There are many ways to buy wholesale to sell on Amazon. How do you maximize your profit and turn it into a cash flow business? Listen in to today’s episode.
What do you mean by “Amazon Wholesale”?
The traditional model of Amazon Wholesale
Traditionally buying wholesale for Amazon means buying products in a business-to-business through a distributor or wholesale company and then distribute.
Usually, someone just sells those products from the distributor and doesn’t have a direct relationship with the brand when you buy wholesale to sell on Amazon.
That didn’t work for Dan as not enough capital and couldn’t access discount tiers when you buy wholesale to sell on Amazon.
Dan and Eric’s model of how to buy wholesale to sell on Amazon
The aim is to help manufacturers in the marketplace.
Firstly, you need to educate the brand as to the value of Amazon as a platform.
Amazon was 55% of e-commerce sales last year in the USA.
More people will see the product on a day than in any store etc.
Foot traffic vs. Online traffic
Dan realised could provide a lot of value to companies.
Combined that with the ability to find great products when you buy wholesale to sell on Amazon.
Why buy wholesale to sell on Amazon?
What results can you get from Amazon Wholesale?
The best thing is this is governed by systems and processes.
They’ve worked through various models.
This works way better than anything they’ve done before.
What goal do you want to achieve with your Amazon wholesale business?
Do you want to make crazy money millions?
Or a great lifestyle?
Early on that was confusing for Dan – they thought the path to freedom was the money generated.
It turns out that what mattered more was creating systems and processes.
Day to day work on an Amazon wholesale business
Dan has no day to day role in Amazon.
He hasn’t opened an Amazon account for 2 years!
They have 2 domestic employees (in the USA) and 2 in the Philippines that handle all operations.
Dan DOES have input in agreements with manufacturers.
An employee asked Dan to review – what do we want from a relationship as well as what they can offer.
It’s not passive but more passive than most business models.
Also, it delivers a sizeable profit!
The average margin for Wholesale on Amazon is 20-25% net for Dan and Eric. As a cashflow business, that’s great.
1-3 hours obligated to the business – 35-40% ROI month to month.
With Private Label, there are a lot more decisions to be made eg designing product, sourcing etc.
Improving easier than creating
Making something better that is already good is also much easier than creating or finding a new product.
And you get predictable income when you buy wholesale to sell on Amazon.
That’s why Amazon wholesale has advantages over the private label as a model.
Goal – more time and freedom
Spend more time with kids and provide with experiences Dan didn’t get.
Dan asked them before school started, what do you want to do?
Daughter (9) – I’d love to go to LA and see Santa Monica pier.
That day Dan called into office – off rest of week – booked ticket for rest of week
Position kids to have the mindset for freedom.
Another example – employee vacation
One rule – no talking shop about business.
Over the 2 weeks, never talked about business.
Dan worked for a retail company selling eg Pokemon cards.
Saw amazing growth – Dan played a fair role in that.
Saw how to see how to grow a business.
Was there after college 5 years – $1.5M/yr sales up to $25M
Went from 13th employee to 200 people.
Starting on Amazon – the impulse
One of the employees came in and gave notice. Making more money on Amazon part-time than in day job.
Started company back in December 2011.
Dan was actually let go from the job which was traumatic.
He enjoyed his job and in theory enjoyed his job.
But was afraid of debt because it ravaged his mum.
He bought a house outright, paid off wife’s student loans.
Replaced a roof which was very expensive.
When got terminated – had only $3000 in the account and lots of bills and a 1-year-old baby.
Told wife -“I quit my job today to do my Amazon business”.
He was actually fired! So he just faked bravado.
Starting the business
Couldn’t use money out of the account.
Got credit card for $600.
Did RA – grew it organically.
Working very hard. The budget grew fast.
$850,000 in sales, maybe $250K in profit!
The 2nd year, worked even harder – 70 hour weeks.
But ended up $950K sales end of the year.
That Thanksgiving – Black Friday is the biggest shopping day of the year.
For RA if you’re not shopping, you’re missing an opportunity.
In the USA, you have to be out on Thursday – meant missing out on Thanksgiving!
Dan and his partner talked about – what happens if we can’t work 70 hours/week
Other businesses didn’t work
Dan tried a Retail store but shut it down.
Website my little pony collectables
- Had seen sales via RA
- It produced profit but wasn’t passion or saleable
- Didn’t have the knowledge to drive traffic etc.
- Sold that business for a little money but not a lot.
Private Label on Amazon
- 1st product successful – good at selecting products.
- Not great at listings.
- Probably $200K profit off the first product.
- But when the competition showed up, they were more skilled.
- Outranking them etc. – product dropped off.
- 1 product fell on the face.
- Another one breakeven plus a bit.
- Couldn’t get consistent.
Private Label related products
- Wanted a way to scale time – found wholesale
- Didn’t know what they were doing!
- No real marketable business.
- Research how to start selling wholesale
- Got a list of distributions and went to shows
- Got Giant catalogues – were these sellable? Margin?
- Margins thin.
- Trade show ASD – tried to negotiate but not comfortable
Going direct to manufacturers. – the start of Amazon Wholesale
Dan had a revelation one day. He looked at Eric – why do I need to carry 55 distributors to see who carries this product?
They just called the company direct and said, “I’d love to carry this product.”
Which distributors carry this product?
Happy to let you set up an account with us when you buy wholesale to sell on Amazon.
How much do we have to buy?
The Minimum Order Quantity was just $250
Discount tiers – placed $500 order – product comes in and then ship it out and make money.
“We’re not looking for more Amazon sellers”
The next hurdle – brands said, “We are not looking for more amazon sellers.
Product already being sold via Amazon – would be happy in a new channel. “
What they were saying made sense – we don’t want so much competition as to create a race to the bottom with price.
- One company was a supplement line that Dan had taken – had emailed them. Wanted to get an account to have references.
- They replied – not looking for more Amazon sellers.
- Called him up. They said – look at our sellers – we have all these huge sellers – doing $100m/a year on Amazon.
Adding value on Amazon to wholesalers
The manufacturer asked, “What can you offer me that I’m not already getting?”
Dan actually knew the product – something he understood more than most.
Dan said: “Give me 5 minutes and I’ll show you why you should work with us”
Dan’s pitch to the brand owners for a wholesale deal
The listing looks good to Bob.
Now let’s look at your competitor’s page – PL page – optimised, great pics, great title, vibrant bullets, Amazing listing. Great reviews.
It took him 3 seconds to see the difference.
You and I know the quality of the product.
As a consumer, which would you buy though?
Offer personalised attention to brand owners
“To the other sellers on Amazon, you’re just a number. You’re no. 117.
They have maybe 50 brands.
Dan – I’ve only worked with one other company. But I understand Amazon.
I’ll make sure the listing is always up to date; that somewhere deals with feedback etc.
All you need to do is let me carry the product when you buy wholesale to sell on Amazon.
If you don’t see results, terminate me as a seller!”
They did EVERYTHING they promised – the manufacturers just want the results.
Dan and Eric out-hustled the biggest sellers on Amazon.
Then they just replicated the process for other product lines.
Wholesale deal products are ALREADY selling on Amazon!
They are already selling well.
So you have a real recipe for success.
It’s way simpler than trying to get a private label product to rank.
How does Amazon wholesale on Amazon compare to other Amazon sourcing models?
Retail/Online Arbitrage? (Or thrifting)
Retail arbitrage or online arbitrage This is scalable – but DIFFICULT to scale.
Everything you do is direct input. You have to physically do the research for RA. For OA, you have to do the research.
- Brands don’t want you selling on Amazon. There is a lot of resistance and there is red tape these days.
- You can’t replenish a product if it sells.
Compare to wholesale
Reduces the complexity of supply
Any time you have to
Amazon Private Label
A similar model to Amazon Wholesale except you need a bigger set of skills:
- Create listing
- Also product design and sourcing.
In wholesale, you just improve on an existing listing.
The typical success rate on a product in Private Label
There are different definitions of success:
- Recover funds – that’s one level.
- Continue with products for profit – that’s quite another.
For a friend, the definition of success is: what product makes it past 6-month point?
The answer is about 20% of the products. Bear in mind this is for a very experienced and successful seller.
He owns the IP etc.
An average product launch costs $10-15K. So effectively, he is spending $30-40K on discovery ie finding out which products work and which don’t.
The skills cross over from Private Label
The downside of wholesale compared to a private label – you’re competing for the buy box.
On the face of it, that’s an issue.
But the vast majority of the brands don’t want price fluctuation.
They want the product to retain its value.
You don’t see the same shift in price as with Retail Arbitrage.
Roughly if there are 3 sellers, same price, you can say you’ll get about ⅓ of the sales.
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How much does it cost to get started with Amazon wholesale?
At around 30% ROI, You can often turn $2K into $2.6K within a month.
Then you can rinse and repeat.
Most of the manufacturers based domestically
Worked with USA, UK, Canadian brands.
Contact domestic brand
- Usually, place an order within a day.
- Get it into amazon within a week.
- Time to market is typically 7 days.
Order only 1 month’s inventory
$2K order for a product with $2.6K expected.
Dan knows the cost and what product goes for. Makes it a lot cleaner in terms of cash flow.
For those who are really good at Amazon private label, Amazon wholesale is a great opportunity.
Even if Dan and Eric became amazing Private Label sellers tomorrow, they would continue to do Wholesale and manage risk.
It’s also an easy cashflow engine.
Also, every time you skip over a product idea for private label, it’s a potential wholesale product you could get up within 7 days.
Bulk up your Own store’s products via Wholesale
A lot of the goal for Private Label sellers is to create a product on Amazon then create store off Amazon.
But to start with, you often don’t have enough products as a private labeller to build a viable store.
A lot of his guys in the community build-out they offering on the store via wholesale.
Check out their Website:
Other Amazon Wholesale help from Dan Meadors:
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Watch my full interview with Dan Meadors
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