Many third-party sellers are making money by sourcing items and reselling on Amazon. Let’s learn more about what this involves and what tactics you can use to increase profits in this guide for sellers.
What is an Amazon Reseller?
Amazon’s dominance is legendary in the world of online marketplaces, yet as the platform has evolved, so too has the way in which products are sold on the site.
This, inevitably, has in some circumstances, led to confusion. With references made to Amazon ‘sellers’, Amazon ‘resellers’, FBA sellers and FBM sellers, it’s easy to understand why you might become confused about the whole set-up and how you should get started with your ecommerce business. In particular, what type of seller you should be!
Reseller or Seller: Which is it?
Well, put simply, an Amazon Reseller is an individual or a company that sources products at wholesale – or at least in bulk form – and then sells (resells) them on Amazon.
Back in 2010, the Amazon marketplace consisted entirely of resellers. These retailers often already had a brick-and-mortar store or a stand-alone website, with some simply using the Amazon dropshipping model.
These businesses started to utilise Amazon to ensure they could easily reach more customers. They were ‘reselling’ on the site, which is where the term ‘reseller’ originated.
Critically, these businesses also had access to some big brands because they had successfully built relationships with suppliers over many years.
As the Amazon business model grew more popular and the number of resellers increased, so inevitably did the competition. Until eventually, these resellers found themselves in a situation where competition increased to the extent that prices had to be dropped, their margins became lower, their fees increased, and they were left with nothing to differentiate themselves from all the other resellers!
This was and continues to be a big issue for resellers as they face pretty tough challenges on Amazon, simply because there is no limit to how many resellers can list a product.
By its very nature, the Amazon marketplace is designed to make it super easy for anyone to rock up and list products – particularly with Amazon’s fulfilment system, FBA. And of course, those resellers include the brand owners themselves who can offer low prices which are difficult to compete with.
Ultimately this means lower margins and a race to the bottom.
Is it Worth Reselling on Amazon?
It’s a challenging journey, with time and patience required, particularly as you could find yourself competing with resellers who are well established and who have refined their selling strategies over many years.
There is money to be made. But how much will depend on your strategy, your products and the effort you put in.
With more and more private label brands coming to market, ‘reselling’ has morphed into something much more than simply selling already established brands. In fact, resellers are discovering that by developing brands of their own, they can become the ‘exclusive reseller’ of that brand.
However, this also means that competition is no longer seen only between national brands, but between national brands and private label brands and between differing private label brands too!
So, you can see why some would-be Amazon Resellers might question whether it is the platform for them.
Despite this competition though, there are still a vast number of Amazon resellers making decent profits.
9 Ways to Succeed When Reselling on Amazon
To ensure your success when reselling on Amazon, there are several key aspects which you should consider optimising:
- 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
There are two approaches to consider here:
- Sell products with proven success and high competition.
- Sell products with no proven success and low competition.
If you are a newbie, then B is your go-to option even though success is unproven. A level of product research is, of course, required as there is a risk. There may be a reason why no resellers are listing the product yet, for example, it may not be in-demand, or profit margins may be small.
Still, it is also an opportunity to immediately win the Buy Box and improve your visibility. The Buy Box is the box on the right side of the Amazon product detail page, where customers add items to their basket. It can help you firmly establish yourself as a top seller in your chosen category without the worry of competition – more on this later.
Option A should be considered if you have some experience with reselling and already have a strong seller rank, although you will run the risk of much lower profit margins.
Top Tip: To discover whether a product has high or low competition, search for it on Amazon using it’s ASIN (Amazon Search Identification Number). This is found within ‘Additional Information’ on the bottom right of the listing, and then look at the total number of sellers listing under that ASIN.
2. Source Quality Products
Crucially, it doesn’t matter whether you decide to go with option A, low competition products, or option B, high competition products when it comes to quality.
Your brand will ultimately be defined by the products you sell. So, high-quality products can quite easily position you as a high-end reseller which in turn allows you to increase your prices with a positive knock-on effect to your margins. And of course, reputation counts for a lot too. Inferior quality goods might mean you save money during the sourcing process but will result in high levels of returns and bad reviews. It’s just not worth it.
3. Source High Margin Products
Ultimately you could end up being tempted to source a fantastic quality product but discover it has a low-profit margin. This is precisely what you should avoid if possible.
Having a superb quality product is great, but if you are only making a few pennies profit, it’s not worthwhile, so a happy medium must be found.
When sourcing products and negotiating with suppliers, make sure you are always in possession of all the facts and figures, including costs and fees. It makes it easier to work out your profit margins, which ideally should be a minimum of £5.00 per unit sold.
Reselling on Amazon: Branding
Build Your Own Brand
Building your own brand (and private label) is a sure-fire way to eliminate at least some of the immediate competition as an Amazon reseller and will contribute to your success. You’ll be in the perfect position to grow your business and your profits so you should focus on creating a brand that you can easily add more product lines to.
A mistake that many Amazon resellers make is to build their brand around one product. This makes it challenging to scale your business. Instead, think about your brand as a whole rather than just your product.
For example, suppose you want to sell baby bouncers. In this case, you can sell those as just one of your products and your brand will become a ‘baby products’ brand to which you can add other relevant branded products or private label products later on as your business expands.
Reselling on Amazon: Pricing
We all know that competition is rife on Amazon and if you choose product approach A (high competition products with proven success) as discussed earlier you are going to have a more challenging job to break into the market.
However, proven products obviously already have proven sales, so by choosing to source and sell a popular product you have the advantage of potentially bringing in immediate sales and a boost to your Amazon BSR.
Or will it?
If you’re up against established sellers with great rankings, you won’t necessarily make those sales nor get the boost you expect!
This is where your pricing comes in. By setting a low price, you will have a greater chance of winning the often elusive Buy Box and attract an audience looking for competitively priced products.
The disadvantage of this strategy is that by discounting your products, not only will you impact your profit margins, it’s hard to raise your prices later on. You then run the risk of establishing yourself as a ‘cheap’ brand – even if your products are of high quality, so you must spend time calculating your prices before setting them.
Reselling on Amazon: Seller Ranking
1. Utilise FBA
Successful Amazon reselling also depends on your seller ranking, and one sure-fire way to boost your ranking is to use Amazon’s fulfilment service (FBA).
FBA can handle all your storage, picking, packing and shipping processes along with customer service and even your returns. Importantly, Amazon favours FBA sellers so utilising the service can help you rise up the search results and win the Buy Box.
This is even more significant if your competitors are not using FBA as you’ll immediately be one step ahead with a substantial competitive advantage.
FBA isn’t free, so you will need to take into consideration the slight knock-on effect to your profit margins, but in this case, the benefits certainly outweigh this as your seller ranking is almost guaranteed to improve.
2. Win the Amazon Buy Box
Your seller ranking can also be improved by simply winning the Amazon Buy Box. By being in possession of the Buy Box, you will always be considered the best seller to purchase from by any buyer visiting the listing.
Winning the Buy Box requires all of those critical factors discussed previously:
- Competitive pricing
- Fulfilment by FBA
- A quality product
- Positive reviews
- Keyword optimisation within your listing
Reselling on Amazon: Strategy
1. Always Have an Inventory Strategy
Your inventory is the crux of your reselling business, yet it often gets completely overlooked. If you have piles of surplus stock hanging around taking up space and tying up capital, then that’s an unnecessary expense which will impact your profit.
Likewise, a lack of stock means you could be sailing too close to the wind and end up being unable to fulfil your customers’ orders.
One of the critical tasks when reselling on Amazon is to know your numbers. Run through your calculations thoroughly and forecast your sales. This way, you will know what levels of inventory you will need and when.
2. Start Small and Grow
While it’s tempting to want to build your Amazon reseller business quickly, it’s better to start small and slow and actually learn from your mistakes – because you will make them – nobody is perfect!
Aim to start by reselling just one product, and then expand. You’ll get to understand Amazon’s algorithm and its quirks and you can work on refining your methods and strategies ready to add product number two. It’s a simple ‘rinse and repeat’ approach which will make it easier for you to scale.
Reselling on Amazon needn’t be complicated, and is surprisingly easy to start up, but it is always going to have that competitive edge as it’s harder to scale, particularly if you decide to resell established brands rather than taking the private label route.
Established brands don’t necessarily want hundreds of resellers all listing their products, especially as many brands will simply list those same products themselves, so the private label route is a sensible option.
Rather than finding yourself caught up in a race to the bottom by attempting to resell products with high competition, instead consider bringing new products to Amazon as this can be the game-changer and one of the most crucial elements to your success when reselling on Amazon.
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