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This post is part of our continuing series on ways you can make money online.
Last week we outlined the pro’s, con’s, and challenges of using private labeling to sell products on Amazon and Ebay. Even though it’s a tried and true model, we understand that some online entrepreneurs simply don’t want to go through the hassle of trademark/copywriting paperwork. Not to fear! There are a few other money-making product business models available to you.
Wholesale arbitrage is similar to private labeling in that there are very few barriers to entry. You don’t necessarily need a website or even a warehouse (if using Amazon’s FBA). Depending on the size of your order, you might not even need a ton of cash for your initial inventory investment. But what you will need — and this is so, so important — is the resources and/or connections to find suppliers, vendors and distributors you can trust.
Sure, you can go on Alibaba or Ali Express and find a random wholesaler with a large product catalog. You could have hundreds of products at your disposal to sell online at the click of a button. But this is a short-term fix. If you’re serious about long term wholesaling, you will be better served selling wholesale direct from a manufacturer.
The goal of every seller using wholesale arbitrage is to:
- Source products from suppliers you can trust, and invest in those relationships for the long haul
- Attend trade shows annually (at least) to stay in the loop with product development and find the best deals
- Buy products in bulk upfront for lower prices and therefore (hopefully) higher profit margins
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Some of the benefits of wholesale arbitrage include:
- Buying in higher volumes may mean higher discounts with some wholesalers and distributors
- When you buy wholesale, you increase your chances of always having hot-selling products in stock
- If you build into the relationship, your suppliers may continually loop you into the best products your business has ever seen!
Some of the challenges include:
- RESEARCH! Initially, you’ll have to spend hours and hours of time and money to develop your sources like the rest of us did
- Making sure your supplier doesn’t become your competitor – unfortunately, we’ve heard loads of horror stories where sellers had their supplier hijack their sales when the supplier realized they could cut out the middle man and sell direct to the consumer instead.
If you’re considering wholesale arbitrage, here’s some advice:
- Ask yourself what types of products you want to source.
- Find trade shows that deal with those products. Google is our best friend!
- Contact brands directly and ask if they source or use distributors.
- If a distributor carries one brand you like, they might have others as well.
- Build relationships with your suppliers. Our best products came as a result of relationships.
- Spend at least 70% of your time finding products and building relationships with your suppliers. This is the single most important thing you do as a reseller on Amazon.
- If a wholesale company doesn’t make you go through a process or doesn’t ask for a tax ID or tax exempt form then they’re not a true wholesaler. Basically any one you can buy from online without verification process is usually not a true wholesaler.
- Like we said above, be careful that the manufacturer isn’t already selling on Amazon.
It takes time and money to build up a successful wholesale based business and figuring out where to source products is truly the most difficult part. But once you find a great source for products, 80% of your work is done!
Have you heard of the Canton Business Fair in China? Our annual fall trip is sold out this year, but bookmark this page to get in on the next one!