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.
Table of contents
- What is Amazon Product Sourcing?
- Deciding What Product You Want to Sell
- Where to Source Products for Your Business
- Amazon Product Sourcing Tips
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?
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.
Deciding What Product You Want to Sell
Before we get into how to actually source your products it’s important to talk about how to choose which product you’re going to source.
You could find a great supplier who makes a quality product and gives you a good deal. But if it’s not a product that anyone wants then you’ll never sell enough of it to make any money.
So, how exactly do you go about finding products that are profitable? There are a number of ways you can approach this, but if you want to give yourself the best chance at success we recommend using product research software.
AMZScout offers a wide range of tools as part of Amazon Seller’s Bundle. This package includes everything you need to find awesome products and get the most out of your Amazon business.
Here’s how you can use AMZScout’s tools to find winning products:
Generate Ideas with the Product Database: This tool has 44 search filters, such as category, sales, reviews, weight, and more. Define your criteria and then search Amazon’s entire database for the perfect items.
Choose Your Favourite Products: Review your search results and choose the products you’re most interested in and the ones you feel have the greatest potential. Use the Keyword Explorer and Reverse ASIN Lookup tools to expand on those ideas and discover related items.
Use the AMZScout Pro Extension to Validate Your Products: Search for your product on Amazon, then open the Pro Extension to gain access to a wide range of information, such as average monthly sales, reviews, price, sales history, and more. Dive deep into the numbers to make sure the item is a good choice.
The Pro Extension also provides product and niche scores to quickly tell you how profitable a product is.
Sourcing products for Amazon can be a big investment in both time and money, so don’t leave your decision to chance. With thorough product research, you’ll be able to find products that will make your business money and be worth the investment.
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.
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.
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.
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.
Wholesalers are essentially middlemen. They buy products from manufacturers in order to sell to businesses and resellers.
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 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.
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.
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.
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.
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.
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.
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?
Once you have an idea, go to Alibaba and contact manufacturers that are making similar products. Explain your idea to them to see if it’s doable.
Just remember that like wholesalers, manufacturers have minimum order quantities which can make the process rather expensive.
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.
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.
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. Unfortunately, conventional dropshipping isn’t allowed under Amazon’s terms of service.
If you’re interested in this type of arrangement we recommend using the Fulfilled by Amazon (FBA) program, which allows you to ship all your inventory to one of their warehouses where they’ll store your products and fulfill your orders on your behalf.
Amazon 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 and Google
AMZScout makes it easy to source a product once you find one you like. When viewing a product in the Pro Extension simply click on “Find on Alibaba” or “Find on Google” to start searching for suppliers.
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.
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.
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.