Is Amazon wholesale worth it? If you are looking to create an online income stream and have $10,000+ to invest, Amazon wholesale can definitely be worth it. This article discusses the pros and cons of Amazon wholesale, answers how much Amazon wholesalers make and how long it takes, and highlights why most sellers choose another Amazon business model instead. We also tell you how to save money by avoiding sales tax when buying wholesale products for your Amazon store.
Amazon wholesale isn’t the only business model you can use to create an online income stream. Local lead generation is another online business opportunity. With a local lead generation business, you help small businesses to find more clients. You accomplish this by creating websites to generate free traffic for their specific service niches. Both local lead generation and a wholesale Amazon FBA business can be worth it. It just depends on your business goals and preferences.
Is Amazon good for wholesale?
Amazon is good for wholesale because of its enormous customer base and the FBA program. With over 300 million active customer accounts, Amazon is the largest Ecommerce marketplace where you can reach the most potential buyers for your products.
The Amazon FBA program helps you satisfy your customers and makes your business operations much easier and more efficient. Running your wholesale business through Amazon FBA means Amazon takes care of inventory storage and shipping. Therefore, you don’t have to deal with the hassle of finding a place to keep your products and sending them out every time an order comes through. With an FBA wholesale business, Amazon also serves your shared customers by handling customer service and returns processing for you.
Pros of Amazon wholesale
Although wholesale is a common business model, it’s far from the most popular business model for Amazon sellers. In fact, the majority 54% of Amazon sellers do private label, while only 26% do wholesale, according to the 2023 State of the Amazon Seller Report by JungleScout. Private label and wholesale products are completely different from each other. Private label is generic products from China, whereas wholesalers sell brand name products.
Market demand for brand name products
Profiting from the market demand and consumer preference for popular brands is much easier than trying to sell a product customers aren’t familiar with. Most branded products already have extensive review counts on Amazon for customers to reference as well. Why create your own product when you can capitalize on the popularity of brands like Dove or Nike instead?
Your initial investment into an Amazon wholesale business can grow substantially. By reinvesting your profits back into the business, you can get better margins by purchasing larger product orders. There’s also endless potential to expand your product catalog with other products from your wholesale partner, or even form new partnerships with other wholesale suppliers to gain access to even more products to sell.
Reliable and convenient product stream
Unlike retail arbitrage, where you have to constantly be on the hunt for product opportunities, wholesale distributors provide you a steady stream of products to sell. Furthermore, most of those wholesale distributors with brand name products aren’t located far away in manufacturing hubs like China or India, they are in the United States. Therefore, you can source your products much more quickly and avoid international shipping costs.
Avoid marketing expenses
Amazon ads cost anywhere from $0.05 to $10/click and can be a major expense for Amazon sellers with their own branded products. Wholesale sellers don’t have to worry about that additional cost because they share their product listing with all the other Amazon sellers of that product and rely on the brand name for marketing.
Product listing taken care of (usually)
Setting up an Amazon product listing the right way requires knowledge of Amazon SEO and persuasive copywriting skills. It also requires periodic updates to ensure it stays optimized for visibility in the Amazon algorithm. As a result, most sellers that need to set up their own product listing end up paying a service or freelancer around a hundred dollars or so to write the listing for them. However, as a wholesaler selling the products of popular brands, the listing will already be created most of the time. You’ll be able to just hop on the listing with the other sellers of that product.
Cons of Amazon wholesale
The Amazon marketplace is saturated
As an Amazon seller, you’ll be competing against 2 million active sellers and upwards of 350 million products listed in Amazon’s product catalog, according to Repricer Express. With such substantial competition, long-term success on Amazon can be difficult to achieve, even for top sellers on the platform. In fact, Amazon FBA service Just One Dime notes that approximately 5% of leading Amazon sellers leave the platform each year, leading many to wonder if Amazon FBA is still worth it.
Getting stuck with excess inventory
Wholesale requires you to spend money to obtain inventory in bulk. Occasionally, wholesalers can get stuck unable to sell that inventory. Maybe Amazon suspends your seller account, or another wholesaler comes onto the platform with a lower price for customers. There are many scenarios that could result in you getting left with inventory you can’t sell or have to sell at a loss.
Difficult to get accepted for wholesale accounts
To get wholesale products, you just need to open a wholesale account with a wholesale supplier. Finding wholesale suppliers is easy, but getting them to accept you can be challenging. You’ll find many wholesale suppliers won’t sell to you unless you have a track record of success. You’ll also find that many wholesale suppliers aren’t interested in partnering with Amazon sellers for various reasons.
In an interview with Fields of Profit, wholesaling expert Mike from One Up FBA noted that even his established wholesale business only gets accepted for wholesale accounts for 5% to 10% of all the wholesale distributors they call.
Time-consuming product research
Once you are accepted for a wholesale account, you need to determine if the wholesale supplier carries any products that you can competitively sell on Amazon. They’ll either send you a spreadsheet with all the items they carry and their pricing or provide you a website link to their product catalog. You can spend considerable time looking through their available products and analyzing the wholesale selling potential only to determine the supplier doesn’t carry anything worth selling.
Amazon restricted brands and categories
Even if you do find an item from a wholesaler that has the right variables to be a profitable product for your FBA business, you may not be able to sell it. Amazon has many restricted brands and gated categories that require you to obtain permission before you’re allowed to sell them on Amazon. According to Amazon seller tool Helium10, some sellers have even reported that certain brands require a fee to sell on Amazon, ranging from $1,000 to $5,000.
Competition for the Buy Box
As a wholesale seller, you share product listings with other sellers of the same product and compete for sales. The majority 83% of Amazon sales go through the Buy Box on a shared product listing, according to Repricer Express. The Amazon Buy Box is the white box displayed on the side of a product’s detail page as the recommended default seller for customers to purchase from. All the sellers on the product listing, therefore, compete to be listed as the Buy Box seller.
How much does it cost to sell wholesale on Amazon?
It costs between $3,000 to $5,000 to sell wholesale on Amazon, according to Helium10. However, that’s just considering the costs of product research, purchasing products in bulk, and Amazon FBA seller fees. Amazon FBA wholesale businesses must also consider the costs of business setup and obtaining the proper licenses for wholesaling. These costs depend on which state you're running your businesses from. They can range from a few hundred up to a thousand dollars.
Is LLC required for Amazon wholesale?
An LLC, or other legal business entity, is required for Amazon wholesale because you need to own a business to obtain a reseller permit from your state. A reseller permit, also known as a wholesaler license or seller’s permit, allows you to buy wholesale products to sell at retail price, without you needing to pay sales tax when you purchase the products. Without a resellers permit, you’d have to pay sales tax when you buy the products and your customer would also have to pay sales tax when they buy from you.
Usually, you’ll also be required to enter your reseller permit information when you apply to open a wholesale account with Amazon FBA wholesale suppliers. Therefore, if you want to be able to buy wholesale products, you’ll need an LLC or other business entity like S-Corp or C-Corp.
How profitable is Amazon wholesale?
Amazon wholesale can be very profitable. You can earn anywhere from 10% to 50% profit margin on each sale, according to Helium10. Your profitability depends on factors like your supplier relationship, the size of the bulk order quantity you're capable of ordering, and the amount of competition on Amazon that also sells your product.
How much can beginner wholesalers make on Amazon?
Beginner wholesalers can make between $250 to $1,000/month in profit. Many beginner wholesalers start selling wholesale on Amazon with around $5,000 to invest in products. After considering Amazon selling and FBA fees, a beginner wholesaler can realistically earn a 10% to 20% profit margin on each sale. If you find a suitable product opportunity that allows you to sell out of your products in a month or two, your business can make some nice profits that you can reinvest back into the business to scale.
Can you get rich off wholesaling on Amazon?
No, you can’t get rich off wholesaling on Amazon. There are just too many sellers competing for the same sales to allow a single reseller to become wealthy with the wholesale model. Even so, Amazon is still good for wholesale and you can make a pretty decent income as according to JungleScout, 61% of Amazon wholesalers make at least $5,000/month in sales. You probably won't become wealthy from Amazon wholesale, but you can make money online from it.
How long does it take to start an Amazon FBA wholesale business?
It takes at least six weeks to start an Amazon FBA wholesale business, according to Repricer Express. Most new Amazon seller accounts are approved within 24 hours through Amazon Seller Central, and you can set up an LLC online within two weeks. Most states can issue your reseller permit within a few weeks as well.
From there, the traditional workflow is that you find a wholesale distributor to supply your products. However, many sellers also use reverse sourcing wholesale, where they spend up to a month doing product research to find a suitable product opportunity on Amazon and then find a wholesale supplier with that product. Since most wholesale suppliers will be located in your domestic market, you usually don’t have to wait for long international shipping times. Once you settle on the right product, you can have Amazon pick up the products from your supplier to be taken directly to the Amazon warehouse so you can start selling.
How long does it take to make a living selling wholesale on Amazon?
It takes between 1 to 2 years or more to make a living selling wholesale on Amazon. However, that number really depends on how much you have to invest in products when starting your business and how much of your profits you reinvest into your business.
According to First Republic, the average US household spends approximately $5,111/month. If you start your business with $20,000 to invest in products and average an Amazon FBA wholesale profit margin of 30%, you can make $6,000 in profit from your very first order and so make a living right away. If you only have $3,000 to invest in products, you’ll only make $900 from the same 30% profit margin on your first order. You’ll need to reinvest all your profits for the first few years of your business to grow it to the point that it makes enough profit to comfortably live from.
Is Amazon wholesale hard?
Amazon wholesale is not hard. Although it’s generally harder than starting as a retail arbitrage seller, it’s much easier than bringing your own private label product onto Amazon. Aside from setting up a business and getting approved for wholesale accounts, wholesaling on Amazon is fairly straightforward. You don’t have to deal with any branding or marketing, and Amazon FBA does all the fulfillment and logistics work for you.
On the other hand, a private label seller has a lot of extra steps, like creating a brand, comparing samples from manufacturers, dealing with international shipping and import duties, and learning Amazon PPC advertising to promote products. Amazon wholesale is also much simpler and more cost-effective than a brick-and-mortar wholesale business as well. With an Amazon wholesale business, you don’t have to worry about things like renting retail space and hiring staff to assist customers, like you would with a physical store location.
Why most Amazon sellers don’t choose wholesale
Most Amazon sellers choose private label over wholesale because being a brand owner has many benefits compared to being an Amazon reseller. If you have an Amazon business with your own established brand, you can:
- Access the Amazon brand registry - The Amazon brand registry helps you scale your business by protecting your product listing from other sellers. It also allows you to enhance your product listing beyond the standard listing with more details, images, and videos for customers to make buying decisions.
- Earn larger profit margins - There’s no race to the bottom with prices like what occurs when selling wholesale items and competing for the Buy Box on a shared listing, so private label sellers often earn higher profit margins.
- Avoid being cut out as the middleman - When you sell other brands' products, they can easily cut you out of their business if they want to. A brand you’re working with could decide they only want to let one reseller wholesale their products or just do it themselves.
- Sell your business for a substantial sum - With the wholesale model, there’s not much value in your business if you decide you want to step away. As a private label seller with a branded product and established supply chain, you can sell your business for between 20x and 30x your monthly net income, according to Net Media Focus. Therefore, if your private label business makes $25,000 net income each month, you can get up to $750,000 for selling your business!
Is selling wholesale on Amazon worth it?
Amazon wholesale is worth it for many people. It’s a business model that can allow you to make a stable income online without too much hassle. If you want to get into Ecommerce but aren’t ready to bring your own product to market just yet, Amazon wholesale is a great starting point. However, Ecommerce on Amazon is tremendously competitive and unless you’re making money through the Amazon Associates program, there’s not much opportunity for truly passive income.
If you’re interested in making passive income through an online business, local lead generation is an excellent alternative opportunity to consider. With local lead generation, you don’t compete with millions of sellers like you do on Amazon, you just compete with a handful of small businesses in a local market. Because the competition is much lower, you can achieve some incredible results in a short period of time. A single local lead generation website can generate up to $3,000 in passive income each month, and there’s unlimited potential to grow your business with many websites. Whether you choose Amazon wholesale or another online business opportunity, making money online opens your world to many freedoms and is a goal worth pursuing.