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Posted by Deborah Beckwin - 23 August, 2019

Pros and Cons of Wholesale for Amazon Sellers

B2B Wholesale selling on Amazon involves the seller buying products in bulk straight from the manufacturer / Distributor in order to receive wholesale pricing.

In return the buyers can then make a profit by selling these products elsewhere (typically retail or direct to consumer).

This model allows your company to sell products at a margin without having to launch a brand-new product, hold long-term inventory, or pay large promotional expenses.

This gives you the opportunity to build strong business relationships with the manufacturer you are buying from, but also means you can sell a huge number of different products through Amazon and other channels.

Here are a few of the positives and negatives to Amazon Wholesale selling, and the things you need to consider before you go ahead with the wholesale Amazon business model.

Advantages of Amazon Wholesale Selling

Existing Demand

One of the biggest positives of selling wholesale products via the Amazon marketplace is that there is already existing demand for your products.

This means you may not have to invest your own time or money in advertising, as the buyers for your products will already flock to Amazon to see if their desired product is on sale there. With that said, if you are selling a product that is very popular, you may need to pay for advertising to be noticed or ranked higher in Amazon's search.

Amazon buyersSource

Similarly, if you find yourself with a very competitive product, you are under no obligation to stick to selling one product. You can sell until you’ve sold your inventory and then move on to something else. 

Easier Inventory Restocking

Another advantage of buying and selling wholesale is the reduced pressure of inventory forecasting, in comparison to manufacturing or contract manufacturing your own brand.

When you customize products for your own brand, you may run out of stock and because it takes a longer lead time to manufacture products, your sales and customer loyalty could suffer for a longer period of time.

However, if you are buying directly from a brand at a wholesale price, this gives you the opportunity to restock much more easily and quicker.

It is possible that your brand will already have product stock ready for you to reorder. Although, don’t forget that the better your relationship with the brand, the easier your dealings with them will be.

Amazon Brand Approval

When you have got the approval to be a seller on Amazon, you will also receive brand approval.

Due to Amazon's large presence in both B2C and B2B, having your brand associated with them will naturally put new buyers at ease knowing that your business has been vetted by the retail giant. This could possibly help you to raise your price and make higher margins.

Fulfillment by Amazon  

Fulfillment by Amazon (referred to as FBA) is a way for you to not have worries about storing and sending or dealing with returns as well as receiving benefits such as Prime delivery for your customers.

FBA wholesale AmazonSource

This means you also do not need to fund storage space for all your products, as you can send them to Amazon, and they will store them in their one of many fulfillment centers. This means that Amazon will deal with your inventory.

Although, don’t forget even Amazon sometimes makes mistakes.

So, if there is an issue in handling your inventory you can use one of the handy reimbursement tools to make sure you don’t waste any money.

Disadvantages of Amazon Wholesale Selling

Finding a niche in the market

Even though Amazon marketplace is a great platform for you to be a seller of your wholesale bought products, one of the main disadvantages is trying to find a product to sell that isn’t already sold on Amazon by other sellers.

Amazon is so well established and respected that a lot of sellers have had the same idea as you.

The bigger Amazon gets, the more sellers that flock to their site to sell their products, and the harder it is to find a niche in the Amazon marketplace that you can take to sell your own products.

However, this does not mean it is impossible, so do your research before you invest in wholesale products and see which products have less competition.

Initial Investment

In order to buy directly from manufacturers, you need to have a substantial amount of capital in order to invest in the products you want to sell.

As you are responsible for funding this initial investment of products, it is you who takes the risk of not selling all your inventory and the subsequent financial consequences.

This is another reason that it is important that you do your research before parting with any money.

Conclusion

There are both positives and negatives to Amazon wholesale selling, but these are massively determined by what sort of products you are thinking of selling, and how much money you have to invest in your business. It is essential that you research the wholesale selling business model and decide whether you think it is worth taking the risk.   

Summary


What are the pros and cons of selling wholesale on Amazon Business?

Pros

  1. Existing demand
  2. Inventory
  3. Amazon Brand
  4. Fulfillment

Cons

  1. Niche Marketing
  2. Initial Investment

B2B eCommerce Marketing

Topics: Wholesale, Management, Sales & Marketing, B2B Marketing, small business

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