How Amazon Works: Selling Wholesale Goods on Amazon
Are you planning to sell Amazon Wholesale products? Well, the good news is that getting started is very easy because a seller account can be created in a few minutes. the main challenge, however, is product sourcing. The main two options at your disposal are: sourcing in China under your own brand (Amazon Private Label) or sourcing famous branded products in Europe (Amazon Wholesale). In the following article, we will discuss what you need to take into account when selling Wholesale products on Amazon and what strategy will get you the furthest.
Private Label vs. Wholesale Products
On Amazon, this business decision is something that could go either way. Your product, your strategy and your personal preferences have a big influence on whether you should choose one or the other. Both types of products have advantages and disadvantages, which we will now briefly explain. This doesn’t mean that choosing one necessarily excludes the other. On the contrary, sellers can sell as the owner of a Private Label on Amazon and sell Wholesale simultaneously.
Advantages and Disadvantages of Amazon Private Label
When we talk about Private Label, it means selling products under your own brand. Fact is, most Private Label sellers buy cheap product in China and try to resell it in the EU or UK. The production costs in China are incomparably low and thanks to Alibaba it is not difficult to find a source of supply. However, sourcing in China is not the only option. There are many EU partners that are worthwhile dealing with, especially if the EU is to be your main marketplace.
|1. Building up your own brand||1. Sourcing and communication problems|
|2. Economies of scale possible||2. High risk with sourcing in China|
|3. No competition on the product||3. Full product liability and declaration of conformity|
|4. Access to product listing||4. High costs with small quantities for testing|
|5. SEO and keyword optimisation possible||5. Long delivery times + planning effort for repeat orders|
|6. Large profit margins possible||6. High marketing effort to create brand awareness|
Advantages and Disadvantages of Amazon Wholesale
Wholesale products are products that are sold under established brands. This means that, as a retailer, you are only involved in sales, not in building the brand itself. This format also brings disadvantages and advantages alike.
|1. Sourcing in Europe||1. No unique selling point|
|2. Low quantity orders possible||2. Hardly any economies of scale possible|
|3. Fast delivery||3. High competition, possibly even against Amazon|
|4. No product liability and declaration of conformity||4. No intervention in the product line|
|5. Easy handling and product advertising|
|6. No effort for product listing|
|7. Ratings already available for known products|
|8. Low marketing costs|
If you are still unsure whether to go for Wholesale or Private Label, this blog article will give you a few pointers.
Special Features When Selling Wholesale on Amazon
In a regular store, selling wholesale produce is not necessarily any different than selling private label goods. The situation is different on the Amazon marketplace. Selling Wholesale on Amazon has a couple of downsides.
Amazon Does Not Allow Double Listings
On platforms such as eBay every seller is able to list their products. That is not the case on Amazon. The online giant makes the stipulation that each product may only appear once in the catalogue. For wholesale products, this means that an already existing product may not be created again. By comparing the EAN and brands, Amazon recognises any attempt to create a separate listing and prohibits it.
As soon as more than one retailer wants to offer the same product, both offers are combined in one listing. We will explain later how the customer then decides from whom they want to buy.
First Come, First Serve
The person who creates the listing first, or has the rights of product creation from the trademark owner, may determine how the listing should look in terms of titles, bullet points, images, and description. Each additional merchant must use exactly the same listing if they want to sell this wholesale product on Amazon.
This can be advantageous, as it saves the effort of keyword research and writing good descriptions. But if the author of the listing was rather uninspired, all sellers have to live with the consequences of selling Wholesale on Amazon with a rather unfortunately optimised listing.
Amazon Itself Acts as a Seller
Amazon not only provides the platform but also acts as a trader itself. While this was initially limited to the books category, Amazon now offers its products in all categories. Although Amazon also has some private labels, Amazon’s main business is wholesale products.
For selling Wholesale on Amazon, this means that you not only have to compete against many other sellers but may even have to compete against Amazon itself. The problem with this is self-evident: Amazon will surely find ways to make its own offer stand out to the customer.
90% of Customers Buy via Buy Box
“Buy Box” is the rather bulky term used for the “Add to cart” button on the product detail pages of Amazon. Selling Wholesale products on Amazon profitably is practically only possible through winning the Buy Box.
It is logical that customers would want to add an item to their shopping cart if they like it. But what happens if several sellers offer the product that just went into the shopping cart? Which seller wins the deal? Based on various factors, Amazon has developed an algorithm that calculates which offer will win the Buy Box. The factors of this algorithm are of course just as intransparent as the Google search algorithm. But there are some hints regarding which key figures Amazon uses for calculation. For example, the total price, i.e. the product price plus shipping costs, the shipping speed, the inventory, and the seller performance will certainly influence which offer is in the Buy Box.
All offers that are not in the Buy Box are put together in a list that buyers can view by clicking on the “All offers” button. However, 90% of all purchases on Amazon are made through the Buy Box. Therefore it should be the goal of every seller to win them. Only then is successfully selling wholesale products on Amazon possible.
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How to Be Successful With Wholesale Products for Amazon
With the special features described, it is clear that suppliers of Wholesale products on Amazon are subject to particular competitive pressure. However, it should not be forgotten that Amazon provides ad hoc access to 37 million buyers – more than anywhere else. For this reason, it is certainly worth a try to successfully place your products on Amazon. With the following tips, we would like to help you do just that.
For better orientation, we have divided the following part into different sections of the product life cycle.
Wholesale products for your Amazon business have to fulfil certain requirements. Before purchasing anything, get an overview of the situation and find out on how best to sell your Wholesale product on Amazon. Here’s what you need to look out for:
Analyse Competition and Sales Potential
If you don’t have a product yet or you are just thinking about buying Wholesale and selling on Amazon, it would be a valuable time investment to have a closer look at the existing competition and potential of the product you are trying to sell.
You can follow two basic strategies:
- Attempt to assert yourself against the competition.
- Avoid competition and offer niche products.
|||Low competition||Strong competition|
High sales potential
Only with competitive products
Low sales potential
Test with small quantity
When analysing your competitors, pay particular attention to whether Amazon is a competitor. There are extremely attractive products where Amazon hardly ever loses the Buy Box. To compete with the online giant in these cases is extremely optimistic, bordering naïve.
To analyse whether a product has high or low sales potential, there are useful analysis tools, Amalyze being one of them. Our tip, find one to your liking and use it. Selling Wholesale products on Amazon becomes much easier afterwards.
Plan Product Range on Amazon
If you have a Private Label, you should only offer a small variety of products, especially at the very beginning, in order to scale as much as possible with as little start-up capital as necessary. It is, however, different with Wholesale goods. Since economies of scale hardly come into play with Wholesale anyway, it makes sense to offer as many different products in small quantities as possible.
There are two main reasons for this. Firstly, especially in the EU, it is possible to buy retail products in small quantities. Short delivery routes and lack of production overhead ensure a stable price, almost regardless of the quantity ordered. Of course, wholesalers are happy to receive larger orders and then give discounts. But these do not have as great an effect as when running a Private Label.
The other main reason is the distribution of risk. If you offer many different products, you spread the risk of loss of sales should you lose the Buy Box. It also allows you to try out niche products and possibly hit the jackpot.
Especially if you sell wholesale products through Amazon, a good nose for emerging trends can help you succeed. If you recognise these early, you have a head start over your competitors and can serve a strong market with little competition until the trend is discovered by other sellers.
But beware, as fast as trends emerge, as fast they disappear again. More on this later.
Calculate Product Costs Correctly
Since too many sellers do not correctly include all the costs incurred in the sales price, I regularly see sellers who overestimate themselves in the price war in order to still be profitable.
Former Head of Amazon Services
When selling Wholesale products on Amazon, there is nothing worse than calculating too tightly. Because of the high competition, you have to enter the market with competitive prices. If you don’t keep an eye on your cost structure, you will quickly sell at a loss. This must be avoided at all costs.
What does your product really cost until it reaches the customer? Of course, everyone has their eye on the EC. But what about the other costs? Packaging costs, freight charges from the wholesaler to you, cartage or transport insurance, FBA fees if applicable, the Amazon commission in the respective category and the packaging and shipping fees to the customer, and that’s just to begin with. All these must be included in the total price of the product if you want to start selling Wholesale on Amazon successfully. On top of this, there is a profit margin, because you want to live on something. And on top of that, there is the VAT, because the government needs to live on something. As you can see, there are quite a few cost points to take into consideration.
In order to keep up with the competition for the Buy Box in terms of price, in the end, you have almost only the purchase price as leverage. This is why it is so important to know your cost structure before sourcing.
How to Sell Wholesale Products on Amazon? Make Offers Nobody Can Refuse!
So you have purchased the products at a competitive price. What’s next? Make yourself aware that you are dependent on winning the Buy Box. No Buy Box, no turnover. It’s that simple.
Qualify for the Buy Box
In order to win the Buy Box at all, a retailer has to meet a number of performance criteria:
- Less than 14 days delivery time.
- 97% punctual delivery.
- Less than 4% rate of late deliveries.
- 95% rate of valid tracking numbers.
- Cancellation rate less than 2.5%.
- 90% of all enquiries answered within 24 hours.
These key figures are really the bare minimum. Even if these figures are achieved, winning the Buy Box is not a given. That is why it is important to stay focused and constantly outperform the competition.
Offer Prime to Buyers
The Prime programme offers Amazon customers not only their own video streaming platform but also a guarantee for fast delivery. Offers that qualify for Prime are marked with the well recognisable Amazon Prime logo.
Amazon has installed a filter on the product overview page, which hides all offers except the ones offering Amazon Prime. For this reason alone, but not only because of this reason, you should aim for Prime. The other main reason why you should aim for Prime is that the Amazon algorithm favours the offers in the Prime programme when awarding the Buy Box.
The Prime logo helps to sell wholesale products on Amazon.
There are two ways for you to use Prime:
- Store the products with Amazon (FBA).
- Participate in the “Prime by seller” programme.
We will return to point 1 later, let’s begin with point 2. For a few years now, Amazon has expanded its Prime programme so that retailers can now also ship goods from their own warehouse. For this purpose, however, a few performance features must be fulfilled. Therefore, you should consider carefully whether selling Wholesale on Amazon via the Prime programme is what you want.
You can find more information for this on the official Amazon website.
Use FBA on Amazon for Wholesale Products
FBA stands for “Fulfillment by Amazon”. On the marketplace, offers sent via FBA are marked as such (“Fulfillment by Amazon”) and are therefore easily recognisable. With FBA, Amazon puts its logistics expertise at the service of retailers. They send their goods to an Amazon dispatch centre. From there the articles are distributed and stored. If a customer buys the product, all processes run via Amazon. The retailer does not have to do anything at this point. Even the customer service is handled by Amazon.
In a nutshell, selling Wholesale products within the Amazon FBA programme offers several advantages:
Using a Repricer
Even if you have your goods shipped through Amazon and meet the factors regarding seller performance, delivery time and availability for the Buy Box calculation, there is still one factor that often decides whether you win or not: the price.
We described above how important the cost calculation at the product selection stage. When all costs are clear to you, you can adjust the prices to win the Buy Box for yourself. This is because the current price displayed in the Buy Box still does not guarantee that your offer will be placed in the shopping cart field. A price adjustment is inevitably necessary.
But this is hardly possible manually. Instead, it is better to use a repricer. Some work on a rule-based basis. This means that you always want to be x cents cheaper than the next cheapest competitor’s price. However, we cannot recommend this type of repricing, as this quickly leads to a price war that shrinks the margin of all participants. Dynamic repricers are much smarter and really help Amazon sellers in selling their wholesale items on Amazon at a profit instead of just offering the items at a lower price.
A dynamic repricer like the SellerLogic repricer for Amazon works intelligently with the aim of achieving the optimal price in the Buy Box. It adjusts the price depending on the market situation to win the Buy Box and then tries to raise the price again to get the highest possible price and maximum margin.
It also helps to calculate the minimum price. Find out more here!
What alternatives are there besides fierce competition? To avoid the competition, you can offer product sets, also called bundles. For example, a gaming mouse and a gaming keyboard can make a useful bundle. These two products are created with a common new EAN at Amazon. As long as other sellers do not create this bundle, you have no competition in the Buy Box.
Analyse Product Performance
It is not always possible to sell wholesale products equally well on Amazon. Usually 20% of all products generate 80% of the turnover.
Divest Unprofitable Products
This does not mean that you should directly sort out all the other 80% of the product portfolio because then you would still lose 20% of the turnover. Nevertheless, streamlining the product portfolio can significantly increase profitability.
Carry out a regular ABC analysis which classifies your products into categories A, B and C according to their performance. Look in particular at the C products and be honest with yourself whether the effort justifies the return.
Identifying the End of Trends
Trends are a blessing for selling wholesale products on Amazon. If they are discovered early, good money can be earned. The problem with trends is that they end at some point.
A repeat order at the wrong time can turn a trend product into an absolute shelf warmer and is probably why one or the other seller has a basement full of fidget spinners somewhere and probably will have for the foreseeable future.
In other words: pull the plug early and look for the next trend product.
Conclusion: With the Right Decisions, Selling Wholesale on Amazon can be Successful
The high level of competition for retail products can be a major deterrent. However, Amazon offers enough services and programmes to sell successfully on the online the marketplace. To do so, it is necessary to understand Amazon and to meet all of the online giant’s requirements. If you add to this your commercial know-how, a stable cost calculation, and our SellerLogic Repricer for Amazon, there is almost nothing standing in the way of your success in e-commerce. Best of luck to you!
Image credits in order of appearance: © Piman Khrutmuang – stock.adobe.com / © Андрей Яланский – stock.adobe.com / screenshot @ Amazon