With big names out there representing the Amazon Private Label spotlight, other Amazon avenues can sometimes feel like they are left on the sidelines. Surprisingly to many, wholesale provides a unique opportunity for Amazon FBA sellers. One could argue that wholesaling is the best-kept secret of Amazon going into 2023. With that said, like any E-commerce business, it isn't without its challenges. We thought we'd help break down what Wholesaling means for Amazon small businesses, along with its benefits and, of course, shortcomings.
What is a Private Label (PL)? The private label process requires purchasing products to be private labeled under your brand. Wholesaling is a little different, and here's how:
- No need to brand products and build brand awareness or loyalty
- Less time in developing and launching product ideas
- Less concern with counterfeit products affecting your business model
Amazon FBA Selling Terms
- Wholesaling is the sale of goods and products in bulk to a retailer for resale at a higher price.
- Private Labeling goods are made by third-party manufacturers. These products can differ in packaging, branding, or be completely unique.
- Online Arbitrage practices buying items in online and reselling them at higher price points.
Highlights of Wholesaling on Amazon
If you're looking for fewer headaches wholesaling may be for you. Building a brand is no small feat or a short-term game plan. While the rewards can be great, so can the risks. If you're private labeling products, you focus time, energy, and money on differentiation and scaling your brand. After spending enormous money on design, marketing, and infrastructure, you could still end up with a lousy product or a lack of overall brand recognition.
Once you've eliminated the need for the private label process and gained brand approval for Amazon business wholesale, you're essentially focusing on finding well-selling products and less competition. It is almost always certain that sourcing other wholesale products can be more manageable, as you are building a report with the manufacturer over time. The same is valid for holding inventory levels. After creating a relationship with Amazon wholesale suppliers, keeping products in stock becomes a win-win for all sides of the equation.
Further to these benefits, you aren't left to find solutions to further your investment after a failed product. In wholesaling, you can ditch the product if it is too competitive as there is no responsibility to reorder or scale a brand you didn't build. Similarly, you can avoid the frustration of having to find one-of-products like Retail Arbitrage (RA). You also have more control over pricing than retail Arbitrage, where you've already purchased products at a markup.
Just because you're wholesaling doesn't mean you don't qualify for the fulfillment perks of FBA! You absolutely do, and this is another reason why wholesaling trumps other sales options on Amazon. You don't need to build a brand, handle storage, or customer returns, and you still qualify for the consumer benefits of Amazon Prime.
Benefits of Wholesaling Recap
- Little to no marketing costs
- No requirement to build a brand
- Easy to eject from a product if it isn't selling
- Re-stock inventory fast and efficiently
- Access to FBA advantages
- Increasing margins
So What’s the Trouble Then, Wholesale All the Way?
If only it were that simple. While wholesaling can steer your business model clear of many Amazon-related headaches, it isn't without issues. Amazon is vastly different than it was 6-10 years ago, where you could start a Private Label brand with less than $3k. With wholesaling in the current market, large inventory levels are often required to secure the price point you're after. This simply isn't feasible for many individuals looking to sell on Amazon. You also run the risk of finding a poor-selling product for whatever reason or another and risk barely breaking even or recouping your costs.
Notwithstanding purchasing large amounts of inventory, a big reality in wholesaling is finding manufacturers who will work with you when you are completely green to the wholesale space, let alone E-commerce. That's also if you find a product. Amazon is getting more and more competitive, and with that comes over-saturated niches and products with unbearably low margins for the wholesale world. This is where your research and diligence will come in handy. You will need to do the leg work.
Pitfalls of Wholesaling Recap
- The need to purchase large amounts of inventory is not always feasible (money talks when negotiating prices!)
- Finding a high-margin, low-competition product can be challenging
- Securing a contract with a wholesaler can be difficult
Noticing some similarities? Here's the thing, Private Label and Retail Arbitrage experience some of these exact difficulties but only in a different way. People are still hoping to start in PL, RA, or even wholesaling with as little capital as possible. Competition is fierce in all avenues of Amazon; Private Label, Retail Arbitrage, and Wholesaling are no exception.
Lastly, dealing with manufacturers in any scenario isn't always easy peasy. There is no one size fits all approach, but the lasting impact doesn't have to be as detrimental or widespread with wholesaling.
Negativity aside, as Amazon expands, so do the systems and processes around the platform. This is precisely why SmartScout has come up with front-running software to help you find the best brands possible to sell on Amazon. Without resources, businesses on Amazon lose a competitive edge and fall into the pitfalls of saturation, and risk failing full stop.
We saw demand in the market for better software to identify strong trends, signal out competition levels, and ultimately find gaps in the wholesaling marketplace. That's what SmartScout does. We Smartly Scout brands that have a chance of winning success in all avenues of Amazon.
While wholesale is our primary focus, some significant shifts are in store to broaden and align our customers' needs with our software's exclusive offer. The days of pouring through hours of research, confusing excel sheets, and slow programs are done. We're here to help you do the leg work and find success on Amazon.
