Online sourcing: Buying from wholesalers and distributors
Many Amazon sellers are turning to wholesalers and distributors for their stock now Online and Retail Arbitrage is getting saturated. If you are serious about making money online and selling on the Amazon Marketplace you should consider this option. It will open up more product opportunities and will diversify your supply chain.
The difference between wholesalers and distributors
Wholesalers and distributors are very similar. Distributors tend to operate mainly online whereas wholesalers often have premises you can visit to collect products. Distributors tend to be at the top level of the supply chain. The larger manufacturers will send their products to distribution and then they will trickle down through wholesalers and retailers. In certain categories like toys, you don’t tend to get distributors at the top and instead there are only wholesalers.
How does wholesale pricing compare?
Do not presume that the wholesaler’s prices will be significantly below the current retail prices you are paying. In fact, the opposite is often true. This is normally because larger retailers like Amazon have so much buying power they can get huge discounts arranged with the manufacturer. They will still buy from the same distributors as you but with their own special pricing.
Retailers will often have loss leading sales and promotions to entice customers. The selling price can therefore be below what most people are paying at the wholesalers. Even if you do get accounts with wholesalers you should always check retail pricing before you purchase. You might open accounts at several wholesalers and find you use them for only 20% of your stock. You may still buy most of your stock from retailers when there are sales and promotions on.
How to open an account with a wholesaler or distributor
First, you need to find good quality wholesalers and distributors. The best way to do this is to identify the brands you are interested in and then visit their website. They will normally have a list of their wholesalers. If they don’t then contact them directly and say you want to sell their products and need a list of their best suppliers.
If you are targeting a particular category of products then find some popular brands which best represent that category. You can then find the wholesalers for those brands who will probably have a wide selection of similar products.
Some of the smaller wholesalers might let anyone walk in off the street and buy from them. This is normally a bad sign as their pricing is probably not that competitive. The serious wholesalers and distributors will require you to be a registered company and there will be an application process to complete.
How to be taken seriously by suppliers
Before applying it is worth buying a domain name and building a professional looking website. Try to have an email address that matches your domain and company name. You can also set up a LinkedIn account and a LinkedIn page for your business and include them in your email signature. It all helps to make you look like a serious prospect and therefore they are more likely to open an account for you.
The wholesaler or distributor will probably take a quick look at your website. You just need it to look professional and have the correct address and company details on it. You do not need to create a full-blown e-commerce site so just keep it simple.
Top Tip – This is a good opportunity to take your online selling to the next level. You will feel more focused and professional once you have a Limited company or LLC in place and a professional website and email. Not only will the suppliers take you more seriously but also Amazon and your future customers.
Setting up a simple and professional website
1. Firstly you need to buy a domain and hosting. We use Siteground for all our sites as they offer great support and have always resolved any issues quickly. Visit Siteground to get started.
2. Then you need to install WordPress. Luckily on Siteground this is incredibly simple and free. You just click a button and fill in some information and its done.
3. WordPress comes with some preinstalled themes which look okay. For a more professional and customisable website, we like to install our own themes and plugins and we use MyThemeShop for these. You can have unlimited access to all their products for a monthly fee or just choose the one you want. For this site we used the Onepage theme. You can take a look at MyThemeShop here.
For any additional plugins, they can normally be found on Themeforest which we also recommend.
4. You now just need to add a contact form, logo and your company details to your WordPress site. You can then put the site live and you are done.
Opening an account and placing an initial order
Some suppliers may require an initial order to open the account. If they have unique brands and stock then this might be worth doing. It will mean there is a barrier in place and not many people will have access to their products. This, in turn, means there will be less competition when reselling them. You need to see it as if you are paying a fee for this unique access.
Suppliers are generally happy to open accounts for new customers if you look the part but remember it costs them money for each dead account they have so they will be wary. If the suppliers are quite strict and make you jump through more hoops then see this as a good sign. The more barriers there are then the harder it will be for your competition to open accounts.
Will the wholesaler or distributor care if I resell on Amazon or eBay?
We often get asked if you should tell the supplier you will be selling on Amazon. Things have changed a lot in the last few years and most suppliers are now fully aware that people will be reselling on eBay and Amazon. Some of them are even doing it themselves under a different company name. We have suppliers who openly encourage us to resell on Amazon. They will even email opportunities they have spotted where we can buy their product and make a profit.
The brand owner may have insisted the supplier does not sell to people who resell on Amazon as it devalues the product in some way. Therefore we recommend you put more focus on other sales channels when initially setting up the account and try to avoid explicitly mentioning Amazon. If you are selling any products that are vaguely bought for business or schools for example then maybe tell them these are your main customers.
So why open wholesale accounts if the pricing is not competitive?
Here are some of the many advantages to having accounts with wholesalers and distributors;
1. You can backorder popular products that are in short supply. This means you might be the only seller on Amazon for this product so can make good margins.
2. They may offer credit which can be anything from £1000 to £25,000 and more. This can be a huge help with cash flow. They will obviously do credit checks and you will normally find the more you spend the more they increase the credit limit.
3. They run their own unique promos and discounts which are often better than retail deals. Some sellers make a living from just buying deals and promos from distributors. They may then have the lowest price on that product for months and can easily undercut other sellers on Amazon who paid the regular pricing.
4. A lot of wholesalers and distributors will drop ship direct to your customers. This means you never touch the product. It is not as relevant for FBA sellers but if you are also selling on eBay or a website it can be a great advantage. Some may also ship stock directly to Amazon FBA. I would be slightly wary of the smaller suppliers as you may give them ideas to sell themselves on Amazon. Also, the larger suppliers might not be that keen on you selling at all on Amazon.
5. You can use the invoices from these authorised wholesalers and distributors to get ungated in Amazon categories and also particular gated brands. This is a huge advantage. You will also find you have more protection against Copyright or Intellectual Property Policy Warnings and infringement claims. You can reach out to your account manager and they can help get in touch with the manufacturer to get the complaint removed.
Top Tip – You can still buy the products from retail if you see a good deal once you have used the wholesaler to get ungated.
A list of wholesale suppliers and directories in the US and UK
So our overall advice would be to start setting up accounts and testing the water. When we originally started selling we only bought from distributors but then prices were undercut by people doing retail and online arbitrage. As brands and amazon themselves clamp down on this and gate more products it means the opportunities to buy from distributors and make a profit are increasing again. You will be diversifying which we always recommend, opening up more opportunities and also giving your business more solid foundations and long-term prospects.
We use FBA Wizard Pro for analysing the product pricing files we get from our distributors. Most wholesalers and distributors will be able to provide these files. You can quickly upload the files into FBA Wizard Pro and it will pick out profitable products to sell on Amazon. It is very effective software and can save hours of your time trawling through data.