Hey there! I‘m William, a successful Amazon FBA seller and wholesale expert here to provide you with an ultimate guide to getting started and succeeding with the Fulfillment by Amazon (FBA) wholesale business model.
Through years of experience managing multi-million dollar Amazon wholesale accounts, I‘ve seen firsthand how selling name-brand products in bulk on Amazon FBA can be an extremely lucrative business when done right. But it does require upfront effort and capital before you can start unlocking the real power and profitability of Amazon wholesaling.
In this comprehensive 2500+ word guide, I‘ll share my insider knowledge to help you understand exactly what‘s involved in the FBA wholesale model, how it compares to other Amazon seller approaches, actionable steps to get started, and tips to ultimately succeed long-term. Let‘s dive in!
What is the Amazon FBA Wholesale Business Model?
The Amazon FBA wholesale business model involves purchasing large quantities of name-brand inventory directly from manufacturers or distributors at discounted wholesale rates, then reselling those products through your Amazon Seller Central account at marked-up retail prices.
As an FBA wholesaler, you become the middleman between the wholesale suppliers producing goods and the end consumers purchasing them on Amazon. The goal is to use your buying power to obtain volume discounts, then leverage Amazon‘s marketplace, infrastructure and audience of loyal shoppers to sell those goods at higher margins.
For example, let‘s say you negotiate a deal with an electronics wholesaler to purchase Bluetooth speakers for $10 per unit when buying a minimum 500 units. You then send that pallet of 500 speakers to Amazon‘s warehouses to be stored and fulfilled via Fulfillment by Amazon (FBA). Finally, you list the speakers on Amazon for $19.99 per unit. After fees, you could potentially net $5-8 in profit on each speaker sold. Scale that up across thousands of units, and the earnings can be significant!
According to Marketplace Pulse, the wholesale model makes up over 20% of Amazon‘s Gross Merchandise Volume, generating tens of billions in sales annually.
Here are some of the key benefits that make FBA wholesale an enticing business model:
- High Profit Potential: Buying at low wholesale costs and marking up for retail provides healthy margins. Discounts for volume purchases improve this further.
Minimal Effort Selling Branded Goods: Source high-demand name-brand goods rather than expend effort designing your own products.
Amazon‘s Infrastructure and Audience: Leverage Amazon‘s warehouses for easy order fulfillment. Tap into their 200+ million loyal buyers.
Fast Startup Time: Begin selling proven products quickly rather than waiting months to develop private label goods.
Cost Efficiencies: Combined wholesale order volumes provide economy of scale. Amazon handles fulfillment/customer service.
However, FBA wholesaling also comes with some unique risks and challenges:
- Significant Upfront Capital Required: You need cash flow to place large initial inventory orders – often thousands of units. Bootstrapping can be difficult.
Lower Margins Than Private Label: Markups over wholesale prices are usually in the 30-50% range at best, less than customized products.
Inventory Management Complexity: Forecasting demand, accounting for spoilage/expired goods, managing return logistics at scale.
Little Brand Control: Unlike private label, you rely on the reputation of the brands you source rather than building your own.
FBA Fees Add Up: Amazon‘s fees for warehousing, fulfillment and advertising eat into margins.
If you have the appetite for those risks and can secure sufficient startup capital, FBA wholesale trading lower margins for higher volumes can become a very profitable endeavor. But it takes work and the right approach. Next let‘s examine how it compares to other popular Amazon seller models.
Wholesaling Compared to Retail Arbitrage and Private Label Selling
To understand the nature and opportunity of FBA wholesaling, it helps to contrast it with retail arbitrage and private label – two other common Amazon seller approaches.
Retail arbitrage involves sourcing inventory by purchasing products at clearance or discounted rates from retail stores, then reselling them at higher prices on Amazon for profit.
A key difference from FBA wholesaling is the volumes – retail arbitrage focuses on finding one-off discounted goods at retail stores vs. buying pallets of inventory directly from manufacturers and distributors.
Key Attributes of Retail Arbitrage:
- Source by visiting retail stores like Walmart, Target, Ross in search of marked down items and buying at temporarily discounted rates.
Requires less upfront capital – often under $1000 to get started buying small batches of goods.
Typically focuses on buying just 1-10 units of an item at once. Profits on retail arbitrage come from many small wins.
-Finding reliably discounted name-brand items takes significant time and effort hunting both online and in-store. Hard to consistently source the same products at scale.
-Still utilizes FBA for easy fulfillment but at much lower individual order volumes.
Retail Arbitrage Pros
- Very low startup costs – ability to bootstrap beginning inventory.
Nimble – easy to pivot when specific products go out of stock.
Retail Arbitrage Cons
- Inconsistent sourcing at scale. New inventory always needs to be found.
Lower volumes make it harder to qualify for wholesale pricing.
Amazon limits how many identical items you can sell without approval.
Private Label Selling
Private label products are created by sourcing custom manufactured goods produced to your specifications and branded with your own logo and packaging.
Rather than reselling name-brand goods, private label sellers focus on product design, branding/marketing and controlling a unique product not sold elsewhere.
Key Attributes of Private Label Selling:
- You design (or hire designers) to create a custom product, logo, packaging.
Manufacturers are sourced typically from Asia to produce the goods. This can take weeks or months.
Requires significant upfront investment in product development, inventory, marketing. $5,000+ startup costs are common.
Margins typically range from 50-100% over manufacturing costs.
Full control over branding and ability to set a unique market position.
Private Label Pros
- Higher profit margins thanks to product uniqueness.
Ability to differentiate with niche products and branding.
Tends to be less direct competition on Amazon.
Private Label Cons
- Very high startup costs and long development timelines.
High risk if products fail to resonate as expected with consumers.
Manufacturing and shipping complexities when sourcing from overseas.
FBA Wholesale Offers a Balance
Examining retail arbitrage vs. private label shows that FBA wholesale strikes a balance between both models:
- Requires more capital upfront than retail arbitrage but less than most private label ventures. Tens of thousands in investment rather than hundreds of thousands.
Faster startup time by selling proven products immediately vs. months of manufacturing and product development.
Leverages Amazon infrastructure and loyal customer base like other approaches.
Profit potential not as high as private label but stronger margins than one-off retail arbitrage.
If you want the fast startup and advantages of selling established brands along with the volume pricing benefits Amazon provides, FBA wholesale can be an appealing "Goldilocks" compromise.
Now that we‘ve compared the models at a high-level, let‘s get into the step-by-step process for starting an FBA wholesale business.
Step-by-Step Process to Start an Amazon FBA Wholesale Business
If you‘re convinced that FBA wholesaling is a good fit, use the following step-by-step checklist to launch your own profitable wholesale selling business on Amazon:
Step 1: Register as an Amazon Pro Seller Account
The first step is upgrading your seller account. Register for an Amazon Pro Seller account to access crucial features like:
- Bulk uploading high volumes of product listings instead of manual entry.
Enhanced inventory tracking and sales reporting to optimize volumes.
Volume-tiered pricing – the more you sell, the bigger the discounts on Fulfillment by Amazon (FBA) fees.
Ability to run sponsored product ads to promote your brand and offers.
The Pro Seller plan costs $39.99 per month but saves tremendously over the Individual plan thanks to benefits like volume-based FBA fulfillment discounts and bulk listing tools.
Step 2: Identify Profitable Wholesale Products to Sell
Conduct thorough product research to identify quality items that:
- Already have strong sales and existing demand on Amazon. Let Amazon data guide you.
Are priced competitively to allow your desired wholesale-to-retail profit margin.
Have relatively low competition from other sellers. Use tools like Jungle Scout to analyze.
Great places to find lucrative wholesale products:
- Filter Amazon Category Best Seller lists by high sales volumes but lower seller count.
Use keyword research tools like Helium 10 cerebro to identify high-traffic search terms with low competition.
Check wholesale directories like SaleHoo that reveal distributor pricing on popular items.
Monitor trends using Google Trends and Amazon Movers & Shakers.
Thoroughly evaluate each product opportunity – purchase samples when possible to assess product quality. Read reviews. Avoid fad products with temporary demand spikes and lean towards proven evergreen sellers. Identify gaps where consumer demand exceeds seller supply for a product – that‘s your opportunity!
Step 3: Find Reliable Suppliers and Negotiate Volume Discounts
A key step for consistently sourcing profitable wholesale inventory is partnering with reliable suppliers for the products you want to carry. Recommended approaches:
- Many brands list their wholesale application process right on their website. Apply to those of brands that align with the products you want to focus on.
Search industry directories like ThomasNet to find manufacturers and distributors of relevant products.
Attend large trade shows for your product category to network with potential suppliers in person. Exchange business cards and product catalogs.
Get referrals from other established wholesale sellers – most are happy to share their suppliers since they likely won‘t carry competing SKUs.
Once connected with potential suppliers, vet them thoroughly – order small test batches, check references, confirm they can support the volumes you require. Then work to negotiate the best possible wholesale pricing:
- Build rapport with sales reps by placing small initial orders with prompt payment.
Offer volume commitments in exchange for increased discounts – pledge to buy X units over Y months to get better cost per unit.
See if you can get pricing in line with large nationwide retailers as your orders ramp up.
The right wholesale partners are invaluable for consistent supply and maximum profit margins. Invest time to find and cultivate these crucial relationships.
Step 4: Obtain Business Registrations, Licenses, Taxes
Make sure your business is properly registered and compliant with taxes:
- EIN: Apply online with the IRS for your Employer Identification Number – basically an SSN for businesses.
Sales Tax Permit: Required in most U.S. states to resell goods. Apply through your state revenue/taxation department.
General Business License: If your state requires, obtain a general business license. Check state and local requirements.
Working with a sales tax accountant is a smart move when volumes exceed occasional selling. Get this foundation solid from the start.
Step 5: Enroll in Amazon‘s FBA Program
Fulfillment by Amazon (FBA) provides the warehousing, picking, packing, shipping and customer service that makes managing high volumes possible.
To get started:
- List products in your Seller Central account per Amazon‘s requirements.
Prep and label products to Amazon‘s specifications for FBA processing.
Create your first FBA shipment for your pallet(s) of inventory. Send to Amazon‘s warehouses.
Flip the inventory from "Fulfilled by Merchant" to "Fulfilled by Amazon". Now Amazon handles everything.
Yes, FBA does deduct fees for storage, fulfillment, and optional services like advertising. But it‘s a tradeoff well worth it at wholesale volumes. The time and overhead you save hugely outweigh the incremental fees.
7 Keys to Success When Wholesaling on Amazon FBA
If you follow the checklist above, you‘ll have the core foundations in place to sell wholesale on Amazon FBA. Here are some additional tips I‘ve learned over the years for optimizing and finding long-term success as an FBA wholesaler:
1. Strategically Diversify Your Mix of Products
Carry a smart blend of products to maximize sales, mitigate risk, and tap into multiple placement opportunities:
- High-Volume Essentials: Consumables with steady reordering like laundry detergent, batteries, diapers. Lower margins but make up for it with continual demand. Get the listing perfect.
Trending Hits: Capitalize on hot products like fidget spinners and air fryers while demand is high. Stay on top of trends.
Niche Goods: Specialized hobby items or gear with dedicated enthusiast buyers and limited competition on Amazon. Become a category expert.
White Label Filler Items: Generic unlabeled items like phone chargers and HDMI cables that complement your brand‘s core products.
Seasonal Items: Relevant products around major holidays, events and seasons. Forecast demand and load up inventory early.
2. Bundle Complementary Products
Bundling products that often sell together boosts order value. Someone buying a Fitbit is likely to also want bands and screen protectors. Offer bundles and increase average order size.
3. Use Amazon Promotions Extensively
Take advantage of Amazon‘s built-in traffic and marketing with promotions like coupons, lightning deals and sponsored product ads. Drive demand for excess inventory and new product launches.
4. Plan an Inventory Sell-Through Strategy
Plan ahead for liquidating slower-moving stock to free up capital for faster-selling items. Run promotions, sell to liquidators, donate. Don‘t get stuck holding obsolete inventory.
5. Forecast Demand and Restock Aggressively
Staying in stock is crucial – use sales velocity data and seasonality. If you sell out of an item, buyers may migrate to competitors. Restock popular products aggressively.
6. Specialize to Become a Category Expert
Resist the temptation to sell too broadly across multiple categories when first starting out. Specialize your wholesale focus to become an expert.
7. Invest in Solid Accounting From the Start
As your Amazon revenues scale into higher volumes, don‘t neglect the accounting. Invest in a CPA skilled in ecommerce accounting and inventory management.
Why Amazon FBA Wholesale is a Compelling Model
In closing, let‘s recap why Fulfillment by Amazon wholesale can be such a solid business model:
- Mitigated Risk Selling Established Brands: Let manufactuers handle product development. Just focus on marketing and selling proven name-brand goods.
Volume Discounts Increase Margins: The more inventory you buy, the better wholesale pricing you can negotiate. Buying power is leverage.
Leveraging Amazon‘s Infrastructure and Audience: Amazon‘s warehouses store thousands of units. Prime shoppers provide a built-in audience.
Fast Startup Time: Begin selling profitable products in weeks versus spending months developing your own private label brand and merchandise.
Rewarding Economies of Scale: Combined inventory buys provide volume efficiencies. Lower fulfillment costs by utilizing Amazon‘s infrastructure.
Ready to Dive In?
I hope this detailed guide gives you the foundation to understand the FBA wholesale model, helps you evaluate if it aligns with your goals and capabilities, and provides actionable steps to get started.
Wholesaling isn‘t easy. But by using my tips above and the step-by-step walkthrough, you‘ll be well-equipped for finding success. Remember to start niche, reinvest revenue to scale purchases, and leverage Amazon‘s powerful commerce engine to your advantage.
If you need any specific guidance getting your FBA wholesale business off the ground, don‘t hesitate to reach out. I love helping fellow sellers maximize their success. Here‘s to dominating Amazon wholesale!