≡ Menu

Wholesale vs. Private Label vs. Retail Arbitrage

The above pic is Dan & Eric from The Wholesale Formula. They sell $11M+ annually on Amazon

Dan & Eric from The Wholesale Formula  sell $11,00,000M+ annually on Amazon. Those profit #'s (above) are just for ONE pallet for ONE month.

For my Amazon business, I source products 3 ways (well, more than 3, but the major methods are):

  • Retail/online arbitrage
  • Private Label
  • Wholesale
Can you guess which two have been the more problematic these days?

That's right. Retail/online arbitrage, and private label.  I'm not dismissing those methods. They still bring me money. But I -- and you -- have been hitting some roadblocks on Amazon, right?


So let's break it down.


Problems with Retail/online arbitrage: 
  • Keeping track of all the different products and quantities.
  • Removing price labels
  • Getting warnings/cease and desist notices from Amazon or the brand owner (yikes!) of a few products
  • Getting said products forceably removed from Amazon
  • The risk of the Amazon price plummeting as other sellers buy the same product
  • Insurmountable brand restrictions imposed by the manufacturer
  • Generally having to handle the inventory yourself (you're the receiver, prepper and shipper)
  • Inability to efficiently deal with supply and demand. Example A: A big influx of resellers can bloat the supply at Amazon, and leave you with aging inventory and/or plummeting prices. Example B: You may have a "hit" product but it's generally very difficult for you to replenish your stock consistently via retail/online arbitrage
I'll always be friends with arbitrage, though. It's gotten tougher but I still enjoy the "thrill of the hunt", and I love snapping up holiday clearance items for the following year. But it's not without its headaches.


Let's move on to private label problems:
  • Competitors copying and/or hijacking your listing
  • Manufacturing and import delays (if you're dealing with a foreign manufacturer)
  • Generally higher up-front costs for overseasl manufacturing (typically $3000 to $5000)
  • Having to build an Amazon listing from 'scratch'
  • Having to build up customer reviews (honestly and within Amazon's rules) via discounts, giveaways, etc.
  • Having a competitor (unethically) file a copyright/trademark infringment notice with Amazon and thus getting your listing pulled down. This actually happened to me. The legal remedy ($3,000) cost far more than the monthly potential revenue for this product).
  • Amazon red tape (silly Hazmat restrictions for battery-powered products are but one example)
  • Dealing with one-star product reviews
Again: I'll always be friends with private label. It appeals to the entrepreneur in me. But it's not without its headaches.


So here's where wholesale sourcing licks ALL the problems above (when it's done the right way):
  • No price labels to remove
  • You can deal with one (or a few) SKUs and larger quantities of each SKU
  • You (the Amazon seller) are working direclty with the brand owner/manufacturer, so you are already granted permission to sell.
  • The product is (generally) already in the Amazon catalog, so it already has a history of sales and reviews on Amazon
  • If a competitor starts unethically filing trademark/copyright infringment notices against the product, that's handled by the brand owner/manufacturer (not you.)
  • The brand owner/manufacturer can easily restrict Joe-Schmoe sellers from piggy backing the listing, undercutting the MAP (minimum advertised price), etc.
  • Many brand owners permit initial small orders from resellers (e.g., $500 to $1500)
  • With a uniform product you're ordering wholesale, you can have a trusted pre-fulfillment center receive, prep and ship the products to Amazon for you, at a reasonable cost. This way, you don't have to 'touch' the product.

So, does wholesale sound appealing? Great. I can tell you, it works!

You're probably asking "where can I start?"

  • Proven Wholesale Sourcing ($297) is an easy to follow system from my trusted partner Jim Cockrum. You get it free when you buy the entire Proven Amazon Course ($399)

And if you have any horror stories with retail arbitrage or private label (or even wholesale), sound off below.


{ 2 comments… add one }

Leave a Comment