Sellers who want wholesale products can fall into this trap.
(Breathe a sigh of relief because it's easy to spot. I'll show you now.)
Typically, a seller will go to google.com and type in “buy wholesale”, and they'll end up buying from one of the dozens of companies they see in the results. Example:
See those companies? They all call themselves 'wholesale distributor' or 'drop shipper' etc. If you're an online seller, you're thinking “that's for me”, right?
Wrong. There are two problems here.
One, those companies are really not in the business of true wholesale. But they won't tell you that. They're actually middle-men, typically buying from a liquidator or another middleman (rarely do they buy direct from the manufacturer!), and then selling the inventory to people like you, for a markup.
Second, this type of 'fake wholesale' is easily accessed by any seller. It's what I call a low barrier to entry for the seller. Meaning there is a very small “barrier” the seller needs to surmount in order to be a reseller of products. In other words: Any seller with a credit card can source and sell those products.
I can click on any of those providers above, click on any item, use my credit card, and buy whatever minimum quantity I want – 10, 25, 100, 1,000.
So what's wrong with that?
It's that anyone with a credit card account can go to any of those sites to buy a product. Even if you find what you think is a winner, another 1,000 online sellers can see what you're selling and do the exact same thing you did, and voila – you have competition and saturation.
Go to Alibaba.com (a multi-billion dollar network of China suppliers eager to sell to you) and type "Spiderman" in the search box. Look around. All those Spiderman toys are unauthorized reproductions/knock-offs. Just about every major toy company in the world does not sell through Alibaba! Either they have their own distribution staff or they outsource it to a trusted company. (Entertainment Earth's Wholesale division is an authorized distributor of Marvel toys, for instance.)
If you've been selling on Amazon for a few years, you'll remember the big ban of "Frozen" movie merchandise they put on 3rd party sellers. That's because Amazon seller were searching online for "Frozen Toy Wholesale" and all - all - of that merchandise was counterfeit and flooded into Amazon's warehouses.
So if you do any type of this 'fake wholesale' sourcing, it makes it very hard for you to a.) know if what you're sourcing is authentic, and b.) compete and sell at a profit.
What's worse, the brand or manufacturer can have Amazon remove your listing or close your account because you're either 1.) not authorized to sell the brand; or 2.) they suspect you have inauthentic merchandise. (I cover that in this Jan. 2020 blog post).
Many Amazon sellers buy these products online. Then up to 150 sellers jump on the same product and start competing on price. There's no profit left. A lot of sellers actually take a loss by doing this type of sourcing.
You know which seller isn't taking a loss? The authorized reseller. More on this below.
If you want to source a profitable product, again and again, for reselling on Amazon, you want a high barrier to entry to other sellers. This means you want products that are comparably difficult for other sellers to source.
Become a direct, authorized buyer of one of the millions of manufacturers/brands on Amazon Surprisingly, very few sellers do this properly. You contact the manufacturer/brand owner (or an authorized distributor) directly. Many manufacturers/brand owners are used to some pretty horrible online sellers contacting them. Think about your competition. Typically they're hostile, aggressive, bossy, and they feel entitled. And that's how they act toward manufacturer/brand owners. That's not you, right? Successful online sellers also solve problems for manufacturers. Many manufacturers don't know how Amazon works, and sellers like you can “get in good” with them by helping them solve their challenges. Once you land one manufacturer, it becomes 'rinse and repeat' easy!
You CAN source wholesale products for reselling on Amazon the RIGHT way!
Here's a FREE workshop that will show you - from scratch - how the experts do it. The workshop runs Jan. 30 - Feb. 13, 2020:
I'm looking forward to hearing about your adventures in wholesale. Don't get trapped into buying just from a Google search and going with somebody who's just there to take your money.
Good luck and keep me posted!