A reseller is a store that buys goods from suppliers, which are usually manufacturers or wholesalers, and then sells them to end users, in this case through their Amazon listings. Unlike brands or private label sellers, a reseller’s main goal is to sell products that are already made.
Reselling on Amazon is very popular because it is much easier to start a business and requires less capital. This gives startups the freedom to start small while still giving customers a wide range of products. It also gives them the freedom to grow and branch out in new ways over time.
Amazon has helped resellers grow their businesses in a big way. Let’s take a look at the most common types of Amazon resellers and the ways they do business.
There are several kinds of resale models.
Dropshipping
Dropshipping lets merchants send an order to a third party, usually a supplier, to be filled. Products are made, stored, shipped, and delivered to customers by the company that makes them or by a third-party supplier.
This is a business strategy that some online sellers choose because it cuts down on overhead and operating costs. In some dropshipping deals, the reseller is in charge of marketing and customer service, while the dropshipping service is in charge of the physical goods and shipping to help fulfill orders.
How Does Drop Shipping on Amazon Work?
When dropshipping is used as a business model, sellers usually tell the supplier or dropshipper about the specific orders that customers have placed. The dropshipper then takes care of all the logistics of fulfilling the order, like packaging and sending the goods.
The seller’s only job is to let the customer know what’s going on with the order, like when it’s shipped, where it is, and how to track it.
Keep in mind that Amazon has rules about dropshipping that you must follow so that the customer doesn’t get confused:
- No matter who ships the item, you must be listed as the seller on packing slips, invoices, and the outside of the package.
- You can’t put the name or contact information of any other seller on packing slips, invoices, or outside packaging. It has to be your own name and information about how to reach you.
- You must be the only one who takes in and handles returns.
- You must follow all of the other rules in your seller agreement and Amazon’s rules.
The dropshipping process can be broken down into a few simple steps:
- The supplier finds a product or makes it.
- The reseller makes a deal with the supplier, and the supplier keeps stock of the product.
- The seller adds a product to the listings they already have on their Amazon webstore or eCommerce storefront.
- When a customer places an order, the reseller handles the payment and sends the order to the dropshipping service.
- The dropshipper gets the order ready and sends it out, giving the reseller any important information along the way.
- The reseller gives the customer information about how to track the package and an estimate of when it will arrive.
How Much Money You Need to Dropship
You don’t need a lot of money to do Amazon dropshipping because you don’t have to keep a stock of the products you want to sell. Signing up as a Seller only requires a small investment, which is the same for all Seller accounts. The Professional plan costs $39.99, while the Individual plan costs $0.99 per unit sold.
The professional fee stays the same no matter how many units you sell, so if you sell more than 40 units, you might as well go for broke.
Amazon only charges referral fees, which change depending on the kind of product. Most of the time, they are between 10% and 15%. Because of this, dropshipping requires a relatively low amount of capital, most of which goes to the supplier.
What Kinds of Products Can You Dropship from Amazon?
With more than categories to choose from, sellers have a lot of options and the freedom to sell in as many niche markets as they can.
But Amazon has rules that must be followed and certain requirements that must be met. The seller must make sure that their store doesn’t list any products that aren’t allowed. When making a store, you need to think about the fact that some products in popular niches like fashion, beauty, and jewelry need to be approved.
Dropshipping Profit Margins
Depending on the product and category, the average margin for a dropshipping reseller is between 10% and 30%.
Online Arbitrage
Online arbitrage is when you buy something on one online market and sell it on another for a higher price. With this strategy, resellers don’t have to deal with suppliers and can work from anywhere. But it also makes it hard for resellers to handle a lot of orders at once.
How does Amazon’s online arbitrage work?
Online arbitrage involves looking for websites where you can buy products you want to sell cheaply and then putting them up for sale on other eCommerce sites where they might sell for a higher price.
Capital Required to Begin Online Arbitrage
Online arbitrage doesn’t need any start-up money, and sellers can put in as much as they can afford. This is a big plus of this business model, and it makes it much easier for new people to join.
Product Categories
The problem with this model is that no matter what you want to sell, if it’s easy to find on another website for a much lower price, it might not be worth the effort or make enough money.
Aside from that, there are a lot of different kinds of products you can sell. When choosing products to list, choose ones that people want more of.
Online arbitrage brings in profit margins
When you do online arbitrage sourcing well, you can make more money because the margin is so important. Once set up, resellers are said to make anywhere from $300 to $2,000 a month, depending on how much inventory they have.
Retail Arbitrage
Retail arbitrage is similar to online arbitrage, but in this case, a reseller buys products at a discount from a retail store and then sells them on Amazon. This process has nothing to do with suppliers or manufacturers. Products are bought by resellers straight from a store or market.
What’s the deal?
Retail arbitrage works because prices for the same product in different cities can be different, which can lead to profit margins. In this structure, a reseller might find that a popular item in a certain outfit has lower or discounted prices because of seasonal sales, etc. They can buy the product for less than the MRP price and then sell it on their Amazon store for the MRP price.
For example, if there is a sale at Walmart and a seller can buy notebooks that usually cost $5 for $2, they can sell them on Amazon for the original price and make a nice profit.
Capital Required to Begin Retail Arbitrage
Retail arbitrage is usually a good way to make money, and you only need $100 to $200 to get started.
Product Categories
Finding good deals on popular items is all it takes to find goods for retail arbitrage. Walmart and Target are two stores that compete with Amazon. They usually have good deals on all kinds of products, so they are a good place to start.
With retail arbitrage, margins of profit
In retail arbitrage, the profit margin depends on the deals a seller can find, so it can change from one product to the next. In some cases, sellers may be able to make twice or even three times as much money on a single item.
Amazon Wholesale
After setting up a wholesale seller account, Amazon Wholesale is just like any other business in that you buy and sell products in bulk. If you want to sell wholesale on Amazon, you have to buy a lot of products at a discount from the manufacturer or supplier and then sell them on Amazon at retail prices.
With this strategy, you can sell popular products from well-known companies, which makes it easier to make a sale.
What’s the deal with Amazon Wholesale?
In Amazon Wholesale, the reseller buys a large amount of a product from a distributor. Once these items are bought, the reseller’s page can list them.
How Much Money Does Amazon Wholesale Need?
Amazon Wholesale has a much higher start-up cost than the other ways we’ve talked about. Taking into account the costs of inventory, storage, research, seller fees, and other things, a business on Amazon Wholesale would probably need at least $3000 to get started.
For a successful business, Amazon Wholesale margins can start at around 15% and range from 30% to 40% net. Getting a higher margin may take some work, but it can pay off in the end.
Conclusion
Selling on Amazon can be a very lucrative and profitable business. Each of the above ways to make money is profitable in its own way.
But keep in mind that reselling on Amazon requires a lot of research, time, and effort, as well as money, at first, before the proof of concept brings in a lot of money.