One of the best ways to make money on Amazon FBA is to become a wholesale seller. Previously on other blogs, we mentioned other types of sellers like private label sellers, retail arbitrage and online arbitrage. An overlooked avenue for sales on Amazon is to get into wholesaling. Out of the 2 million sellers that currently sell on Amazon, 26% of them are wholesale sellers.
Wholesaling is very similar to retail and online arbitrage, but the seller focuses on selling a large quantity of products. Instead of selling a lot of unrelated profitable products, the seller focuses on building a small catalog of high selling, large quantity items. To get started wholesaling, you’ll likely need some business verification like business address, EIN numbers, etc. to work with some suppliers.
If you are a brand new seller, it’s best to start with retail arbitrage and work your way up to wholesale. Once you are ready to start wholesale, you can use this blog as a reference to find some potential suppliers.
Why do you need to find good wholesale suppliers?
When you think of a wholesale supplier, you generally have an idea of a big warehouse that sends and receives large boxes and shipments. Even if a supplier looks legit, they may not be the best one for you. When talking about a “good” wholesale supplier, I’m referring to one that works well with your Amazon business.
Good wholesale suppliers often have branded, high selling items and are open to working with third party sellers like you. Here are some of the key reasons why you need to find a good wholesale supplier.
Many “wholesale” suppliers are not actually wholesale, they are smaller businesses that are acting like wholesalers. A real wholesale supplier gives you low prices on a variety of products. The cost structure that a supplier provides you can significantly impact the profitability of your business. Many wholesale suppliers have branded products that sell well on Amazon at very affordable prices.
Some suppliers are the actual manufacturers of a product and they can offer the best prices on the market. Many sellers rush to look at international suppliers, but it’s extremely important to mention that any branded products being sourced overseas have a high likelihood of being counterfeit. Selling any counterfeit items on Amazon can get your account suspended.
Finding a reliable wholesale supplier will give you a huge competitive advantage. The average wholesale product on Amazon has several sellers that list their products on there. Some sellers are retail arbitrage sellers that have a few products and some can be wholesale sellers. If you have access to a low cost and reliable supplier, you can get the lion’s share of sales of a given product.
This allows you to always be in-stock and make sales. Additionally, you will likely have the best offering since you get your products directly from a supplier. The only way another seller can compete with you is if they also have access to a supplier and they purchase a large quantity of products. Besides that, you are likely to make the most sales on a product if you go wholesale.
A quality wholesale supplier can reduce the burden of your shipping and inventory management. When you first get started wholesaling, you should have the product shipped to you so you can verify the quality before sending it to Amazon. Once trust has been established between you and the supplier, the supplier can ship directly to Amazon FBA for you.
You won’t have to store, ship or touch the products because they are going from your supplier’s warehouse to an Amazon warehouse. This allows you to scale your revenue without having to buy or rent space for your Amazon business. You can literally end up selling thousands of products remotely without ever handling returns, customer service, etc. This is a very lucrative opportunity if you work with a high-quality supplier.
What is the process of finding a wholesale supplier?
Finding a good selling product:
Now that we’ve covered the importance of finding a quality supplier, how do you actually find one? First, you need to find a good product. There’s no use in finding the best supplier in the world if their product is not selling on Amazon. You’ll need to do some product research to ensure that a product is in demand before looking for wholesale suppliers. You can do this using free tools like JungleScout estimator or any other tools you might be using. In the product research stage, you should be looking for demand for a product.
A good metric to gauge demand is the sales per month of a product. In the example below, you can see the monthly sales for a toy that has a best sellers rank of 150,000. As you can see, it averages 60 sales per month. If there are 4 sellers on that listing, you can estimate you’ll get 15 sales per month on that product. There are other factors that can influence the sales percentage per seller like if someone has the buy box or if you’re the only FBA seller.
Check price history:
Looking at the average sales per month alone isn’t good enough to invest in a wholesale product. The best sellers rank of a product is not a static metric, it changes based upon the sales volume of a product. A product that has a 50,000 best sellers rank that’s selling hundreds of products per month can have a rank of 200,000 in a few weeks.
This is because there’s a lot of factors that can affect the sales of a product like seasonality, holiday shopping and more. An efficient way to check the stability of a product is to check its history with Keepa. Keepa is a tool that can show different metrics of a product like sales rank, price, etc. over a long period of time. You can go to Keepa.com and search for the product you’re interested in. Once a product comes up, you will see a graph like the one below.
On the right side of the graph, you’ll see different colors. Each color represents a different data point like Amazon’s price for a product, different sellers’ prices for a product, price differences between used and new products and more. If the sales rank and price are stable over a long period of time, it’s likely a good product.
If you see that Amazon is selling the product, don’t even think about it. Amazon has access to the manufacturers of the product and their AI will do a price war with you until you lose money on the product. It’s much easier to compete with other sellers because they have limited quantities and since you’re getting your product from a manufacturer, you’ll have better profits.
Once you’ve found a good stable product that’s selling well with low to medium competition, it’s time to start looking for a supplier for your product. There are many resources on how to find a good supplier, I’m going to cover some of the best practices below:
Contact brand directly:
Contacting the brand is one of the best ways to become a legitimate distributor of that product. When you find a product you like, contact the brand on their page. Some brands have a “become a distributor or supplier” section on their site and you can fill an application. If there’s no such section on their site, you can get a contact email from their site. Once you get the email, you can send an email talking about how you want to sell their product.
It’s important to be as professional as possible to increase the likelihood that they will allow you to sell their product. You are not just a reseller, you are a business owner that can add a new sales funnel for the brand. Some very popular brands require a minimum purchase order that can be literally thousands or tens of thousands of dollars. You can negotiate with a brand and get the first order of a few hundred dollars; once that sells, you can purchase a larger order.
Look for “product” distributor/supplier:
An overlooked method to find suppliers is to do a google search on the product you want and add supplier or distributor at the end. For example, if you are looking for a Crayola product, you can search “Crayola distributor in U.S.” As you can see from the screenshot below, the top 5 results are Crayola and 4 other distributors. Using this method, you can contact each of them and negotiate for the lowest price. Crayola will likely give the best price, but they probably have strict requirements to become a distributor and they have a large minimum purchase order.
When googling for distributors, you have to be rational. Since you’re not looking from a verified directory, it’s entirely up to you to figure out if the distributor or supplier is legit. If something seems fishy, it’s best to just avoid the supplier and stick with a more trusted supplier. There might be some international companies that come up in your Google search, it’s best to avoid them altogether unless you’re doing private label from Alibaba.com.
Wholesale directories are some of the best resources when it comes to finding a good supplier for products. Instead of searching for a specific product supplier, wholesale directories give you suppliers that specialize in a niche. For example, a toy supplier can have a lot of branded toy items like Barbie, LEGO and more.
Finding a great supplier can add significant value to your bottom line as a wholesale seller. Many of them have holiday promotions and kickbacks if you sell enough items from them. You can try finding them both online and offline.
There are a variety of options for online supplier directories. You can find free options, but the really good ones require some sort of monthly payment. If you are a brand new seller with limited cash to start with, your cash is best invested in finding items to resell and not buying access to a directory.
If you are an established seller or a new seller with some capital, buying a directory can speed up the process of finding trusted suppliers significantly. Some of the well-known directories include WorldWide Brands and SaleHoo. I’ve personally used SaleHoo before and had a good experience. I forgot to cancel my free trial the first month and they repaid me, so I have nothing but good things to say about SaleHoo.
Offline supplier directories are extremely underrated. As Amazon sellers, most of the day we spend doing product research or shipping items. This leads us to rarely interacting with other businesses in our communities. Joining your local chamber of commerce or searching for physical directories can expand your network and get you access to great suppliers. There are many wholesale suppliers who do millions of dollars in revenue with no online presence. If you find one of them, it can give you a great competitive advantage over other sellers.
Open Wholesale Account
Depending on the wholesale supplier you work with, you may need some requirements prior to getting your new wholesale account approved. Here are some tips, so you can be as legitimate as possible before interacting with a supplier.
Set up a LLC/S Corp: When a supplier asks for your business information and you give them your personal name and residential address, red flags go up for them. Suppliers are accustomed to working with big businesses that have big invoices, so they’ll be very hesitant if they see your personal name and home address for your business information. By setting up a business entity, you’re just as legit as the supplier. This enables a foundation of trust and the supplier will be more likely to cooperate.
Get an EIN number: An EIN number is an Employer Identification Number, it’s basically a tax identification number for a business. Some states require you to have a reseller’s license (ex. California), so you can get this done also.
If you have a LLC/S Corp in addition to a EIN number and reseller’s license, you’re as certified as anyone else. Giving this information to a supplier when they request it establishes a lot of trust and you can focus on finding and shipping in your first wholesale product.
Use a business address: Many sellers may be living in large metropolitan areas where they live in apartments. When interacting with the wholesale supplier, don’t provide an apartment number or a residential address. If you have a friend or family member with a business address or a PO box, that’s much better to use.
If you’re shipping from the wholesaler to Amazon, you don’t need to worry about a lot of boxes coming to your home. This is just a minor tip to look as professional as possible.
These tips on finding a wholesaler supplier is to help guide you in the right direction. Will there be additional challenges that may come up when trying to find your first wholesale product? Probably. You have to persevere until you succeed with your first product.
Once all the hard work is done for the product, all you need to do is reorder from your supplier and you have a new income stream. This allows you to launch your second, third and more wholesale products. The process can be time consuming and difficult, but the work you put in today will result in many profitable products tomorrow.