This is how Amazon works: Selling wholesale goods successfully on Amazon
If you want to sell wholesale products on Amazon, it's easy to get started. A seller account can be created in a few minutes. The main challenge that every seller must face is product sourcing. There are usually two options: sourcing in China under your own brand (private label) or sourcing famous branded products in Europe (wholesale products). In the following article, we will discuss what you need to take into account when selling wholesale on amazon and how to be successful with this strategy in Amazon.
Private Label vs. Wholesale products
What sounds like a question of faith is more a decision of personal preferences. Both types of products have advantages and disadvantages, which we will now briefly explain. But one does not exclude the other. On the contrary, sellers can sell private labels on Amazon in parallel to wholesale products.
Advantages and disadvantages of selling Private Label on Amazon
In the word of the online retail, when we talk about private label, it means selling products under their own brand. Most people try to buy cheap products in China. 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 absolutely necessary. With some effort, interesting partners in the EU can certainly be found.
1.Building up your own brand
2. Economies of scale possible
3. No competition on the product
4. Access to the product listing and therefore keywords and text under your own control
5. Large profit margins possible
1. Possibly difficult sourcing due to communication problems
2. High risk with sourcing in China
3. Full product liability and declaration of conformity
4. high costs with small quantities for testing
5. Long delivery times, high planning effort for repeat orders
6. High marketing effort to create brand awareness
However, Private label is not the main topic, so we would rather go back to the main topic, selling wholesale products profitably on Amazon.
Advantages and disadvantages of Amazon Wholesale Selling
In general, wholesale products are products that are sold under more or less famous brands. This means that as a retailer you are really only involved in the sale, not in building up the brand itself. Of course, this has advantages, but also disadvantages, which we have briefly listed below.
1.Sourcing in Europe
2. Low quantity orders is possible
3. Fast delivery
4. Product liability and declaration of conformity lies with the manufacturer
5. Easy product advertising
6. Easy to handle
7. No effort for product listing
8. Ratings already available for known products
9. Low marketing costs
1. No unique selling point
2. Hardly any economies of scale possible
3. High competition, possibly even against Amazon
4. No intervention in the product line
Check out the whole blogpost to make a profound decision:
Special features when selling wholesale on Amazon
While wholesale products in your own shop does not have to be considered much differently than private label goods, the situation is different on the Amazon marketplace. Selling wholesale on Amazon has some downsides.
Amazon does not allow double listings
While on eBay every seller can list their products, Amazon 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 the attempt and stops it.
Now, if more than one retailer wants to offer the product, both offers are combined on one listing. However, we will explain later how the customer then decides from whom they want to buy.
First come, first serve
The person who first discontinued the listing, or who has the rights to the 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 selling 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 same badly 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 products itself in all categories. Although Amazon also has some private labels, Amazon's main business is wholesale products.
For sellers of wholesale products, this means that they not only have to compete against many other sellers but may even have to compete with Amazon. It is not too difficult to imagine that Amazon will find ways to favour its own offer.
90% of customers buy via the Buy Box
Behind the bulky term, the Buy Box is the button "Add to cart" on the product detail pages of Amazon. In English, this field is called "Buy Box". Selling wholesale products on amazon is practically only possible through the profit of the Buy Box.
After all, it is logical that customers want to add the item to their shopping cart if they like it. But if they do so and several sellers offer the product, which dealer gets the deal? Amazon has developed an algorithm that calculates which offer will be in the Buy Box based on various factors. The factors of this algorithm are of course just as untransparent as in the
Google search. But there are some hints 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 summarised in a list that buyers can view by clicking on the "All offers" button. However, 90% of all buyers at Amazon are made through the Buy Box. Therefore it should be the goal of every merchant to win them over. Only then is it possible to successfully selling wholesale products on Amazon.”
How to be successful with wholesale products on 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.
Even before you purchase the product for the first time or even try to sell your wholesale products via Amazon, you should get an overview of the situation.
Analyse competition and sales potential
If you don't have a product yet or are just thinking about buying a new product, then you should definitely look at the existing competition and potential.
You can follow two basic strategies:
For a quick decision the following matrix helps:
high sales potential
Only with competitive EKs
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 - to put it positively - very brave.
To analyse whether a product has high or low sales potential, there is for example the Amazon analysis software "Amalyze". Selling wholesale products on Amazon becomes much easier with such a tool.
Plan product range on Amazon
With private label, you should offer a few different products, especially at the beginning, in order to make the most of economies of scale with little start-up capital. But it's different with retail goods. Since economies of scale hardly come into play anyway, it makes sense to offer many different products in small quantities.
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 a lack of production overheads 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 producing 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 if you lose the Buy Box. It also allows you to try out niche products and possibly make a real lucky strike.
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
Let us quote a former Amazon employee here:
FORMER HEAD OF AMAZON SERVICES
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.
There is nothing worse when selling wholesale products on Amazon than to calculate too tightly. Because of the high competition, you have to go to the market with competitive prices. If you do not 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 an 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. All these must be included in the total price of the product if you want to sell successfully on Amazon wholesale products. 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, which you have to pay to the tax office as VAT.
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.
Offer at Amazon
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. That is why it is necessary to do everything to get the Buy Box.
Qualify for the Buy Box
In order to win the Buy Box at all, a retailer has to meet a number of performance criteria:
These key figures are really the bare minimum. Even if these figures are achieved, the Buy Box's profit is far from certain. Therefore, try to perform as well as possible - otherwise, it is hardly possible to sell wholesale products profitably via Amazon.
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 is marked with the small Prime logo.
Amazon even offers its own Prime Filter on the product overview page, which hides all offers except Prime. For this reason alone, you should aim for Prime. But not only for this reason. Amazon prefers 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:
1. Store the products at Amazon (FBA)
2. Participate in the "Prime by seller" programme
We will come back to point 1 later, so let's move on to 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 you want to sell your wholesale products via the Prime programme from Amazon.
You can find more information on the official Amazon site.
Use FBA on Amazon for wholesale products
FBA stands for "Fulfillment by Amazon". On the marketplace, offers sent via FBA can be recognised by the remark "Fulfilment by Amazon". 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.
Thus, the sale of wholesale products within the Amazon FBA programme offers several advantages:
We have compiled further information on how you can sell trading goods profitably via Amazon FBA in a separate blog post: For whom is "Fulfillment by Amazon" suitable?
Get your money back!
SellerLogic Lost & Found finds every FBA error.
Using a repricer
Even if you have your goods shipped through Amazon and thus meet the factors seller performance, delivery time and availability for the Buy Box calculation, there is still one factor that often decides for better or worse: the price.
We have described above how important the cost calculation is already 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 by hand. 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 to sell their wholesale products 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 thus the maximum margin.
He 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 on 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 early on
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 at some point they end.
A repeat order at the wrong time can turn a trend product into an absolute shelf warmer. Or how many more Fidget Spinners do you think will be sold?
It is better to pull the plug early and look for the next trend product.
Conclusion: With the right decisions, selling wholesale on Amazon can be successfully
The high level of competition for retail products can be a major deterrent. However, Amazon offers enough services and programmes to sell successfully in the marketplace. To do so, it is necessary to understand Amazon and to meet all requirements. If you add to this your commercial nose, a stable cost calculation, and our SellerLogic Repricer for Amazon, there is almost nothing standing in the way of success in e-commerce.
Picture credits in the order of the pictures: © Piman Khrutmuang - stock.adobe.com / © Sundry Photography - stock.adobe.com