This post is by Dillon Carter, co-founder of goAura.com.
When it comes to building a wholesale business as an Amazon seller, relationships are paramount to your success. A great relationship with a supplier or brand can mean the difference between opening an account or not, as well as accessing larger discounts and getting exclusive products.
Simply put, building a relationship with your supplier is the “secret sauce”.
After learning this the hard way myself, I wanted to share how you can use relationships to your advantage. When this is done correctly, it can quickly become the competitive edge you’ve been looking for.
The wholesale business model on Amazon
The wholesale business model works like so:
- Find branded products that are selling well on Amazon.
- Open an account with either the brand or a distributor of the brand’s products.
- Sell those products on Amazon.
- Rinse and repeat to scale.
Wholesale on Amazon sounds easy compared to private labeling and other ecommerce business models, but it’s actually one of the most challenging models of all.
The reality is that getting these wholesale accounts is the hardest part. It’s fundamentally different from what you may be used to if you are coming from a retail or online arbitrage business model. These approaches often provide a gateway into wholesale selling, but are actually very different.
Relationship-based vs transactional
Many business models for Amazon sellers are transactional in nature. You purchase goods at one price and sell them at another. No human interaction required.
Wholesale, on the other hand, is a relationship-based model. The relationship you form with your suppliers or brands is how to make this business work. It’s less about finding more suppliers (that’s the easy part) and more about building a relationship that opens doors.
Switching from a transactional business to a relationship business is hard. It’s a whole new skill set that you need to develop. You need to convince suppliers of the opportunity to take your money. It’s odd but true. The B2B sales between you and your supplier are the difficult part. Selling on Amazon is the easy part.
If you can switch your mindset from transactional orders to building relationships, you’ll be ahead of 90%+ of other wholesale sellers. What’s the benefit of all that work?
- You’ll get to sell brands and products that are hard to access.
- Suppliers will provide more competitive prices.
- You’ll be offered early access to new products.
- Suppliers will be more likely to sign exclusive distribution agreements.
These are the factors that define success in selling wholesale on Amazon.
But there’s a problem here. Brands and suppliers just don’t like Amazon sellers. You can approach them with wads of cash and they will turn you away. To overcome this problem, you first need to understand why they don’t want to sell to you.
Why don’t suppliers want to do business with Amazon sellers?
I spent four months trying and failing to build my business selling wholesale on Amazon. After getting denied for each account, I started asking questions:
“You’ve already told me no, but can I ask a few questions just to help me better understand things from your perspective?”
This simple question was a game-changer. It turned out that I had touched a nerve, and every supplier passionately explained why they don’t like doing business with online sellers.
It’s interesting what can happen when you simply ask the right question! Here’s what they said:
1. Terrible communication
As it turns out, the wholesale business model hasn’t evolved much in the last decade or so. Sure, we can sell on Amazon using amazing technology but the brands behind those products still operate as they always have.
This is why relationships matter when it comes to selling wholesale on Amazon: communication changes everything.
Every brand and supplier I spoke with brought up communication as the number one reason why working with Amazon or online sellers is painful for them. As sellers, we’re comfortable communicating behind chat or email, but we rarely make a phone call.
2. Small orders
The next thing I learned was that approaching a brand aggressively by negotiating hard on price, and then placing much smaller orders than expected, is not a healthy way to start or maintain a relationship.
I get it. You’re starting your business and capital is limited. But imagine starting a relationship and making demands from the first date, but never giving the other person what they wanted out of the relationship. Did you ever stop to ask what they wanted? Well, that’s what most people are doing when they start selling wholesale on Amazon.
What’s interesting about small orders is that it’s not actually about the money spent. It’s about your relationship relative to how much money you can and are willing to spend with a brand. If you approach a brand respectfully relative to the capital you have to spend, that relationship will flourish.
3. They don’t stick around
It’s just as bad to start a relationship with a brand and then go silent on them, as it is to misrepresent yourself or your spending power. A relationship should have an open line of communication and never end with a sudden silence.
Imagine finding the perfect fit for a spouse and them feeling the same way, only to completely disappear a few weeks later without reason. It’s fairly similar when dealing with brands. Once you’re on board, they want to stay in the loop. They want to know how you’re contributing to their brand and products in the long run. Remember, this is a long-term relationship.
4. They never follow MAP
This is one of my favorites. MAP (Minimum Advertised Price) is the lowest price you can list a product at publicly, as set by the brand.
Amazon sellers are known for “breaking MAP” – selling below the set price – to increase their Buy Box ownership and increase sales. Naturally, this creates friction with brands and suppliers. It’s a serious issue plaguing our industry, but following MAP can actually be turned to your advantage.
One positive about MAP is that the listings are less competitive from a pricing standpoint. This lack of price competition enables you to scale your business more easily. Brands who monitor pricing will stop supplying to those who break MAP and help clear the field for you.
But how do you compete if you can’t beat other sellers on price? What you can do is compete for the account itself. When you have a healthy relationship with a supplier, you’re in a better position to negotiate an exclusive contract. In addition, if you negotiate lower pricing (and your willingness to follow MAP could help with that) you will have more to spend on PPC campaigns to grow sales volume without a loss of profitability.
Selling wholesale on Amazon the right way
Now that you know the four major problems when dealing with brands and wholesale suppliers, let’s talk about how to solve each of them.
1. Better communication
If you want to start a business relationship on the right foot, call first. By calling suppliers, you’re building a skill that you can hone over time and use as a competitive advantage against sellers who are unwilling to pick up the phone.
Calling suppliers to open accounts with them can be very uncomfortable. You’re face-to-face with rejection. Don’t worry though, as it’s really not personal.
The outcome of all those awkward phone calls? I’ve found that calling suppliers to open an account results in an approval rate four times higher than by using email.
2. Negotiate like a human
This solves the “small fish” problem. If you’ve called a supplier to open an account, you’ve most likely built a rapport with them. That can be used to help negotiate better pricing on your order.
Recently, while starting from square one with a new brand, I was given an additional two discounts (30% in total), because the brand liked that I spent two hours on the phone with them discussing how we could make our relationship a win-win from the start.
It turns out that if you spend more time building a relationship with someone, then they want to reciprocate that for you… who knew?
3. Make MAP an advantage
Most Amazon sellers avoid MAP prices as it negates any competition. At least, that’s the thought. Although it does disable price competition, it does not constrain the cost of the inventory to you and your competitors. With five sellers on the same listing, they may each have paid five different prices for their inventory.
In other words, the better the relationship, the better the pricing, and the more competitive your business can be.
While speaking with brands, you’ll find that they mention MAP to detract you from wanting to pursue the account. Instead, I typically respond with the following: “I’m glad that you’re protecting the brand. We actually prefer MAP as it shows that the brand cares about the longevity of their products”.
How to get brands on your side
Although the Amazon world is filled with an ever-increasing number of sellers, I would argue that competition is not very high when it comes to the wholesale model. I say that because most sellers are unwilling to do what’s written in this post. It’s simply too much effort. There is a massive amount of opportunity if you’re willing to do what others are not.
To stand out further from other Amazon sellers, you’ll need to add more value to the relationship than you get back. By value, I mean what you bring to the table. It’s the reason why some sellers get accounts with ease while others struggle – they are so focused on the financial transaction that they negate adding any value to the relationship.
To add that value, you’ll need to consider doing the following for your brands:
- Listing optimization.
- Running PPC campaigns.
- Updating listing images.
- Having in-depth conversations about how you can help them achieve their goals.
- Help them launch into new marketplaces.
Do the above and you’ll be considered a “unicorn” seller to your brands, and they will offer you exclusive contracts, first pass on new products, additional discounts, and much more.
You might be losing on the value side of the relationship, but you’ll be winning on the financial side.
Simply put, if you can get behind the brand, the brand will get behind you. That’s the key to selling wholesale on Amazon.
This post was by Dillon Carter, co-founder of goAura.com. Aura is an intelligent Repricing tool for 3rd party Amazon sellers wanting to grow their sales more easily.