Selling Wholesale VS Private Label on Amazon

In last week's issue of  The Weekly Warrior I spoke about dropshipping as way to get into selling products on Amazon.

Another method that has become more popular of late is buying wholesale products and reselling them on Amazon. This is a good way to get started for anyone who wants to get a side hustle or full time business going that doesn't require as much capital and effort as Private Label selling.

I've sold on Amazon as a Private Label seller and while it was fun to build a brand, if I had known about selling wholesale products I would have chosen that route first.

If you're wondering why wholesale over Private Label? I've got a list of pros and cons that's essentially a cheat sheet to decision-making of one versus the other.

Minimal investment. You can typically order as little as a dozen items or less at a time.

No need to create a product listing. The product page already exists and so does the product number.

Short delays in obtaining stock. You can access wholesalers local to the country you're selling in.

Popular branded products. You can sell products that already have a track record and are in demand.

Inexpensive utilitarian products. Your shipping costs are minimized when buying locally to the end user, so you can still make a profit with low-cost products.

Little to no advertising expense. Selling branded products with strong demand means that people are already looking for them.

Same country, time zones. Dealing with a long-distance supplier, say in China, has a number of challenges. Time difference is just one of them.

Legal liability. None for the product since you're not the manufacturer.

Overall less risk. If you're totally new to selling on Amazon, selling wholesale eliminates many of risks involved.

Competition.  There's a lot of competition from many other sellers and Amazon itself.

Research.  This really isn't a con, it's just something you have to do. The same applies in any business model.

Pricing.  This is an issue since other buyers can fight you for the "buy box" by lowering their price.

Need for repricing software. Since you'll be competing on price to get exposure, repricing software can help. Prices can change quickly, just like the stock market.

Using FBA.  Pretty much a necessity if you want to win the buy box. But you'd want to use FBA anyway, unless you want to be the packer and shipper in your business.

Building a brand. You're creating something new from your ideas.

Responsibility. You are responsible for all decisions about your business & products - from your logos, colours, fonts, packaging, sourcing, etc..

Pricing. You can set the price to what you want. However, the market decides if it wants to pay that price...

Buy Box. You don't have to fight for the buy box when you have a brand the way wholesale product resellers do when many of them sell the same brand of product.

Product Listing. You get to decide how your product is presented through your listing. You create the copy, get photographs, instructions, etc.

Creating a brand & business from scratch.  If you've never done this before, it can be exciting and terrifying. The learning curve is steep

Training.  Even if you have training you have to make all the decisions about what your brand and business will be.

Up-front capital.  You need at least $2000 - $3000 of truly disposable income to start.

Website.  To be credible, you need a website for your brand. Would you buy from a branded company that did not have a website?

Marketing & Social Media. To build awareness and brand loyalty, you need to spend on advertising to create a following for you and your business.

Ordering from overseas.   Unless you already have a very specific local product in mind, or one that you are manufacturing yourself, you'll want to order from overseas suppliers to leverage cheaper costs.

Ordering product samples.  Typically not free. Add shipping to that, then the time it takes to arrive, then communications with the supplier.

Minimum order quantity.  Depending on the type of product, expect that you'll have to order at least 300 - 500 units.

Production lead time. It could take weeks or months before your product is manufactured.

Dealing with foreign suppliers. You'll have to learn a bit about how business is done in the country you're sourcing from. For instance, Chinese New Year means about one month or more of factory downtime because of the huge displacement of workers back to their hometowns and back.  Many workers take this opportunity to change jobs as well.

Planning months or a year in advance. If your product sells well, you need to plan re-orders around the normal ordering process and also factory shutdowns and possible delays.

Factory inspection. You'll need to arrange for a third-party quality inspection of your goods before they are shipped.

Shipping, Customs & Duty Costs. You may only pay a small amount like $2.00 per unit for your product, but shipping, customs & duty can be a killer! Even by sea your 500-unit order could have a landed cost of $10 or more. Then you have to add the Amazon FBA fees at the warehouse (if you won't be preparing & shipping from your home).

So, to sum up...

Given the above, you need to do your research to avoid big surprises.

Even then, life happens and doing business on Amazon is a learning process as for any other business. You may hear of sellers that "hit it out of the park" with their first product. But that's not the norm.

It takes a lot of hustle & grind to build any business, there's no magic pill. But it's really worth it if you know what you want and are willing to stick it out!