The different types of sellers
When you first start off selling on Amazon, you can be overwhelmed with information. It’s best to narrow your focus and decide on the type of seller you want to be. When you have a focus on the type of Amazon business you want to run, you can scale it up and choose other options later. There are several different types of Amazon sellers. Sellers should be aware of these types and choose the kind of seller they want to be. The different types of sellers include retail arbitrage, online arbitrage, wholesale and private label.
Retail arbitrage sellers are the first type of sellers on Amazon. These type of sellers basically go to physical stores nearby and selling their products on Amazon for a profit. Since retail arbitrage has a low barrier to entry, most new sellers start off as retail arbitrage sellers. As a retail arbitrage seller, your success is directly correlated with how much good products you can source. Many sellers source at local retailers like Walmart and additional unconventional places like thrift stores and discount stores.
Retail arbitrage sellers have a lot of opportunity to make high profits. This is because they can sell both used and new products. Amazon allows certain types of used products like books and electronics to be sold on its platform. This allows retail arbitrage sellers to shop for used products that can be at a very low price and sometimes even free. Sellers that are new to Amazon can start by selling products that they have in their own house. This gives them the opportunity to make quick sales while learning how Amazon works.
The success of retail arbitrage sellers is directly correlated with their ability to source products. If sellers live in smaller cities, they may find better success by driving and sourcing from neighboring urban cities. The more good products you can find in stores and other places near you, the more sales you will have on Amazon. Retail arbitrage is exciting for new sellers, but they need to take the time to learn about metrics that influence sales. This includes things like Amazon best sellers rank and getting approved to sell in gated categories. To learn more about retail arbitrage, check out this guide linked here.
Online arbitrage sellers are the second type of Amazon sellers. Rather than using only physical stores to gather inventory, online arbitrage sellers also use online stores. The majority of online arbitrage sellers are not strictly sourcing from online stores because they also source from retail stores. What differentiates online arbitrage from retail arbitrage is the use of software programs and tools. Many sellers that do online arbitrage use certain programs that can source from websites automatically.
These programs often require a monthly subscription and they can gather hundreds of possible deals for Amazon sellers. This is huge because instead of spending hours going around stores looking for possible products, a software tool can do all of that for you. A lot of beginner sellers start with retail arbitrage and then advance to online arbitrage once they are comfortable.
Online arbitrage is dependent on how good the software program you are using is. If a tool can only provide tens or a few hundred products per month, it’s likely not worth it. Some powerful tools like Tactical Arbitrage can scan online stores 24/7 and give sellers literally thousands of products to choose from.
Once a seller finds a good online arbitrage product, they can order it and it can ship directly to their office or home. After they receive the products, they can send it directly to Amazon’s warehouses. Sellers can keep doing this and make thousands of dollars in sales. To learn more about online arbitrage, check out this guide linked here.
Wholesale sellers are another type of Amazon sellers. Amazon wholesale is when sellers buy products directly from a manufacturer or distributor to sell on Amazon. There are very few sellers who start off directly as wholesale sellers. Most of them start as retail or online arbitrage sellers and gradually move to wholesale. Sellers transition to wholesale because it allows them to sell products at scale. With retail and online arbitrage, most sellers sell one or a few quantities of a product. In contrast, wholesale sellers can sell tens if not hundreds of a single product.
Wholesale sellers have much more hurdles than other sellers to overcome to get started selling wholesale products. They often need a real business license, wholesale license, EIN number, actual business location and more. This is because many of the quality distributors and manufacturers will vet wholesalers prior to working with them. This may seem like a lot of work, but it’s just the cost of doing business as a wholesale seller.
The benefits of selling wholesale by far outweigh the difficulties. Once a seller has their business up and running, their catalog of wholesale products can often support their entire business. All they need to focus is finding new wholesale products and keep reordering previous products. Many wholesale sellers on Amazon can scale their business to six and seven figures. To learn more about wholesale, check out this guide linked here.
This is the last type of Amazon sellers. Private label is the practice of taking generic products and building a brand on Amazon. It has the highest barrier to entry out of all of the types of sellers on Amazon. This is because private label takes a lot of money and time upfront to launch a product. Private label involves finding a potential product, finding an international supplier, making an optimized listing and shipping products into Amazon’s warehouses. This is very time intensive and it can take several months to launch one product.
The good thing about private label is the long-term benefits are tremendous. It takes so much effort upfront just to launch a product, but once it’s established, it can be on auto-pilot. One of the key benefits of private label is the decreased competition between sellers. On an average Amazon listing, there can be tens of sellers competing. A private label product allows sellers to have their own listing and brand their product. This prevents other sellers from selling directly on their listings.
The majority of large Amazon business engage in private label. Once you start hitting big numbers, it’s very hard to keep doing retail and online arbitrage unless you have a team. The good thing about private label is that it doesn’t require sellers to store the products. Sellers can directly have their suppliers ship directly into Amazon warehouses. This basically allows private label sellers to work on their Amazon business anywhere with an internet connection. To learn more about private label, check out this guide linked here.
This covers the main types of Amazon sellers. Although it can be exciting to think about what you can be, it’s important to narrow your focus and just get started. Once you actually are building your business, you can start thinking of ways to expand and try other business models. For brand new sellers, I recommend doing retail arbitrage and getting ungated in categories as soon as possible. This will allow you to experience how selling works on Amazon and open up the opportunity to do online arbitrage.