Fulfillment by Amazon (FBA), the features of the Amazon marketplace itself, and the nature of Amazon’s Buy Box algorithm’s preference for cheaper items have created a situation in which brands, retailers, and resellers are engaged in a constant pricing war.
Businesses that adopt the direct-to-consumer (DTC) model are able to undercut retailers, which means that reselling on Amazon can be difficult for resellers that don’t bring real value to the table for customers.
So how does reselling on Amazon work? Check out these FAQs.
Q: Does reselling on Amazon work?
A: Reselling on Amazon works if resellers could get their hands on exclusive products that give them some degree of autonomy with respect to pricing. As long as the total cost of acquiring, marketing, and reselling the product in question allows for a profit margin that makes sense, then reselling on Amazon could work very well.
Q: How can I make reselling on Amazon work?
A: Businesses interested in reselling certain products must be able to convince the brands responsible to become exclusive Amazon resellers so that they won’t have to compete with the brands themselves. Another possibility is to market your own products under your own private label so that “reselling” on Amazon essentially becomes a marketing method and a matter of piggybacking off better-known brands to sell your own products.
Q: How does Amazon FBA compare to Amazon Marketplace/Retail?
A: Amazon FBA sellers that end up competing with Amazon retail, regardless of whether they are reselling on Amazon or selling their own products, as long as Amazon has the same item in stock, even if the FBA seller has a lower price, they won’t win the Buy Box algorithm.
Q: What options do I have when reselling on Amazon?
A: There are basically two options for reselling on Amazon: (1) resell high competition items with a success record or (2) resell a low competition item with no proven success record. While the second option may seem easier for new vendors, it may prove to be more difficult in the long run because the reason why certain products have long competition is because of the lack of demand. Therefore, it may not matter whether you end up winning the Buy Box, because nobody is looking for those items. However, if you do become an industry leader using the second industry, it will help you later down the line when you begin selling high competition items, as it will improve your Seller Rank, which is crucial to rank for visibility on Amazon and attract sales.
Q: What are some main reasons why reselling on Amazon does not work?
A: The most common reason why resellers fail when reselling on Amazon is that they don’t understand the cost structure of the product that they are reselling. How do you undercut the brand, the retailers, and other resellers competing for the same Buy Box real estate while still remaining profitable? If you figure that out, then you can expect some degree of success as an Amazon reseller.