Why Online Wholesaling Is Among The Safest Businesses To Invest In
Selling wholesale is a great way to grow a successful business as a seller on different marketplaces such as Amazon and Walmart. Over the years, we’ve seen online wholesaling as a safe and stable investment vehicle in the long run. This is especially true for sellers with a substantially upscaling fulfillment model preferred by many marketplaces. In this article, we take a look at some of the reasons why you should consider starting an online wholesale business.
How Does a Wholesale Business Model Work?
Before jumping into the benefits of selling wholesale, let’s look at how a wholesale business model works.
The seller procures items in bulk directly from the manufacturer at a wholesale price and then earns a profit by selling these items on an online marketplace like Amazon or Walmart. The key is to find the most reliable subcontractors with winning products. You have to store your products and give each a retail price, relabel, and package before handing them over to the right eCommerce platform. After that, the relevant marketplace will take care of all the other steps.
Source: Listing Mirror
6 Benefits of Selling Wholesale
Is a wholesale business model worth investing in? Here are a few reasons to help you decide.
1. Stable Income
Typically, wholesale returns fall between 10% and 30%, which isn’t the highest among our eCommerce services, yet the most stable return for your online store. You should consider this model if you are looking for long-term opportunities in the most sustainable fulfillment method. About 76% of Amazon sellers will be profitable in 2022, despite serious disruptions due to supply chain problems and the continuing pandemic.
2. Decent Profits
As a wholesale seller, you usually have much fewer overheads than if you are selling your own products on a marketplace (also known as private labeling). That’s because you don’t have to bear all the marketing expenses that come with introducing and selling a product. Right from the beginning, you have a clear idea of what your profit margin is likely to be as your costs are somewhat fixed, and you’ll know your estimated sale price beforehand.
You can profit by negotiating a good deal with your manufacturer and selecting a high-demand product. Most eCommerce wholesale retailers generally enjoy a profit margin as high as 6.5%, whereas brick-and-mortar retailers tend to have an average profit margin between 0.5% and 4.5%.
3. Established Customer Base
Do you know that 66% of customers start their online research for products on Amazon? In the wholesale model, you sell a product from a renowned brand. Therefore, you can leverage the existing customer base that the brand has created over the years.
Consumers already know about this product and are interested in purchasing it. Often, you’ll find that the product is already listed on Amazon, along with product reviews. This will save you the time and effort of creating a listing from scratch, and you’ll be able to ramp up your business quickly.
4. Reliable Inventory Sourcing
With online wholesaling, you have peace of mind knowing that as long as the manufacturer creates the product, you’ll be able to source it. Once you purchase the product, you have full control over it. You are no longer dependent on the manufacturer for pricing or other aspects.
Plus, you can work out an early payment or prepayment discount with suppliers. The usual early bird discount ranges from 2% to 5%, but depending on your relationship, you might get an even better deal.
95% of Amazon sellers, plan to expand their businesses in 2022, and they can do so easily with the help of online wholesaling. The wholesale model doesn’t restrict your ability to scale, as there’s a consistent and reliable source for inventory replenishment. This means you can scale your business quickly and flexibly.
If a product sells exceptionally well, you can effortlessly increase your inventory to keep up with customer demand. Once you have developed a good relationship with your manufacturer, you can quickly scale up by placing larger orders and selling more of their products.
6. No Need for Extensive Marketing
When selling wholesale, the brand has already done all the heavy lifting to develop and market the product. This frees up a lot of your time and resources that you’d otherwise have to spend designing marketing materials, social media promotions, or even product packaging.
As mentioned, if the product is already listed on a marketplace, you can simply use the current listing. If it’s new to a platform, the manufacturer will provide you with the listing content and images.
Is a Wholesale Business Model Risky?
Not really! Compared with many other models, such as private labeling, a wholesale model is less risky. That’s because you aren’t the company that’s manufacturing the product. So you don’t carry the risk, accountability, and liability that come with creating a product and establishing a brand. Instead, you are only selling products already recognized in the market.
Moreover, as a wholesale seller, you don’t bear the risk of your seller account being permanently suspended because of consumers submitting fake product complaints. That’s because you source the inventory from the manufacturer, and you can provide Amazon or Walmart with the relevant evidence (such as receipts or invoices) to prove it.
Launch Your Wholesale Business with AWM
Whether you’re looking to start your wholesale business on Amazon or Walmart, we can help you establish a smooth supply and logistic chain while continuously negotiating with manufacturers to resell their products on fair profit margins.
From company incorporation to getting approval from the marketplace to set up a functional store, we help you every step of the way to realize your warehousing journey. Once your products are shipped to our warehouse, we take care of relabeling and packaging to meet the marketplace’s criteria. Get in touch to learn more about our warehousing services.