One of the best (and most widely used) ways to make money selling on Amazon is by sourcing products at wholesale prices, then selling them at a profit.
This might include items that you private label, or you could take “no name” or existing brands and sell their products.
It sounds simple enough, but in reality there are a number of steps and details that go into sourcing the right products from the right supplier. What should you be looking for in a product? How do you determine the right supplier?
We’ve got 10 tips for successfully sourcing wholesale products for sale on Amazon:
Deciding what to sell is an important first step. You’ve got to take a long term view and think of it as you would if you were stocking a bricks and mortar store. While selling online allows you the flexibility to easily pivot, ideally you want to find products which can provide you with a good source of long-term revenue.
#1. Our checklist
We already looked into the characteristics you should look for when choosing a product for private labeling — the same principles apply to any product you’d like to source wholesale and sell on Amazon.
The product should be:
- Priced within an “impulse buy” range and allow you to meet profit goals.
- Popular enough, but not dominated by competitors (look for a low number of reviews — it will be easier for you to overtake competitors for those products).
- Easy to store and ship so that your costs are kept down.
- Free of any existing patents. (Unless you are getting a good wholesale price for a patented brand and selling that brand name under agreement).
- Simple and durable to reduce your risk of product returns due to damage or not understanding how to use the product.
#2. Start out with some cash
Sourcing wholesale products requires some outlay of cash on your part. Most wholesalers will have a minimum order amount (some as low as $100 or so), and, generally speaking, the more you order, the better the price you can negotiate for the products.
At a minimum, you probably need to start out with $500 to $1000 available for purchasing product. The thing is you have to be prepared that you may lose that investment too if the product doesn’t sell. Most of the time, you can’t return the product to the manufacturer unless it is faulty.
#3. Use resources to help you choose
Amazon is actually a great resource for helping you to choose which products might be good ones for you to pick up and sell. Check out their lists such as “Most Wished For”, “Hot New Releases”, “Movers and Shakers” and “Most Gifted.”
If you want to get an idea of the monthly sales volumes a product is already making, check out Jungle Scout’s estimator tool which will provide you with an estimate of monthly sales volumes based on the product category and the product’s sales ranking in that category.
What to look for in a wholesaler
One of the big assets of a business can be the relationships developed with suppliers. If you’re ever thinking of building up your business to the point where you can sell it, supplier deals and relationships are one of the items which a potential buyer will look for.
So, what should you look for in a wholesaler?
#4. Domestic or foreign?
You may not have a preference either way for where you source your products from, but there are definite pros and cons of each.
For example, many people look to China or other countries in Asia as it is well-known that you can source products cheaply there. However, you then have challenges in locating a good supplier, understanding local business etiquette, language barriers and the possibility of ethical issues (no one really wants to be supplied by a sweatshop, for example).
If you choose a foreign supplier, you’ll also have to consider the costs and hassles involved with importing. You’ll have high shipping costs to get your product to an Amazon warehouse and you’ll probably have to hire a customs broker to help you through the import process. It’s also a good idea to have an agent in the foreign country who works to find you the best quality products at a good price, from a reputable manufacturer. (You could skip this and simply hire a manufacturer online directly from a site such as AliBaba, but you run the risk of not getting a good deal this way). In short, you still need a decent cash outlay first.
Sourcing domestically may mean you pay more for your product (which might not matter, if the product is unique, desirable and you can price it to make a profit). On the other hand, advertising something as “Made in the USA” may be a good selling point for your product.
Domestic sourcing means you will have an easier time with talking to the right people and negotiating, plus you don’t go through the hassles of the import process. For either case, you should also check how long it will take them to produce an order of product and ship it to the warehouse. You need to know this for your stock management.
#5. Product quality
For starters, no manufacturer is EVER completely free of product defects — you only need to look to major recalls from large vehicle manufacturers to verify the truth in that. If a company is claiming to be free of defective products, run away.
That being said, the important part is that they are set up to manage and mitigate any defective or damaged products. Look for manufacturers who use a Quality Management System, such as ISO 9001. Depending on your product type, there will be industry quality control standards which should apply (products such as skincare or supplements are good examples). You will need to research and know what these are so that you can check a supplier is suitably certified.
Of course you should always ask for samples before purchasing in bulk too, just don’t let one good sample be your deciding factor. You should always have done your homework on required certifications too.
#6. Are they experienced?
Some manufacturers out there will show you plans or prototypes for products they have never actually made before. This doesn’t always mean it won’t work out, particularly if your product is unique, but you’re more likely to get better results from a manufacturer who regularly produces the product you want so is very experienced with getting it right. See if they have any verifiable references from satisfied customers.
#7. Are they legit?
No one wants to be scammed by a supposed manufacturer they discover online. Unfortunately, marketplaces such as AliBaba have been known to attract fraudsters, so do a bit more work checking up on how legit a business is.
Here are some clues:
- They have a verifiable business address listed. All manufacturers have a physical address, right?
- You find good reviews about them online. (You could also try Googling “their business name, scam” to make sure they haven’t been cited by anyone for illegal or misleading activity).
- You can see they are a registered business (easier to find for domestic manufacturers).
- They have verifiable certifications.
- (For AliBaba): they are a gold member.
- (For AliBaba listings): they have registered capital of RMB500,000 or more (this means they can pay their bills, or refund you if you need to return defective products).
- They offer payment methods other than Western Union.
- Check out their website; is it of good quality with care shown? Look for high quality images, good product descriptions and clear information for contacting them. If they won’t take care of their “shop front”, this could be a red flag about what’s going on out the back.
- There are no other red flags. For example, if you are looking into a US-based supplier, can you contact them on a legitimate phone number and get through to the company?
There is no absolutely fool-proof method for ensuring your manufacturer is legit, but these items should give you a strong indication.
Look out for these scams…
Unfortunately, there are many scammers present online including sites where you’re looking for manufacturers. Here are some to watch:
#8. Brand name products
The adages “you get what you pay for” and “if it seems too good to be true, it probably isn’t true” apply here. Cheap brand name products (especially in consumer electronics) are almost always counterfeit. This can not only get you in trouble with the true patent holder, but cost you a ton of money when you receive a “cease and desist” letter and have to get rid of your excess stock. Sometimes fines will apply too.
#9. Faked paperwork
Any kind of paperwork which may be produced to assure you of authenticity can be faked. It is good practice to always verify those documents with the issuing authority. If this is difficult for you to do, there are services such as China Checkup which exist to help ensure sellers are dealing with legit companies.
#10. Poor quality (or no) products
Sometimes buyers may receive products which don’t live up to the quality they were expecting, or, they may pay for products which never arrive at all. Unfortunately, you may kiss your investment goodbye in these kinds of cases, but there are some options open to you.
- Always pay by Paypal or via a bank credit card. This means you can file a dispute and hopefully receive at least some money back. Paypal also has a program where they hold funds until you’ve received the goods and are satisfied.
- Some manufacturers insist upon payment into their bank account. The first preference should be Paypal or bank card (Note: NEVER give out a number for a debit card which links directly to all of your bank account funds). However, if you’re certain the company is legit, make sure you’re paying into a company and not a personal account.
- Requests for unexpected extra payments to “cover costs” are a major red flag. Don’t. Do. It.
Your decision for where to go and who to do business with when sourcing your products wholesale shouldn’t be taken lightly. This is not a five minute Google search; if you want to ensure good quality, good price and a legitimate company then you need to put your due diligence in with research.
Be aware of the red flags and scams to avoid and always err on the side of more research rather than a hasty decision. If you feel you need it, look for a company who can help you verify the legitimacy of a manufacturer or a “middle man” who can ensure quality.
Best of luck with sourcing profitable, high quality products!