Matthew Ferguson explains why wholesalers are hesitant to deal with marketplace sellers and the best ways to build relationships with them
I am based in the UK and have been selling on eBay for a couple of years and Amazon for six months. I sell mainly toys and children’s products but I have recently been ungated in the Health and Beauty and Personal Care categories, so I’m looking to spread my wings.
At the moment I mainly do arbitrage but I would really like to move more into wholesale. However, I find that decent wholesalers are reluctant to supply Amazon sellers.
How should I reply to an email from a wholesaler that I have approached, and would really like to work with, to try and ensure I get a favorable response?
— Mandy Williams, U.K.
There are a few reasons why wholesalers might be abrasive to marketplace sellers. I would be willing, able and arrogant enough to guess that 90% of all wholesalers’ new prospects are basically saying the same thing: “I want to sell on marketplaces”.
Maybe they are just so fed up with the question, they’ve forgotten mother’s manners and are rude. You can’t count that out these days.
Marketplaces tightens margin and… neck muscles
Wholesalers often still have a stigma around marketplaces, and we can’t really blame them. Marketplaces breed a very high level of competitive aggression as a necessity to sell product.
If you are buying the same product as 50 other sellers, and are all selling on the same channels (Amazon, eBay, Tesco, Newegg, Fruugo, ManoMano, etc), you are likely all fighting for pennies. The race to the bottom is on, and the seller willing to work the hardest for the smallest salary will win, albeit the victory will be hollow and soul destroying, much like overeating cake after a solid workout at the gym.
I mean… we should work to live, right? Putting on my philosophical feathered hat for a moment, life should be about living. Life can’t be easy or good if you’re making peanuts per product, and the struggle shouldn’t be required to pay off the credit card bills. Life should be about keeping the family civil on a long road trip.
As a reseller, if you’re selling thousands of cumulative GMV on a regular basis, working 6 days a week and 10-hour days, and making no money… you’ll be questioning your life choices.
Wholesalers get a lot of this fed back to them in the form of requests to negotiate on price. You can bet the majority of resellers are trying to get the best price-to-volume ratio, scraping pennies between the purchase costs, shipment to FBA, Amazon charges, storage costs and how much it’s actually worth to a buyer.
Wholesalers are secretly selling there already
We get wholesale distributors, manufacturers and suppliers coming to us on a routine basis and they always have the same starting request:
We want to start selling into marketplaces directly. Given our position, we can undercut the market with better pricing and volume. But we don’t want to kill our wholesale business overnight. Can you help us get started and run it?
The implied question is fairly easy to ascertain: “How can we compete with our customers, without them knowing it?” I’m very sad to inform you Mandy, that our company can and does make this very easy for them to do.
So, putting it very simply, you may hit a brick wall because they don’t need a yet another retailer to reprice against, under their secret new legal entity which is going to compete with you.
It’s not a growth lever
Wholesalers want to grow too. To do so, they need to be able to shift more product at bigger volumes on a faster timeline. Wholesalers lose sleep over pallets of product which gather dust and produce cobwebs during spring. Even if they only work with a handful of buyers, there is a very good chance one is on the marketplaces already.
What value do you offer them? As a wholesaler, your new business only means their purchase orders received will be smaller, for less units, because they are spreading the product between more sellers. Ecommerce-focused companies often buy in smaller amounts anyway, but now you’re asking them to segment the orders even more. That’s less profitable than selling all the product in one big shipment, and they don’t want to work for peanuts anymore than you do.
You are not coming to them with a new market. You don’t have a physical store where new footfall might increase the sales velocity. You don’t have an established ecommerce channel of “your” buyers, which might produce the digital equivalent of a bricks-and-mortar location.
It’s a new relationship, which infringes on the old ones
Wholesalers are working with other companies. That’s emails, meetings and phone calls. That’s regular purchase orders, communications, contacts and history. While both sides are likely pretending to be best friends, there really is a human relationship there. There is also a revenue-producing business relationship.
By adding you into the mix, an unproven unknown, they are risking their existing relationships. They might annoy their buyers with new entrants. They might kill some projected order forecasts with existing customers, if you come in and start selling to the same end-consumer.
So it’s not you, it’s them. But it’s still a relationship you need to court. The best way to boost your chances is by meeting these companies at trade shows. Forge a human relationship with a face and a handshake. Get them to like you and know you. This is far better than cold calling or emailing wholesalers.
And, to be honest, some of the best suppliers for you probably aren’t advertising online. If you can find a supplier easily online, so can everyone else.
Let’s take a look at the big picture
Assuming a supplier says yes, would you turn a profit? I mean, let’s say they all accept your application, and you are suddenly spoiled for choice on what to buy.
Could you buy enough of it to be profitable? The bigger the volume, the better cost per unit. But you’re entering the landscape behind others. Are they already buying and selling at a great volume?
If a wholesaler is slamming the door – or not replying to the door bell – the moment you mention marketplaces, there’s a chance it’s for a good reason. They might be doing you a favor, strategically speaking.
If you’re growing and have more money to spend, why not start branding goods as your own? You can build a name with potentially more lasting power. You can source from different suppliers on Alibaba, and the products you are selling become unique because they are yours alone. That’s a new ASIN and a product with no other sellers, because it’s “your brand”.
We did an article on this earlier in the year. It’s not rocket science or significantly more costly, and the long term rewards could be an upgrade from peanuts to cash-ews.
Granted, you’ll need to sell it as something new and better. You’ll likely want to invest in some images, while trying to source something with uniqueness, or a better ratio of price-to-quality. Building new listings has its own challenges. This won’t be any easier at first, it just has a better, longer-lasting reward at the end of the listing rainbow.
Also, I can tell you flatly that Health and Beauty is full of this already, because nobody can turn much of a profit reselling there. This category is utterly flooded with small brands. Unless you can purchase big-name brands at absurdly low price points, don’t bother reselling small brands. Make your own, or run away.
You asked me a specific question. Sorry. I just rambled on and on, ignoring it (forgetting actually, Peppa Pig is on TV and George really needed to hold on to that balloon).
I am sure you are savvy Mandy. You’ve grown this far, so hard work and business smarts is no secret to you. I actually recommend you reply with waffle. Obfuscation is your weapon in your replies… yes, really.
I would give them facts, but in a colorful way. I wouldn’t tell them you are selling on marketplaces unless they ask, but instead paint them in a new light. Something like:
We predominantly sell into international markets, sourcing and selling locally across Europe, across several channels and demographics. Our network includes an active base of several million visitors spread across numerous company-owned digital channels that we’ve cultivated with active marketing presence over the years.
Basically, all I am saying here is we sell on an Amazon unified account, and on a few regional eBay marketplaces. But it sounds fancier.
We are focusing a physical presence in the UK, given its strong retail landscape. We are using digital channels at this time, while we complete a SWOT analysis of key geographical areas with the right audience for potential physical footfall acquisition.
You live in the UK, right? That’s “physical”, and I’m sure you focus on where you are more than anywhere you’re not. Sure, you’ll do a SWOT analysis… in your head, five minutes after you googled what it is. And the conclusion will be to not open a physical store. But, as long as you spend this five minutes thinking about it after emailing them, you’re not lying.
We have a proven track record of selling volume, using analytics to probe for market weaknesses.
Basically, we sell stuff that sells and we don’t reorder if it doesn’t.
You might be getting the idea. I wouldn’t lie, but there is no harm in stretching.
We have identified a $25 billion market in North America for product in several categories, and are planning to exploit this in 2018.
Basically, we plan to sell on Walmart eventually.
Maybe none of this will work. Just remember they are expecting you to sell yourself in this application, and explain the value you can bring. While some people will challenge you on these statements and force you to come clean, some will appreciate the effort you put into the reply and open the door.
I hope this gives a basic perspective on what to try next. Just make sure it’s all worth it. We increasingly suggest focusing on your own brand of product and forging relationships with factories over time. It’s not much more expensive these days, and the rewards are far greater when it works out.