Is Amazon Wholesale Profitable? | 3 Factors Causing Wholesalers To RETHINK Amazon

December 16, 2023

Is Amazon wholesale profitable? Wholesale is one of the most profitable selling opportunities on Amazon. A typical gross profit margin for an Amazon business using the wholesale model is around 50%, according to Amazon guru Steve Chou of My Wife Quit Her Job. However, wholesaling on Amazon is not as profitable as it was previously. Various factors like increasing Amazon fees are causing wholesalers to rethink Amazon. If you plan to start a wholesale business, you must know how much money you can expect to make. The amount is less than you might expect. Sometimes, product sourcing tips make all the difference in building your Amazon wholesale profits.

Amazon wholesale isn't the only profitable online business opportunity in 2024. Local lead generation is another business model where you make money online by helping businesses get more customers. A local lead generation agency uses SEO to rank websites on Google to attract customers for a specific service in a specific location. You then sell those leads to a local business who can perform the service for the customer for $500 to $3,000/month! 

Is Amazon FBA wholesale still profitable?

Amazon FBA wholesale is still profitable. In fact, Amazon FBA wholesalers make between 15% to 20% net profit margin per product, according to JungleScout. However, Amazon FBA wholesaler profit margins are decreasing. There are 3 main factors causing this decline, and many additional variables supporting this unfortunate trend. 

Why are Amazon FBA wholesale profit margins decreasing?

1. Amazon seller fee increases

Amazon has gradually increased third party seller fees over the years. In fact, the percentage of an Amazon FBA wholesaler’s revenue that goes to Amazon fees has risen a whopping 40% in just the last five years, according to Marketplace Pulse. Currently, Amazon fees eat up over 50% of a FBA wholesaler’s revenue.

2. Rising popularity of arbitrage selling

Over the last few years, more third party Amazon sellers are opting for retail arbitrage and online arbitrage. Between 2020 and 2022, retail arbitrage rose from 19% to 25% of Amazon sellers. Online arbitrage rose from 17% to 24% in the same period, according to JungleScout. These business models entail selling branded products on the Amazon marketplace, just like wholesalers do. Therefore, the rise in popularity of arbitrage sellers has further saturated the market for branded products on Amazon. That means more sellers competing on the same product listings. Higher competition leads to lower margins as sellers try to attract customers by offering the lowest price. 

3. Lack of wholesale product sources 

Wholesaling has been one of the most popular business models on Amazon for many years. As such, most easily accessible domestic wholesale suppliers have already been contacted by Amazon sellers. Although these wholesale supplier options would be happy to sell their products to more Amazon wholesale businesses, adding more sellers of the same product on Amazon negatively affects profitability for everyone. 

Because domestic wholesale suppliers have many Amazon sellers that want to work with them, they aren’t as inclined to provide discounts to incentivize buying from them. This further limits an Amazon wholesaler's ability to improve their profit margins. Unfortunately, the popularity of wholesale on Amazon hasn’t helped to increase the quantity of wholesale suppliers either. According to IBIS World, the number of wholesale suppliers in the United States has slightly decreased by -0.2% in the last five years. Therefore, supplier and product options for wholesalers are stagnant. 

How much can you make with Amazon FBA wholesale?

Despite lower profit margins, Amazon wholesalers still make great income through the platform. You can make between $1,000 and $50,000/month in profit with Amazon FBA wholesale. The majority 53% of Amazon sellers make between $5,000 and $250,000 in revenue per month, according to JungleScout. Considering that a typical Amazon FBA wholesaler has a profit margin of around 20%, many Amazon wholesalers are making thousands of dollars in profit each month from their wholesale business.

How much does it cost to wholesale on Amazon?

It costs $39.99/month to wholesale on Amazon. $39.99 is the cost of the Professional account in Amazon Seller Central, which allows you to sell your wholesale products to Amazon’s customer base of 300 million active users. The Professional seller account allows you to sell unlimited products through Amazon. It also enables you to apply to wholesale products from restricted categories and brands. The products of many popular worldwide brands like Adidas and Crayola are restricted on Amazon. So, you need to seek approval from Amazon before you can sell them.

What fees does an Amazon wholesale business pay? 

Although the Professional seller account gives you access to sell on the Amazon marketplace, it’s not the only money you’ll pay when selling wholesale on Amazon. 

Referral fees

Amazon takes a percentage fee of the total price when you sell a wholesale item. The percentage they take depends on your product’s category. The referral fee for a wholesale seller ranges from 8% to 17%. For example, Amazon takes a 15% referral fee for products you sell in the Footwear category. 

FBA fees

If you want to outsource fulfillment aspects of your business like inventory storage, shipping, and customer service to Amazon, you’ll have to pay Fulfillment by Amazon (FBA) fees. The majority 73% of Amazon sellers use FBA because it can save costs and improve opportunities on the platform. Therefore, it's likely you'll also operate as an Amazon FBA wholesale business. 

FBA fulfillment fees

You incur FBA fulfillment fees when Amazon ships your product from the Amazon warehouse to the customer. These fees depend on the category of the product, the dimensions, and the weight. For example, Amazon will charge you a fulfillment fee of $5.40 to ship a non-apparel product that has dimensions between 15” x 12” x 0.75” and 18” x 14” x 8” and weighs between 1 to 1.5 pounds.

FBA storage fees

You incur FBA storage fees each month for storing products in the Amazon fulfillment center. The amount of FBA storage fees Amazon charges you depend on the daily average volume of products you have in Amazon’s warehouse and which month it is. October through December are peak selling season. Amazon charges storage fees about 3 times higher during those months than the rest of the year. For example, a standard size product costs $2.40 per cubic foot each month during December but only costs $0.87 per cubic foot in January. 

If your wholesale products stay in the Amazon warehouse for over 180 days, Amazon will charge you an additional aged inventory fee. As of April 2023, Amazon wholesalers are assessed an additional inventory fee ranging from $0.50 to $6.90 per cubic foot, depending on the product's storage length.

Fee to access some gated brands

According to some Amazon sellers and Helium 10, it can cost up to $1,500 to get ungated to sell the product of an established brand.

How to find profitable Amazon wholesale products?

  1. Start with Amazon product research - Performing comprehensive product research is the first step in finding a profitable wholesale product idea. This is important because it helps you determine what kind of products are selling well on Amazon and where you can be competitive. The Amazon Best Seller page is a free method for seeing hot products. However, many Amazon wholesalers find it beneficial to use a paid product research tool like JungleScout. Product research tools provide access to advanced data and insights to see trends on Amazon and to make informed seller decisions. 
  2. Contact wholesale suppliers - Once you have an idea of what kind of products you can profitably sell on Amazon, you need to open a wholesale account with a wholesale supplier to access discounted products. The more wholesale accounts you open, the greater your chances of finding a profitable product to sell on Amazon. In fact, you’ll have to contact many suppliers if you want to find profitable products because most wholesale suppliers won’t work with you. To give yourself the best opportunity at finding a profitable product, Amazon FBA guru Marvin Leonard recommends contacting 50 to 100 wholesale suppliers every week.
  3. Analyze wholesale supplier lists - Each wholesale supplier you open an account with will provide access to their list of products. Many people doing wholesale selling on Amazon use a list scanner tool like ScanUnlimited to quickly determine if the wholesaler has any profitable products they can sell on Amazon.
  4. Calculate profit potential on Amazon - When you find a potential wholesale product, you can use the Amazon Revenue Calculator to estimate your profits when selling the product through the Amazon FBA program. 

Where to find Amazon wholesale suppliers with profitable products?

  • Online wholesale directories - Websites like SaleHoo, Inventory Source, and Alibaba contain thousands of wholesale suppliers. 
  • Trade shows - Large scale trade show events like CES are a great way to meet suppliers in-person and see some of their products up close. 
  • Direct contact with brands - If you want to work with a specific brand, you can contact them to see where to obtain their products at wholesale. Sometimes, you can even order wholesale directly from the brand.
  • Search Google - The world's #1 search engine is a powerful tool to find a profitable product. You have more freedom to use unique keywords to generate different results based on the niche and location you're searching. 
  • Industry trade publications - Amazon wholesalers operating in a specific industry can benefit from subscribing to that industry's newsletters and magazines. Trade publications offer up-to-date supplier contact information and news about the latest products. 
  • Local business networks - Joining a local professional network like your city's Chamber of Commerce can provide you referrals to wholesalers and expert advice on dealing with them.
  • Research business directories - These online databases contain profiles for many wholesale suppliers in North America. Many public libraries pay a monthly subscription for their members to access these directories for free. 
  • US customs database - You can use a resource like the PIERS database to see which companies are importing and exporting products from the US. This paper trail can allow you to discover wholesale suppliers with less competitive products for Amazon. 

Where can you learn how to be a profitable Amazon wholesaler?

You can learn how to be a profitable Amazon wholesaler from one of the many Amazon wholesaling courses available online, like The Wholesale Formula. These courses can teach you everything from how to find an Amazon FBA wholesale supplier to how to handle inventory management for your Amazon store. There are also plenty of free resources for learning the basics of Amazon wholesale online.

Is Amazon wholesale the most profitable business model on Amazon?

Amazon wholesale is not the most profitable business model on Amazon. When comparing Amazon wholesale vs private label, a private label product typically has a higher profit margin than a wholesale product. While an Amazon wholesaler can expect around a 20% profit margin, a private label seller can get double that at up to 40% profit. Private label sellers list their own branded products on Amazon, so they have more control over the price they charge and profit margin on each sale. They don’t experience the downward pricing pressure that occurs when directly competing with other sellers for sales on the same product listing. 

Is it worth selling wholesale on Amazon?

So, is Amazon wholesale worth it? It is worth selling wholesale on Amazon if you want to make money online by selling physical products and have $3,000 to $5,000 to invest, but don’t want the hassle of creating your own branded product. Even though there are challenges, the Amazon FBA wholesale business model allows you to make money online by selling products another company created using Amazon’s systems to fulfill customer orders. If you can find a handful of profitable products, Amazon wholesale can provide a solid income. 

However, the failed product launches and constant rejections from suppliers that come with Amazon wholesale aren’t for everyone. Many digital entrepreneurs prefer local lead generation as an alternative to Amazon wholesale. Setting up a local lead generation website is cheap compared to the cost of placing a bulk product order. Furthermore, you only have to communicate with a limited number of local business owners to make money as opposed to hundreds of wholesale suppliers from all over the nation. Regardless of which online business model you choose, deciding to create an online income stream is one of the best decisions you can make.

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