There are several ways to launch a business on Amazon. While hard work will make a lucrative business out of each one, there are pros and cons to every avenue. In this episode of Amazon Seller School, Todd breaks down his ideas on all three selling strategies so stay tuned for expert advice!
Retail arbitrage means you hit different retail stores (Walmart, Target, Goodwill), purchase products, and resell them on Amazon. You can even scan products to determine if they’ll turn a profit based on their price and purchasing history. Online arbitrage is the same idea but instead of retail stores, you’re purchasing products from different websites and using coupon codes and credit card points to snag discounts.
Pros? Retail arbitrage is an easy way to get your feet wet. You’ll learn the ropes of selling on Amazon from price comparison to finding discounts to shipping and figuring out what’s profitable. Because all it really takes is $50 at Target, retail arbitrage is low risk. The cons? It’s incredibly hard to scale this type of business and if you’re hit with an inauthentic claim or trademark violation, receipts from retailers won’t bail you out.
Private label means you’ve developed your own brand or product to sell on Amazon. It’s a great opportunity if you’re passionate about a particular product. But you’ll need to take your business outside of Amazon if you ever hope to sustain it. Competition on Amazon is stiff and it takes a tremendous amount of work to build your own brand from the ground up. You’ll need unique selling points to stand out and because Amazon prioritizes brands and wholesalers above all else, there’s a good chance you won’t see sales.
But if you’ve got a passion – go for it.
From Todd’s experience, selling wholesale on Amazon reaps the most profit with the lowest risk. You purchase products that are already selling well from brands or distributors and resell on Amazon. It doesn’t take a large investment to get started and tools like Keepa and Jungle Scout help you predict what will sell. There’s always the risk of competitors undercutting your prices and it takes consistent relationship-building to snag discounts and win exclusivity, but all-in-all, wholesale equals private label with a lot less risk.
Nothing on Amazon, or in business, is easy. While wholesale may be less risky, success still takes patience, persistence, and endless phone calls to brands and distributors.
Eager for more Amazon knowledge? Check out Todd’s other podcasts and YouTube videos. You can also schedule a coaching call and get on the waitlist for a three-month training course. As always, happy selling.
Resources From This Episode
- Jungle Scout
- Amazon Seller School Podcast
- Amazon Seller School YouTube Videos
- Schedule A 1-on-1 Coaching Call
- Sign Up For Small Group Coaching Program Waitlist
Outline of This Episode
[00:32] Todd’s introduction to this episode
[01:33] Retail arbitrage 101
[07:11] What’s a private label?
[14:04] Why wholesale trumps all (in Todd’s eyes)
[21:33] Todd’s closing thoughts on this episode
Wholesale, retail arbitrage, private label FBA FBM. There’s tons of options to sell on Amazon. So which one is the best and which one should you choose in 2020 stay tuned.
Welcome fellow entrepreneurs to the Amazon Seller School podcast where we talk about Amazon wholesale and how you can use it to build an eCommerce empire, a side hustle or anything in between. And now your host, Todd Welch
Private label, retail arbitrage, Amazon wholesale FBA, FBM, tons of terms. What is the best way to start selling on Amazon in 2020 that’s what we’re going to dive into in this podcast episode. So stay tuned. Welcome everybody. This is episode number 16 of the Amazon Seller School podcast. And if you’re listening to this, you probably already know the answer of what I think is the best way to sell on Amazon. But we have a lot of new people that listen to the show and I want to go over the other ways to sell on Amazon as well and give you all your options and why I think they’re good, why they’re bad, and which one I think is best. So let’s go ahead and dive into this. If you want to get the show notes, head on over to Amazon Seller School.com/16 to get those as well as transcripts and any other links that we talk about in this video.
So let’s go. All right, so let’s go ahead and start with retail arbitrage. Now retail arbitrage is essentially selling products from other stores. There’s also a variation of that called online arbitrage. Retail arbitrage is buying clearance products or regular priced products possibly from different stores such as Walmart, Target, Goodwill, and other thrift stores that you might have in your area. Any store. Really what you do is you’re going into those stores and you’re scanning a whole bunch of products, so you got your little scanner, you’ve got an application on your phone and you’re scanning products. It pulls up the information about that product. If it’s available on Amazon, the price of it, you can look at the price that you have to pay in the store and see if there is profit there to be had. So that is basically what arbitrage means is you are taking advantage of the price difference from one area of buying products and then selling it in another area.
So in this case, buying from Walmart perhaps and selling on Amazon for a higher price. Now a lot of people do that, vice versa, maybe buying an Amazon selling on eBay or Walmart, and there’s lots of different ways. Online arbitrage is very similar. It’s just that instead of buying from retail stores, physically going out and buying your buying from websites all over the internet, possibly all over the world, and finding discounts, taking advantage of coupon codes and credit card points and things like that to get discounts on products and then flipping them and selling them on Amazon, Walmart or other marketplaces and things like that. So that is one of probably the easiest ways to get started selling on Amazon. And I do like doing that in the beginning to learn the Amazon platform. I think it’s a good way, a good low risk way to get started.
And what I mean by that is that you can take 50 bucks and head out to your local Walmart or your local thrift store and find some products that are selling on Amazon and you can buy them at a low enough price that if you include your shipping and any labor that it takes for you to send it into Amazon and of course all the Amazon fees and still make a profit on that, you can send it in and sell it and you learn that entire process of selling on Amazon. You cannot scale it that well, especially retail arbitrage because you’re physically having to go out to stores and shop, scan items and so it’s a time to money kind of thing. The more time you put in, the more products you can find and the more you can sell on Amazon, but you can’t scale beyond your time unless you start hiring people and having them do the shopping and stuff for you.
But that is a very difficult way to scale, very difficult to manage in doing that kind of stuff. So I like retail arbitrage in just getting started and learning the ropes on Amazon, but then I would move into one of the other ways of selling, which is private label or wholesale. Now online arbitrage, you can scale that a little bit better. You can build systems and have maybe virtual assistants in the Philippines or wherever doing that scouting and searching for you, but I tend to see the margins and the profit are very slim and Amazon does not necessarily like online arbitrage or retail arbitrage. And what I mean by that is if you were to get an inauthentic claim or a trademark violation or something from a brand that doesn’t want you selling their products, Amazon is probably not going to take the receipts from any of those stores that you have because there’s no direct path from those stores back to the brand that Amazon can follow and it’s not a professional way of buying products.
So Amazon does not take those so you could potentially get your account shut down. That’s not to say there’s not a lot of people out there doing retail arbitrage and online arbitrage and making a lot of money. There’s always exceptions to every rule and if that’s something that you really like and you like the idea of that by all means go forward with it, but I think in 2020 and going forward 2021 and further, it’s going to get harder and harder to do that route is Amazon is really pushing hard to have brands selling on Amazon and wholesalers selling on Amazon and having those direct paths to make sure product is legitimate. It’s not knock offs and things like that, so it’s going to get harder to keep going down that route. But like I said, if you want to start there, learn the ropes, it’s a really good way to take a credit card, spend a little bit money even if you only break even and learn the systems selling on Amazon.
Next up we have private label and private label is my second favorite way to sell retail. Arbitrage was my third favorite way. Private label is my second and I actually do some private label myself. So what is private label? Private label is basically creating your own brand, creating your own products, having your own brand, your own name of your products that you own and they’re your products. They’re not someone else’s, they’re ones that you’ve made. So private label offers a great opportunity to build your own brand and sell a lot of products on Amazon. There’s a lot of gurus out there that swear by private label and it’s a great way to build a business, but it’s getting a lot harder in 2019, 2020, 2021 it’s going to keep getting harder to just create a product, throw it up on Amazon and sell it. So a lot of gurus out there are going to encourage you to just look at all the data, find some hot selling products that maybe their listings are not optimized and they don’t have the best reviews and go to Alibaba and get a place that can make that product for you.
Tweak it a little bit, throw it up on Amazon and you will be a millionaire. Those days if they ever really did exist, which they did kind of are long gone and today it’s a lot harder because we have a lot more competition. Number one, we have competition from China. Chinese sellers are coming on and selling directly so they’re going to undercut you on price and just getting in, launching a new product and getting it, selling well on Amazon is getting harder and harder every single day. Now that doesn’t mean that you shouldn’t do that. Like I said, I have a private label brand, but you cannot just be building a Amazon business. You need to be building an actual brand around your products. So if you take Nike for example, Nike is huge obviously, so I don’t necessarily like using it as an example. Let me think of something else here.
Let’s take ANKOR. So A, N , K, O, R, I believe is how you spell it. They’re one of the largest private label brands on Amazon. They sell a lot of batteries and electronics. They built themselves up on Amazon and they got in in the early days and built themselves up, but they’ve also built a business outside of Amazon so they don’t just sell on Amazon. So in the future, if you want to build an Amazon brand or build your brand around Amazon, you need to also be building an off of Amazon platform. So you’re going to need to have your own website and building that up, making lots of content on your website, maybe how to videos, answering questions, reviewing other products and things like that to get outside traffic coming to your website that then you can eventually drive to your products, maybe sell them on Amazon, you’re going to want to sell on other platforms.
Maybe Walmart and eBay, maybe even go into retail stores. Find distributors that can sell your product around to other places and be more than just an Amazon business because if you just go straight up trying to sell on Amazon, it’s going to be very difficult because they’re big players in this space that are selling or spending hundreds of millions of dollars. They’re making tons of products, throwing a ton of them at the wall and seeing what sticks and continuing to sell the ones that sell well, discontinuing the ones that do not. So that’s what you’re competing against. If you’re only going to sell on Amazon, but if you build your brand and think of something that you’re passionate about and you want to build an entire business around, then definitely by all means go down that route. Just understand that it’s going to be a lot more difficult than a lot of the gurus are trying to sell you on YouTube and other places.
So keep that in mind. It’s not easy. None of these ways to sell on Amazon are easy. Some of them are simple, but they’re not easy. They’re a lot of work. You’re building a real business, so if anybody tells you different, like you can take $5,000 you don’t have $1 million next year. That’s just not the way it works. You’re building a real business. So if you don’t want to build a real business, then I would recommend not even starting to sell on Amazon. And maybe think about what you actually want to do and build a real business instead of just being an Amazon seller, so to speak. All right, so that is private label. If you’re going to go down that route, that’s awesome. Just recognize and understand it’s a lot of work to build your brand. Definitely don’t let that stop you. If you have a passion around something and you have a product you want to build, then by all means build it.
My product that I sell is something that I wanted specifically and could not find on the market. So I basically created it. I took something that was already out there, added a lot of features to it, and then made a, an additional product that pairs with that and creates unique bundle that did not exist before I created this product. So that’s another thing to keep in mind with private label. Don’t just tweak a little thing or two and think you’re going to have a home run product because other people are selling well, you’re going to make yours just a little bit better. You want to make something that is significantly unique and it can be similar to stuff that’s selling out there minus similar to stuff that’s already selling, but it is very unique in what it’s for and the market that I target. So you want to have a unique selling proposition or value proposition for your product.
Why would someone buy yours versus someone else’s and build your unique product, add a lot of features, get really nice packaging, really good photos, really good listing and start selli`ng on Amazon, building your website, building your traffic from Google outside traffic, maybe your social media channels and things like that and build an entire business around that. All right, now last up, and my favorite is Amazon wholesale. So what is wholesale? Wholesale is selling other people’s products on Amazon. So we were just talking about private label and going through all that work to build your brand. What we’re doing as wholesalers, and this is where I have a significant amount of my business, is we’re taking those brands that don’t want to sell their products themselves on Amazon. We’re buying from them in bulk. So we’re getting really good pricing and reselling those products on Amazon.
Now, in my opinion, this is the lowest risk, highest reward way currently to sell on Amazon. And you can start this with relatively low amount of money. If you have maybe 5,000 that would be really good, but if you don’t, you could start with 500 as well. You just have to keep flipping that money more time. So basically what we are doing is we are scouring Amazon and scouring the internet for products that are already selling well on Amazon or have the potential to sell well on Amazon. And then we’re reaching out to those brands directly as well as going and finding distributors of those products. And distributors are basically companies that sell hundreds or thousands of different brands to wholesalers or retail companies and things like that. And once we find a source for those products, we negotiate a discount with them to try to get a better pricing.
And if everything looks good, the product looks profitable, we make a small test order, send it in, see how it sells, or do some more if it’s sold well and the profit was good and rinse and repeat and keep building that business. So our risk is a lot lower because we are typically selling products that are already selling well on Amazon. Some of them might be selling hundreds per month, others may be selling 10, 20, 30 per month. It all depends on the product you’re looking for. But we can use tools such as kipa and jungle scout and know the history of these products and we can then accurately project what they’re going to do in the future as well. So the big risk for us is other sellers coming on these products as well and diluting the amount of sales that we get. Maybe people coming in and undercutting the price and driving the profit out.
But what’s awesome is since they’re selling well we can typically at least clearance out that product and get most of if not all of our money back and put it into something else. In addition. Another thing I like to do is go out and find products that are already selling well on Amazon. So this is kind of like private label in this way with a lot lower risk. So I’m going to companies with products that either their listings on Amazon currently are really bad and they’re not selling well. But if I look at the competition in the marketplace, just like you’re analyzing a private label product, if I see a lot of bad listings, not a lot of competition, but a lot of sales, then I can probably fix their listing, optimize it and get my products in their selling and start that selling well on Amazon.
And I might even negotiate like an exclusive agreement so I can be the only seller on there or maybe negotiate an additional discount in exchange for optimizing their listings. There’s lots of things you can do. So basically you’re taking the best from the private label world in that case and bringing it into wholesale with a lot less risk because you can go into all this, put in the work, optimize the listing, dual launch, try to get it selling. If it doesn’t work, then you just say, well, I’m sorry it didn’t work. We’re not going to order any more product, and you’re not ordering thousands or tens of thousands of dollars worth of product in waiting 30 60 90 days to get it from China. You’re ordering it from a company here in the United States or wherever you’re located. If you’re in Canada or the UK, you’d be ordering from there and selling on those Amazon platforms and you’re ordering in smaller quantities.
You can make your initial order at 10 maybe 24 units, something like that, and then reorder whatever amount you need to order to stay in stock. And if it goes bad, it’s not working. You clearance out of that product and you just say, sorry, that didn’t work. We’re not going to be ordering anymore and you move on to the next one. So it’s a lot lower risk in my opinion, than private label and a lot easier to scale than retail arbitrage. You can hire virtual assistants to do a lot of the sourcing and finding products for you. A lot of the Amazon administration tasks. The biggest thing that you will need to do in Amazon wholesale versus the other two is building your relationships with the brands and with the distributors. I don’t want to make wholesale sound like it’s super easy. It’s simple, but it’s not easy just like the other ones.
I think it’s a lower risk but there’s a lot of work you have to put into it and the big thing, the big difference with wholesale versus private label and retail arbitrage is that it’s all about relationships and building relationships with the brands, with the distributors, getting the owners to know, like and trust you or with distributors, your sales agent, getting them to know, like and trust you. I send out gifts to my brands and agents for Christmas and holidays and things like that to build that relationship. I don’t want to be just a name and a number who sends orders over every once in awhile. I want to be Todd who you jump on the phone with and we chat about the weather. We chat about your family, we chat about fishing, whatever you’re into, and we build that relationship. So that is really what wholesale is all about.
And I have a lot of videos on YouTube as well as a lot of episodes on the podcast talking about wholesale. So if you’re interested in that, definitely check more of those videos out. Listen to my other podcast episodes as well, and you can learn all about doing and selling more on Amazon wholesale. So as you can see, retail arbitrage, private label, wholesale, Amazon wholesale is definitely what I am highest on and what I recommend to people. That’s not to say that the others are not good opportunities and if those are more appealing to you, definitely go out, learn a lot more on YouTube and podcasts about retail arbitrage or private label and really dive into those because you can still make a lot of money doing those. I just think they’re more work in higher risk then doing Amazon wholesale. All right, so those are the three main ways you can sell on Amazon and Amazon wholesale the way that I believe is the best way to go.
If you want my help building and starting your Amazon business, I do one on one coaching calls, which you can find a link for that down below in the description or head on over to amazonseller.school/coach and that will take you right to that page. And I’m also working on a small group coaching, so instead of doing one on one, it’s going to be eight or 10 people and we’re going to do it for three months where we’re going to go through basically building our Amazon wholesale businesses, finding suppliers we’ll all work together and move our business forward. So if you’re interested in something like that is well, head on over to entrepreneur, adventure.com forward/group and that will take you to that page where you can sign up for a wait list and get alerted to that as soon as that’s available.
I’m not going to take everybody on that program if that’s something you want to do. We’ll have a little interview before you’re accepted to make sure that you’re serious about this because I don’t want someone who’s going to get in and then not follow through. So again, if you’re interested in that amazonseller.school/coach and the show notes for this episode, you can find it amazonseller.school/ 16 so with that, let’s go ahead and wrap up this episode. I really appreciate you guys out there and everything you do, make sure you leave us a review on whatever platform you are listening or watching on, and leave us your comments as well. I love to hear about it. This is Todd Welch with the Amazon Seller School signing off. Happy selling everybody.
This has been another episode of the Amazon Seller School podcast. Thanks for listening, fellow entrepreneur and always remember success is yours if you take it.