning where businesses buy wholesale products directly through Amazon's enterprise-specific marketplace. Amazon Business is an Ecommerce platform for businesses who need advanced business-related solutions beyond what the standard Amazon platform offers. Through Amazon Business, businesses can enjoy perks like wholesale pricing, bulk discounts, and multi-user account management.
Is Amazon a wholesale distributor?
No, Amazon is not a wholesale distributor. The wholesale buying opportunities on Amazon Business are through third-party suppliers in the Amazon Business Partner Network. These are major companies that join Amazon Business as sellers, like HanesBrands, in order to sell business-to-business (B2B) products.
Pros of Amazon wholesale
Branded products market themselves
It’s easier to sell products from an established brand that customers are familiar with, like Adidas or Sony. Why? Consumers already have experience with these brands. They know what they can expect for their purchase. In fact, many people seek out branded products directly. According to Marketplace Pulse, over 20% of Amazon searches include a brand name, meaning there are tens of millions of people looking specifically for brand name products on Amazon. Branded products have an existing demand on Amazon, so you don’t have to do any extra marketing to sell them.
Wholesale FBA
By choosing to sell wholesale on Amazon, you open your business up to the Amazon FBA program. FBA is one of the biggest Amazon wholesale benefits because it removes a large portion of the typical Ecommerce workload from your shoulders. The Amazon FBA program also attracts more Amazon Prime customers to buy from you because they get 2-day shipping.
Reliable inventory sourcing
You typically source wholesale products from wholesale distributors. Wholesale distributors have licensing agreements with brand manufacturers to source products in bulk and sell them to retail sellers. They keep massive quantities of product on hand to sell. By establishing partnerships with some high-quality wholesale distributors, your business can have a reliable and steady stream of products to resell.
Highly scalable
If you’re willing to reinvest your profits, Amazon wholesale is a very scalable business model. There’s no limit to the amount of products you can sell on Amazon and by reinvesting your profits into larger product orders, you can get even better profit margins. Furthermore, you can expand your product offering by finding more products in your suppliers' product catalogs or continue forming new supplier relationships to access new products.
Start selling relatively quickly
You can set up your business and start selling Amazon wholesale within six weeks, according to Repricer Express. Although it takes time to prepare your business and find suppliers, you don’t have to deal with the traditional headaches of bringing a product to the market, like extended manufacturing timelines, creating brand materials, or going through the trademark process.
Cons of Amazon wholesale
Expensive to start
In order to get the lower wholesale price for products, you need to buy products in bulk. Typically, wholesale distributors set a minimum order quantity (MOQ). The MOQ can range anywhere from 50 to 1,000+ units, depending on the supplier. Amazon wholesale costs around $3,000 to $5,000 to get started, according to Helium10. This should cover your first bulk order of products and other wholesale seller startup costs like business setup and product research tools.
Amazon gated brands and product categories
Unfortunately, you do not have permission to sell anything you want on Amazon. Selling products from some major brand names and product categories requires permission, if you are even allowed to sell them on Amazon at all. Amazon does this to protect its customers. It can require payment or building up a history of credibility to get ungated from a brand or category you want to sell in.
Difficulty getting accepted for wholesale accounts
To buy wholesale products, you need to open wholesale accounts with wholesale distributors. However, that’s easier said than done, especially if you’re just getting started. Wholesale suppliers are more inclined to build relationships with established retailers. Furthermore, many wholesale distributors will not work with Amazon sellers and those that will work with you will often require some convincing. Expect to get rejected by most wholesale suppliers you reach out to. Plan on calling hundreds just to open a few high-quality accounts where you can find profitable products.
Share a product listing with other sellers
Each product on Amazon has an identification number called an ASIN. Amazon limits each ASIN to one product listing to keep its massive catalog in order. Therefore, Amazon sellers with the same product share a single product listing. An Amazon wholesale business shares product listings because they sell branded products that are available to many other sellers. Sharing a product listing limits your influence over the product listing contents and increases your direct competition.
Competition for the Buy Box
The Buy Box is the default seller option an Amazon customer sees when looking at a shared product listing. If the customer clicks on the Buy Box, they buy from Amazon’s recommended seller and don’t see any of the other sellers on the product listing. The majority 83% of all Amazon sales go through the Buy Box, according to Repricer Express. If you choose the wholesale model instead of selling your own unique product on Amazon, expect to participate in an intense competition to win the Amazon Buy Box.
How to start an Amazon wholesale business?
1. Sign up for an Amazon seller account
To get started as an Amazon wholesaler, you first need an Amazon seller account. You can apply for a Professional seller account on Amazon Seller Central and get approved within 24 hours to two weeks. Taking this step first ensures you are eligible to sell on Amazon before wasting resources.
2. Set up an LLC and apply for a reseller permit
Next, set up an LLC or other legal business entity in your state of business operations. For those who have no permanent base in the United States, Delaware, Wyoming, and Arizona are popular options for business formation. An LLC is required to wholesale on Amazon because you need it to apply for a reseller permit in your state of business. A reseller permit enables your business to avoid paying sales tax when purchasing wholesale products. Most wholesale suppliers will also require you to provide your reseller permit information to open a wholesale account and get access to their products.
3. Contact distributors and open wholesale accounts
Once you sort your business documents out, begin contacting wholesale distributors. You can find distributors by browsing Google, searching online supplier directories like Alibaba, or attending trade shows. It's acceptable to use email for initial contact, but you’ll eventually need to talk on the phone with a sales rep. Use a spreadsheet software like Google Sheets to keep track of relevant supplier information, like:
4. Do product research to find a profitable product
After you get approved for a wholesale account, the supplier will either send you a spreadsheet with their wholesale product offerings or direct you to a webpage with those details. You need to browse through these supplier product lists and analyze profitability on Amazon. Successful Amazon wholesalers use tools to efficiently find wholesale product opportunities. The most common types of tools for Amazon wholesale product research include:
5. Choose your fulfilment method
Once you decide on a product and place your bulk order with the wholesale supplier, you need to choose who is responsible for getting those products to your customer. The majority 73% of Amazon sellers use Amazon FBA to fulfill orders. However, you can also do Fulfilled by Merchant (FBM) if you want to fulfill the orders yourself or outsource it to a third-party logistics company.
5 Actionable tips to be successful with Amazon wholesale
1. Add products on Amazon before placing bulk order
During wholesale sourcing, it’s best practice to add a new product to your Amazon product catalog before placing the bulk order. When you add the product, Amazon will tell you whether you are eligible to sell it. This avoids bulk ordering products you can’t sell.
2. Look deeper to find products not everyone else is selling
One of the biggest drawbacks with wholesale is that you face direct competition on Amazon with other sellers selling the same product. Instead of doing surface level product research, go deep. Use multiple strategies to find suppliers and don’t stop until each is exhausted. It will take some time, but working harder than other wholesalers to find suppliers and products that few others are using is how you find profitable products with low competition.
3. Be a good customer to your supplier
The wholesale industry is about building relationships. If you want suppliers to value you as a customer and give you the best prices possible, you need to put in the effort to establish and maintain good relationships. Regularly check in with your Amazon FBA wholesale supplier sales reps. Let them know about your operations, like when they can expect your next product order.
4. Don’t panic if your products aren’t selling
It’s common for new sellers to panic if their products don’t sell right away with this online business model. Many of these sellers jump to lower the selling price of the product, especially if the product price is going down. This is a big mistake when Amazon wholesale selling. You should have already done the research using an Amazon marketplace price tracker to know at what price you can sell your product for. Be patient and wait for the price to return to normal.
5. Reinvest profits to scale
The majority 72% of Amazon sellers make $0 to $25,000/month in revenue. However, 6% of Amazon businesses make an incredible $100,000 to $500,000/month! If you want to make good money with Amazon wholesale, reivest your profits to get larger product discounts and expand your product catalog.
Amazon wholesale FAQs
You get a wholesale account on Amazon by signing up for a seller account on Amazon Seller Central. There is no special Amazon wholesale account. You get the same Amazon seller account as any other third-party seller.
Yes, it is legal to resell wholesale items on Amazon. According to the First Sale Doctrine, if you purchase a product with a trademark, you have the right to resell that product.
Is Amazon wholesale profitable? You can make $0 to $5,000/month selling wholesale on Amazon, considering that most Amazon sellers make $0 to $25,000/month in revenue and wholesalers earn approximately 20% in profit.
How does Amazon wholesale compare to other Amazon business models?
Amazon wholesale vs private label
Amazon wholesale entails buying the branded products of other companies in bulk and reselling them on Amazon. In contrast, private label is putting your own custom branding on a manufacturer’s product to sell it as your own brand. Amazon private label sellers have their own unique private label product with its own ASIN and product listing.
Amazon wholesale vs dropshipping
The difference between Amazon wholesale and dropshipping is that dropshipping uses the supplier to fulfill orders. With dropshipping, you list products on Amazon you don't own. When a customer buys the product from you, you buy the product from the supplier and provide them with your customer’s shipping details so they handle shipping to your customer. Amazon wholesale requires you to secure products upfront before selling them, while dropshipping does not.
Amazon wholesale vs retail arbitrage
Whereas Amazon wholesale sellers source branded products in bulk from a wholesale supplier, retail arbitrage sellers get their products from retail stores like Home Depot and Target. Retail arbitrage makes money by finding products that are selling at a discount compared to Amazon in retail store locations and online, and reselling them on Amazon for the market price. When comparing Amazon retail arbitrage vs wholesale, wholesale usually has higher profit margins.
Amazon wholesale vs handmade
Amazon wholesale is selling products manufactured from popular worldwide brands, while Amazon Handmade is selling authentic handcrafted goods. Typical Amazon Handmade products include home decorations, jewelry, clothing, and artwork.
How does Amazon wholesale compare to local lead generation?
Amazon wholesale and local lead generation are both online business models. However, Amazon wholesale is Ecommerce and local lead generation is digital marketing. Whereas Amazon wholesale makes money by selling products, local lead generation makes money by helping small businesses to earn more profit and grow.
Local lead generation works by ranking websites for niche service businesses on Google in local markets. The purpose is to attract customers looking for a service, like lawn care or roofing, and connect them with a local business to perform the service. Because you’re getting them more customers, the local business will pay you hundreds to thousands of dollars each month to forward them the leads your website generates.
Local lead generation businesses can earn anywhere from $500 to $50,000+/month in profit, depending on how many websites and clients you have. Once you get a website to rank and find a local business to partner with, your local lead generation website makes you passive income.
