Several third-party sellers profit from sourcing products for Amazon and reselling them. Discover how you can increase profits with this guide for sellers by learning what it involves and what tactics you can use.
How does an Amazon Reseller work?
In the world of online marketplaces, Amazon’s dominance is legendary, but with the platform’s evolution, so have the ways in which products are sold on the website.
Unavoidably, this has led to confusion in some situations. It’s easy to understand why you might become confused about how the whole set-up works and how to start your ecommerce business when you hear about Amazon ‘sellers’, Amazon ‘resellers’, FBA sellers, and FBM sellers. How you should be a seller!
What is the difference between a reseller and a seller?
In a nutshell, an Amazon Reseller is someone or a company who sources products in bulk – or at least wholesale – and then resells them on Amazon.
Amazon’s marketplace in 2010 consisted solely of resellers. Amazon dropshipping is an option that some retailers use simply because they already have an online store or a brick-and-mortar store.
Amazon was utilised by these businesses to expand their customer base. The term ‘reseller’ comes from the fact that they were reselling on the site.
Additionally, they had established successful relationships with suppliers for many years, which enabled them to access some big brands.
Increasing popularity and a growing number of Amazon resellers led to an increase in competition. This resulted in the resellers eventually finding themselves in a situation of increased competition, causing them to reduce their prices, reduce their margins, increase their fees, and have nothing to differentiate themselves from all the other resellers!
Since there is no limit on how many resellers can list a product on Amazon, this was and continues to be a big problem for resellers.
With Amazon’s fulfillment system, FBA, anyone can easily list products on the Amazon marketplace by virtue of its very nature. Also included are the brand owners themselves, so they can offer low prices which are hard to compete with.
There will be a race to the bottom and lower margins.
Reselling on Amazon is worth it?
As a reseller, it can be a difficult journey, requiring patience and time, in particular, since you may face competition from established resellers whose strategies have evolved over many years.
Making money is possible. However, how much you can earn depends on the strategy, the products, and the effort you put in.
The reselling of private label brands has transcended simple reselling of already established brands with a growing number of private label brands coming to market. The fact is, resellers have discovered that they can become the sole distributor of a brand if they create their own brands.
It does mean, however, that national brands are no longer the only ones competing, but also private label brands and different private label brands!
You can see why some prospective Amazon Resellers may be unsure whether it is the right platform for them.
Despite this competition, Amazon resellers still make decent profits despite all the competition.
How to Resell on Amazon Successfully
You should optimize several key aspects in order to maximize your Amazon reselling success:
- Your product
- Your branding
- Your price
- Your seller ranking
Sounds easy? Let’s look at the exact strategy you should take.
Reselling on Amazon: Products
1. Choose Your Product Carefully
Here are two options to consider:
- Sell products that have proven success and are in high demand.
- Low competition and no proven success for products.
Even though success is not guaranteed, B is still your first choice if you are a newbie. There is, of course, a risk involved so product research is necessary. If no resellers are listing the product yet, there may be a reason for that, such as it not being in high demand or having low profit margins.
You will also have the opportunity to gain immediate exposure and win the Buy Box. The Buy Box is the box at the bottom of Amazon’s product detail pages where customers can add items to their shopping basket. Your brand can be established as a top seller without having to worry about competition – we will discuss this further below.
It may be worth considering Option A if you have experience reselling and already have a strong seller rank, although the profit margins will be much smaller.
Search for a product on Amazon using its ASIN (Amazon Search Identification Number) to discover whether it has high or low competition. You can find this under the ‘Additional Information’ portion of the listing. You can also see the total number of sellers that list under that ASIN under ‘Sellers’.
2. Source Quality Products
When it comes to quality, it doesn’t matter which option you choose, option A with low competition or option B with high competition
It is ultimately your products that will define your brand. Thus, you can easily position yourself as a high-end reseller with high-quality products, allowing you to increase your prices and increase your margins. You should also consider your reputation. You might save money by sourcing inferior goods, but these will result in high returns and poor reviews. You shouldn’t do this.
3. Source High Margin Products
You might end up sourcing an excellent product but finding that it has a low profit margin. You should try as much as possible to avoid this.
When you are only making a few cents profit on a superb quality product, it isn’t worth it, so finding a happy medium is essential.
Reselling on Amazon: Branding
Build Your Own Brand
Being an Amazon reseller, you can eliminate at least some direct competition by building your own brand (and private label). If you build a brand that you can easily add more product lines to, you’ll be in a great position to grow your business and profits.
Many Amazon resellers make the mistake of building their brand around a single product. If you do this, scaling your business becomes more difficult. Rather than focusing on just your product, let your brand speak for itself.
Consider selling baby bouncers as an example. If you are selling those products that are just one of your products, then your brand will become the ‘baby products’ brand under which you can add other brands or private labels in the future as your business expands.
Reselling on Amazon: Pricing
As previously discussed, Amazon is competitive, and if you opt for product approach A (high competition products with proven success), you will find it more difficult to break into the market.
By sourcing and selling a popular product you can bring in immediate sales and boost your Amazon BSR, however, proven products obviously already have proven sales.
Is it going to happen?
Your sales will not necessarily increase if you’re competing with established sellers with great rankings!
Your pricing plays an important role here. If you set a low price, you are more likely to win the Buy Box and attract audiences that are looking for highly competitive prices.
This strategy has the disadvantage that by discounting your products, your profit margins will be affected, and it will be difficult to raise your prices in the future. You then risk becoming known as a cheap brand, even if the products you sell are of high quality, so you should take time to carefully calculate your prices before you publish them.
Reselling on Amazon: Strategy
1. Develop a strategy for inventory management
Reselling businesses often overlook their inventory, which is the heart of their success. In the case of surplus stock that takes up space and ties up capital, that is a waste of money that will negatively affect your profit margin.
The lack of inventory could also mean that you are sailing too close to the wind and end up not being able to fulfill your customers’ orders.
Keeping your numbers straight is a crucial aspect of reselling on Amazon. Prepare a sales forecast and go through your calculations thoroughly. This will help you determine the levels of inventory you will require and when.
2. Start Small and Grow
Even though it may be tempting to build your Amazon reseller business quickly, it’s better to start small and slow and actually learn from your mistakes – because everybody makes them!
Then expand by reselling more products. As you become familiar with Amazon’s algorithms and quirks, you can work on refining your methods and strategies with the idea of adding a second product. By simply repeating the process over and over, you’ll be able to scale more easily.
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Final Thoughts: How To Become An Amazon Reseller 2022
Whether you decide that you wish to resell only the well-known brands, or take the private label route, reselling on Amazon isn’t complex, and is surprisingly easy to launch, but it will be harder to scale if you resell established brands.
Many brands simply list their products themselves, so going the private label route is a sensible option since they don’t want hundreds of resellers all listing their products.
In order to be successful on Amazon when reselling, consider bringing new products to the marketplace rather than attempting to resell products with high competition. This can be the key to your success.