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Fake Wholesale “Gotcha’s” are Easy To Avoid. Here’s How

Wholesale sourcing mistakes Amazon sellers make

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:

find wholesale to sell

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.

Another example:

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.

My point:

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.

How?

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:Wholesale Formula Review Workshop 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!

-Jordan

{ 10 comments… add one }
  • Mark July 31, 2018, 9:46 am

    You have made an excellent point regarding the sourcing not being easily available to all your competitors.
    One look on eBay you will see 50 100 listings all sourced from Amazon all the same pictures and info, and close to zero profitability
    Even eBay is sick of this and making changes to make it a more diverse and attractive platform-

    • Jordan Malik July 31, 2018, 9:54 am

      Great point Mark. Anyone in the world can use software and tools to replicate the Amazon item onto eBay with the hopes of selling it on eBay at a higher price, and then turning around and ‘drop shipping’ it from Amazon to the eBay customer. It’s a business with super-slim margins (if any), even at scale, and violates Amazon and/or eBay’s Terms of Service for sellers. I cover that more in-depth about halfway down this page, the part that begins with “2.) Dropshipping from Online Retailers: Amazon, Walmart, eBay, etc.”

  • Michael Reeves July 12, 2018, 6:14 pm

    Hi Jordan, I’ve heard your podcast also on listen money matters and read through a few blog posts. Never sold on Amazon but have done ebay a bit. I travel for work and wanted to see if wholesale is time consuming? I checked out your partnering website however, doesn’t seem they are currently accepting students and I really wanted to get started. Any advice? I hope to here from you.

    • Jordan Malik July 12, 2018, 7:57 pm

      Hi Michael. Of all the sourcing methods (wholesale, retail arbitrage, online arbitrage, private label). Wholesale can take the least amount of time consumption – and can be the easiest to outsource that “work” you need to maintain/grow your business. The “work load” for wholesale is heavier on getting started (product/market research, contacting manufacturers, placing and managing first shipments, etc.), but there are people just like you who gets started successully on a very part time schedule (Like they have a day job and 3 screaming kids and 4 dogs). Sign up here and I’ll let you know when The Wholesale Formula reopens (rumored to be next month)

  • dan January 13, 2018, 12:02 pm

    Jordon
    I do bundling and on the things it does well. I should do more. It takes work though. I also find that many manufacturers don’t like Amazon/Ebay sellers because they don’t follow map and sell their items cheap.

    • Jordan Malik January 15, 2018, 2:39 pm

      Good point Dan, which is why it’s important to let manufacturers know you are committed to following MAP, it’s part of your own ‘company policy’ as an established seller.

      • Duane January 15, 2018, 3:29 pm

        Agree. MAP is very important to many manufacturers, as well as company reputation. We asked for a manufacturer to INCREASE MAP for all the sellers, and THEY DID! More margin for everyone…

  • Gary January 13, 2018, 11:34 am

    Good stuff! Thanks, Jordan.

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