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Amazon Sourcing Strategies: How to Source Products to Sell on Amazon

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by Travis F.posted on 08.04.2022

Amazon Sourcing Strategies: How to Source Products to Sell on Amazon

Lots of people are selling on the Amazon marketplace and building thriving businesses that are changing their lives. But how do you get started?

One of the first things you’re probably wondering is where to get inventory to sell on Amazon. That’s exactly what we’re going to discuss in this post. We’ll go over everything you need to know about Amazon sourcing so you can get the products you need to build your businesses.

Here’s our complete guide on how to source products to sell on Amazon. The tactics discussed here can also be used to purchase products to sell on eBay and other online selling platforms.

What is Amazon Product Sourcing?

What is amazon sourcing? Before you can start selling products, you need to acquire them, ideally for a price that allows you to make a profit when you resell them. Inventory sourcing is simply the act of purchasing products for your business.

This is often the step that intimidates people most. Taking photos of products, creating listings, dealing with customers, and managing a budget are things most people have done at some point in their lives.

But finding, negotiating, and dealing with manufacturers and suppliers will be new for most sellers. It sounds like a big job but as you’ll find out, it’s a lot easier than you think. Plus, depending on what strategy you go for you may not even have to work with any suppliers.

Where to Source Products for Your Business

There are a number of different ways you can source products for your Amazon business, and each has its advantages and disadvantages. Research each strategy carefully and choose the one that works best with both your business plan and your budget.

Here are the three most common ways Amazon sellers acquire their items:

Retail and Online Arbitrage

If you don’t want to deal with suppliers and manufacturers then this strategy might be for you. How it works is that you go to your local brick-and-mortar stores or other online marketplaces and look for products that are selling for less there than on Amazon.

That may sound odd at first and you may be wondering why something would be cheaper at local and online stores than it would be on Amazon. But you’d be surprised just how often this is the case.

Steps of Amazon sourcing for retail arbitrage
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Sometimes there’s an excess of certain products in a given area, causing the price to drop. In other cases, products are just less popular in some places, forcing retailers to lower the price in order to unload them.

Whatever the case, it’s not uncommon to find products that are selling for cheap enough that you can resell them on Amazon for a profit.

If you’re shopping in brick and mortar stores look for sales and clearance bins to find great deals. There are also a number of apps available that allow you to scan products to see what they’re selling for on Amazon. If the price difference is big enough to make a profit, buy as many as you can and list them online.

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How to pick a product for online/retail arbitrage

Knowing your chances at making a profit and finding a good product requires knowledge of the criteria. Using AMZScout’s Dropshipping & Arbitrage extension can help you with arbitrage, dropshipping, and wholesale. 

Here’s how to use it:

Step 1: Install the Online Arbitrage and Dropshipping extension. Click here to add it to your browser.

Step 2: Sign up for your free trial. Enter simple info to sign up, no credit card is necessary.

Step 3: Browse the Amazon website to get product ideas. You can search for a niche from here. It can be:

  • Categories or niches that interest you

  • Trendy products on offline stores and marketplaces

  • Products trending on Amazon.com

Step 4: Focus on important data from your product ideas. Scroll Amazon’s search results. Check important data underneath each product. You will see these important stats: 

  • Margins (note product margins above 50%)

  • Necessary Amazon fees (for selling this product or using FBA)

  • Seller types (If Amazon sells this, the competition is likely too high. Products with only FBA and FBM sellers usually yield the best results)

Wholesale research with the AMZScout Dropshipping and Online Arbitrage extension
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You can prioritize certain products for yourself and take a closer look at each one later.

Step 5: Check the most promising products. Go to each product page for evaluation. The app is a built-in window with important information found on each product. Look out for items that are private label, ungated, or hazmat. Read more about these three product categories below

AMZScout dropshipping and online arbitrage extension
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Step 6: Check the product’s historical data. After narrowing your product list and checking item criteria, check for additional information on the product. The price and Buy Box history display help you develop the best pricing strategy after reviewing price fluctuations.

AMZScout Dropshipping and Online Arbitrage extension price history
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Step 7: Calculate your potential profit. Enter your costs per item within the calculator. Your costs will change depending on these factors:

  • Shipping costs (found from your shipping partner)

  • Advertising costs (A combination of PPC bids and other advertising forms)

  • Other (tools, subscriptions, and other things to keep your business running)

Sales margins will be calculated based on the data you insert. New numbers will appear in the ROI, Profit  Margin, and Minimum Net fields. This data will tell you if the product is profitable.

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Below are some other product concerns to consider when reselling a product

Several factors determine how easy it is for someone to resell a product. Use AMZScout’s Online Arbitrage and Dropshipping extension for these concerns:

  • Private Label - It is sold by a single merchant with a brand registry. It is likely impossible to resell on dropshipping or arbitrage strategies.

  • Gated category or hazardous materials (hazmat) - You will need permission or certificates to sell these items on Amazon. 

  • Prime delivery - Because arbitrage sellers or dropshippers cannot ship fast, you should typically avoid products listed with Prime delivery.

Using the guide above, you can easily find products worth selling. But to find out whether retail arbitrage is right for you, below are some pros and cons.

Advantages
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  • Perfect for Beginners: This is probably the easiest way to source products since you don’t need to deal with overseas suppliers and shipping. You just go to your local stores or search online when you have free time and find good deals.

  • Cost-Effective: This is also a good strategy for people with a small budget. You can buy as few or as many products as you can afford without having to worry about minimum order quantities or shipping costs.

Disadvantages
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  • Time-Consuming: The biggest disadvantage of retail arbitrage is all the time it takes. Going from store to store looking for items to sell is a tedious process and you might find you spend more time doing that than actually running your business.

  • Hard to Scale: This strategy really can’t be automated, meaning there’s only so much the business can grow. Eventually, you’ll hit a ceiling you can’t break through and won’t be able to increase your revenue.

  • Lower Profit Margins: Even if you find products priced low enough to make a profit your margins will never be as good as if you bought them from a wholesaler or manufacturer.

  • Can’t Customize Your Products: When you buy from stores you don’t have any control over a product’s features or packaging. You can’t make your own products and have to settle for what the stores are selling.

Retail arbitrage is great for new sellers and those that just want to give online selling a try. But if you’re serious about building a scalable business that will be able to replace your income then you may want to look at one of the other strategies.

Private Label Products from Manufacturers

Have you ever thought about designing your own product? It may seem like just a dream but creating a custom product is actually a lot easier than you might think.

In order to do this, you’re going to have to go straight to the source: manufacturers. The best place to do this is on Alibaba, a global marketplace for suppliers. There are thousands of manufacturers there in many different industries that would be happy to help you create your item.

Guide for Amazon sourcing for Private Label
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The best way to start is to find an existing product and think about ways to improve it. Are there any features that could be added that would make it better? Are there things customers are complaining about that could be fixed?

How to find a product for private label selling

Private label selling requires you to research different ideas to find out what you want to sell. The AMZScout Product Database is a powerful product research tool that allows you to find your desired products quickly. Below are the steps you can take to use this tool:

Step 1: Access the AMZScout Product Database.

Step 2: Start your free trial. Enter simple details (like your email), no CC is necessary. 

Step 3: Use the search filters to find products that meet your criteria. To find products that sell well, use the sales filter to search for products with sales greater than a certain number (like monthly sales greater than 300). The category filter can help you narrow these numbers down to your areas of interest. You can also use the ready-made Product Selections feature to save time. 

How to use AMZScout Product Database for product research
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Step 4: Focus on new/trending products. Check New Products for items added recently. Trending Products checks those who have significant sales growth.

Step 5: Click “Find Products” for results.

Analyze AMZScout Product Database results
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Step 6: List the items you’re most interested in. For each one of them, you will find all the important stats (e.g., sales, reviews) necessary to determine whether the product s viable.

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You now have a list of items from which to choose. However, focusing on one product is a mistake, you need to find out how viable the niche is. You can use the AMZScout PRO Extension to determine niche viability.

Finding the right niche to join

Step 1: Install the AMZScout PRO Extension on your web browser. You’ll see the AMZScout icon in your upper-right corner once done.

Step 2: Browse Amazon for product ideas. You can also analyze items you found from our earlier steps in using the database. 

Step 3: Open the extension. Click the AMZScout icon found in the top-right of your browser.

Step 4: Analyze the niche and product quality. You can find the Niche Score on the top dashboard. The Product Score is near each product. These numbers help you analyze the niche/product demand, competition, and potential profit.

Amazon niche analysis - step #4
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Step 5: Check the demand. Look at the average monthly sales of each niche and product.

Step 6: Review the review count. Having more reviews typically means there is more competition. 

Step 7: Check the sales history. Look at historical data of products you are interested in. Check the Niche History to analyze trends for potential niches. The Product History lets you see historical data for an individual product. Both trend pages will show you sales, price, and rank over time.

How to check AMZScout Amazon Product History
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Once you have an idea, go to Alibaba or similar platform and contact manufacturers that are making similar products. Explain your idea to them to see if it’s doable.

Just remember that manufacturers have minimum order quantities which can make the process rather expensive.

Advantages
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  • Best Sales Margins: Because you’re buying straight from the manufacturer you’ll get the lowest possible per-item price, which means better sales margins.

  • Less Work: Once your product is designed and approved it’s easy to order more when your inventory begins to run low.

  • Customize Your Products: You’ll be able to add and change features, create your own branding, and make your products exactly the way you want.

Disadvantages
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  • Minimum Order Quantities: You’ll have to buy in bulk which means your initial investment will be fairly high.

  • Shipping Costs: Most manufacturers are from China so you’ll have to pay to have your inventory shipped to you. This is why it’s a good idea to source small and light products that are cheap to ship.

While this strategy involves the most work it can also be the most profitable. Not only will your sales margins be better, but if you create a great product that people love you’ll be the only one selling it. This leads to less competition and more sales for your business.

Wholesale Suppliers

Wholesalers buy products in bulk from authorized brand owners. The reseller must be approved by the brand owners to sell the owner’s products. 

They purchase products in extremely high quantities which means they get a very low per-item price. They’re able to pass these savings on to businesses which is why you’ll get much better prices from wholesalers than retailers.

The process of sourcing products for Amazon wholesale
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The downside is that most wholesalers have a minimum order quantity that you’ll have to meet. You can’t just buy one or two pieces at a time, you have to buy in bulk. So, while the per-item price is low the total cost of the order will usually end up being quite high.

It’s also worth noting that wholesalers will only sell to businesses, so you’ll need to register a business before buying from them.

How to find wholesale products to sell on Amazon

Wholesale specialists can take two approaches. First, they can look for items offered by their existing supplier. Otherwise, sellers can use Amazon (or AMZScout’s tools using the guide above) to find the most profitable options. 

If you’re wondering where to find wholesalers here are a few different strategies:

  • Go to trade shows and talk to businesses face-to-face.

  • Access one of the many wholesale directories online to find a supplier that meets your criteria.

  • Perform a Google search for wholesalers that carry the products you’re looking for.

We recommend the Fulfilled by Amazon (FBA) program. FBA lets you ship your inventory to one of their warehouses (a fulfillment center) where they’ll store your products and fulfill your orders on your behalf.

Advantages
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  • Better Profit-Margins: Buying from wholesalers will allow you to drastically reduce your per-item cost, meaning you’ll make more money on every sale.

  • Less Work: Instead of visiting stores in person you can just order your inventory online or over the phone.

  • More Selection: Most wholesalers will have a wide selection of products to choose from. They may even be able to import/export items for you if they don’t have what you’re looking for.

Disadvantages
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  • Minimum Order Quantities: Because you have to buy in bulk a typical order from a wholesaler is usually hundreds or even thousands of dollars. So you’ll need a fairly large budget to do business with them.

  • Can’t Customize Your Products: Wholesalers aren’t manufacturers so they can’t customize anything for you or change a product’s features.

  • Can Be Difficult to Get Approved: Brand owners are incredibly picky about who sells their products. Both beginners and veterans can struggle to meet sales demands or restrictions of brand owners.

This strategy is for you if you want to build a long-term scalable business but aren’t interested in creating your own products. For example, it’s perfect if you want to start selling books.

A Note About Dropshipping

Some suppliers may offer you the option to dropship. This is when a supplier holds your inventory and ships it to the customer for you.

Amazon has opened its doors to most dropshippers who identify themself as the seller of record. This means that the seller takes full responsibility according to Amazon’s terms of service. 

If you are new to dropshipping, you have the freedom to pick what works. By focusing on profitable products, you can pick your supplier based on whether they offer comparable products. Using the AMZScout Arbitrage and Dropshippnig extension can help expedite the research process.

Advantages
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  • Do not need to buy and keep inventory. Dropshippers work in non-owned resale, meaning that they don’t have to buy or keep inventory. The barriers to entry mean you can start with almost no money.

  • You can automatize the process. Dropshippers are in the perfect position to automate most of their process. After you find a successful process, repeating that process until it stops working is a great way to make passive income.

Disadvantages
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  • Less Control. Because you don’t own anything, the supplier has full control. Having no control can be a major issue in cases of customer service, where you might not have full knowledge of the product.

  • Less Profit. Suppliers take a huge chunk of profit because they handle most of the heavy lifting. Dropshippers often take skills from this field into other selling techniques as a result.

Amazon FBA Product Sourcing Tips

You’re almost ready to go out and start sourcing items for your Amazon business. We just have a few more tips for you to ensure your success and help you get the best possible deal on your products.

1. Easily Find Your Products on Alibaba

You can actually find a supplier while you’re searching for products on Amazon by using the AMZScout PRO Extension. Here’s how it works:

  1. Install the PRO Extension.

  2. Go to Amazon.com and search for a product you’re interested in.

  3. Open the PRO Extension after the search results come up.

  4. Click the Local and global suppliers on Alibaba.com button.

  5. Enter your price range and minimum order quantity to filter out suppliers that don’t meet your requirements.

  6. Compare each supplier’s review score to find the best ones.

  7. Add the suppliers to your Favorites list to focus on the ones you’re most interested in.

2. Get Samples

If you’re dealing with a manufacturer always make sure to get a sample before going through with the order. Most manufacturers are willing to provide free samples to allow you to inspect the quality and give feedback. Never place an order from a manufacturer until you’ve held the product in your hands and are sure it’s what you want.

3. Negotiate a Good Price

Most wholesalers and manufacturers are willing to negotiate on price. So, if you feel you’re paying too much, or their offer doesn’t work with your budget, feel free to present them with a counter offer.

4. Choose the Right Shipping Method

If you’re dealing with a supplier from India, China, or other overseas locations you’re going to need your inventory shipped to you. There are two primary shipping methods: sea and air. Shipping by boat is much cheaper, but it could take a month or longer to receive your items. Airfreight can be expensive, but you’ll have your products in a matter of days. Assuming your items are relatively small and light, shipping by air usually makes the most sense.

Advantages and disadvantages of shipping methods
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5. Calculate All Your Fees

Keep track of all the fees involved when sourcing your products. Remember, it’s not just the cost of the items themselves. You also have to factor in shipping costs as well and any other expenses that occur while sourcing products. Make sure to add these to your Amazon FBA fees to get an accurate representation of the cost of each product. This will allow you to set your sale price accordingly.

Analyze the profitability of a product with AMZScout
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Conclusion

Sourcing products that make money doesn’t have to be difficult. If you take all the right steps and choose the strategy that’s right for your business it won’t be long before your inventory is full and you’ll be ready to start selling.

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