How to Source Products to Sell on Amazon: Best Sourcing Strategies
One of the first things you’re probably wondering when starting an Amazon business is how to source products and where to get inventory to sell. 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 most profitable products to build your businesses.
How to Get Started
To provide you with a clearer understanding of this process, we will break it down into steps and delve into each one in detail. This is a comprehensive guide on how to source products to sell on Amazon. The steps include:
In addition to conducting product research, it’s also crucial to consider factors like negotiating with suppliers. The tips below provide recommendations for navigating these aspects successfully.
Decide on the Business Model
First, you need to determine which business model you want to use for product sourcing. Consider factors such as your budget, time availability, sales experience, and overall business goals.
Here are the four of the most common ways Amazon sellers acquire their items:
Retail and Online Arbitrage: This strategy involves sourcing products from retail stores or online marketplaces at a lower price, and reselling them at a higher price for profit. Sellers leverage price discrepancies, discounts, and clearance sales to find profitable deals.
Private Label: Private label refers to the practice of sourcing products from manufacturers, adding your own branding and packaging, and selling them under your own brand name. This allows you to create a unique product line and differentiate yourself from competitors.
Wholesale: Wholesale involves sourcing products in bulk directly from brand owners or authorized distributors at discounted prices and reselling them to retailers or consumers at a markup. This method requires building relationships with suppliers and managing inventory.
Dropshipping: This is a business model where sellers list and sell products on their online store or marketplace without holding any inventory. Instead, when an order is placed, the seller purchases the product from a third-party supplier who then directly ships it to the customer.
If you are starting a business with a limited initial investment, models like dropshipping are probably more suitable for you, whereas if you have prior experience and higher capital, creating your own brand can be an intriguing business decision.
Find a Product to Sell
The next step involves deciding exactly what types of products you want to sell, and this decision is crucial as it will determine whether you can generate a profit in this business. Product research can generally be approached in two ways.
Finding products for reselling
The first method is suitable for several business models such as arbitrage, dropshipping, and wholesale. The AMZScout tool, with its telling name, can assist you in identifying the best reselling opportunities.
Here’s how to use it:
Step 1: Log into your AMZScout account and install the Amazon Dropshipping, Arbitrage, and Wholesale Extension.
Step 2: Browse the Amazon website to get product ideas. You can search for a niche from here. These may include:
Categories or niches that interest you
Trendy products on offline stores and marketplaces
Products trending on Amazon.com
Step 3: Focus on important data from your product ideas. Scroll Amazon’s search results. Check important data listed underneath each product. You will see these important stats:
Margins (look for product margins above 50%)
Required Amazon fees (for selling this product or using FBA)
Seller types (If Amazon sells this item, the competition is likely too high. Products with only FBA and FBM sellers usually yield the best results)
You can prioritize certain products for yourself and take a closer look at each one later.
Step 4: 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.
Step 5: Review the product’s historical data. After narrowing your product list and checking each item’s criteria, look for additional information on the product. The price and Buy Box history display help you develop the best pricing strategy after reviewing price fluctuations.
Step 6: Calculate your potential profit. Enter your costs per item using 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 enter. New numbers will appear in the ROI, Profit Margin, and Minimum Net fields. This data will tell you if the product is profitable.
Below are some other things to consider when reselling a product
Several factors determine how easy it is for someone to resell a product. Use AMZScout’s Dropshipping, Arbitrage, and Wholesale Extension for these areas:
Private Label - These products are sold by a single merchant with a brand registry. It is likely impossible to resell these using 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.
Finding 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: Sign in to your AMZScout account.
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.
Step 4: Focus on new/trending products. Check New Products for recently added items. Trending Products will tell you those that have experienced significant sales growth.
Step 5: Click “Find Products” for results.
Step 6: List the items you’re most interested in. For each one, you will find all important stats (e.g.: sales, reviews) necessary to determine whether the product is viable.
In-depth Product Analysis
You now have a list of items from which to choose. However, focusing on one product is a mistake, since you’ll need to find out how viable the niche is. You can use the AMZScout PRO Extension to determine niche viability.
Step 1: Login to your AMZScout account.
Step 2: Install the PRO Extension.
Step 3: Browse Amazon for product ideas. You can also analyze items you found from our earlier steps in using the database.
Step 4: Open the extension. Click the AMZScout icon found in the top-right of your browser.
Step 5: Analyze the niche and product quality. You can find the Niche Score on the top dashboard. The Product Score is displayed near each product. These numbers will help you analyze the niche/product demand, competition, and potential profit.
Step 6: Check the demand. Look at the average monthly sales for each niche and product.
Step 7: Look at the review count. A higher number of reviews typically means there is more competition.
Step 8: 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.
Where to Source Products to Sell
When it comes to buying products to sell, finding the right place is crucial for the success of your business. Depending on your goals and availability, you may choose from different avenues and locations.
Dropshipping Suppliers: Dropshipping suppliers are companies or individuals that provide products and handle the order fulfillment process on behalf of the seller. They maintain inventory and ship products directly to the customers when an order is placed.
Manufacturers: Manufacturers are companies that produce goods or products. Amazon FBA sourcing directly from manufacturers involves purchasing products in bulk quantities directly from the source. This method allows for greater control over the product, and often offers better pricing compared to intermediaries.
Brands or Distributors: Brands or distributors are entities that own the rights to a particular brand or product line. Sourcing from brands or distributors involves establishing partnerships or agreements with these entities to purchase and sell their products. This method may provide access to exclusive products or brands with established customer demand.
Other Marketplaces: Apart from Amazon, there are several other online marketplaces from which sellers can source products. Examples include eBay, Walmart Marketplace, Alibaba, and Etsy. These marketplaces connect sellers with a wide range of suppliers, manufacturers, or individual sellers offering various products.
Retail Stores: Sourcing from retail stores involves purchasing products directly from brick-and-mortar retail establishments. This method allows for immediate access to products, enabling sellers to find unique or discounted items. Retail stores can include department stores, specialty shops, boutiques, or even thrift stores.
It's important to note that each sourcing method comes with its own advantages and things to consider, such as cost, control over the product, availability, and relationship management. Your choice of sourcing method depends on your specific business goals, product niche, target market, and available resources.
Place an Order and Manage Shipping
Once you have identified which products you want to source and have established relationships with suppliers, your next step is to start placing orders and manage shipping. This involves ordering products from your chosen suppliers based on the agreed-upon terms and conditions. Provide clear instructions regarding quantities, product specifications, packaging requirements, and any other necessary details. Clear and effective communication with suppliers is crucial to ensure smooth order processing.
After placing an order, it's essential to closely monitor the shipping process. Stay in contact with suppliers to track the progress of your orders and ensure timely delivery. Keep an eye on shipping timelines, customs procedures (if applicable), and any potential issues that may arise during transit.
If you’re dealing with a supplier from India, China, or any 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 receive your products in a matter of days. Assuming your items are relatively small and light, shipping by air usually makes the most sense.
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.
If you’re dealing with a manufacturer, always be sure to get a sample before going through with your order. Most manufacturers are willing to provide free samples to allow you to inspect the quality and give feedback. Never place an order for manufacturing until you’ve held the product in your hands and are sure it’s what you want.
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 for your budget, feel free to present them with a counter offer.
Calculate All Your Fees
Keep track of all 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 for Amazon FBA. 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.
Sourcing products that make money doesn’t have to be difficult. If you follow the necessary 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.