Wholesaling involves purchasing goods in bulk and then selling each unit on Amazon.
Wholesale products, unlike most other products, have one key difference. They are existing products that have product listings on Amazon already. So if you’re looking to sell wholesale on Amazon, essentially you will be adding units to existing product listings and acting as a reseller.
Wholesale – Costs & Profitability
Notably, the start-up costs of selling wholesale on Amazon are lower. Nearly 50% of Amazon wholesale sellers spent less than $2500 to launch their wholesale business. This is because buying products in bulk generally come with hefty discounts. Furthermore, wholesale sellers don’t have to invest in marketing their products, because they are reselling already established brands.
In terms of profitability, most Amazon FBA wholesalers earn over $5000 monthly. Wholesale is an attractive prospect to many sellers because the start-up costs are fairly low for a very decent profit margin! It provides a level of security that other methods do not provide.
Wholesale – Pros & Cons
Despite having a lower start-up cost, wholesale has its benefits and limitations. Most of the pros stem from the fact that the brand you are reselling for has most of the business processes handled, for example:
- There’s no need to create new product listings for an established brand
- Wholesaling is less time-intensive because there’s no need to build your own brand
- Do not have to deal with IP infringements yourself, the brand owner does
- No advertising or marketing costs, products are already in demand
- Lead time for replenishment is shorter because wholesale products are locally sourced
- Easy to scale your business because once one brand takes you on, more brand deals are likely
- Partnerships with established brands are difficult to obtain, you must really offer something of value to their business
- You have to place high-volume orders every time, which means your budget for replenishments must be high
- A wholesale license/permit is required to resell any products on Amazon, you need to be approved by relevant authorities for this
- Other resellers will be selling the same products, which causes price erosion
- The fight for Buy Box is highly competitive between resellers, especially for established brands
- You have to maintain a good relationship with brand owners, meaning you have less freedom as a business owner
Overall, wholesale is a mixed bag, especially for sellers new to the concept. Sellers with wholesaling experience and/or a good network will find it much easier than inexperienced sellers. Still, do not be discouraged, once you have brand deals, wholesaling is a very stable source of income.
How do I get started?
Before anything else, get a wholesaling license. If you’re in the US you need to register your business. After this, apply for an EIN with the IRS. An EIN is an Employee Identification Number and it’s free to get. It will take 4-5 weeks of processing, during which you can start cold emailing and cold calling potential brands to resell for.
What kind of products should I sell?
Product choice depends on a lot of factors, mostly on what type of brands you seek out. The top 3 product categories for Amazon wholesalers are:
- Home & Kitchen
- Toys & Games
- Sports & Outdoors
We recommend doing market research to find high-demand products with zonbase, doing some cost-benefit analysis, and then reaching out to those brand owners. Once you’ve signed on with a brand and have your EIN, you can start selling immediately.