Amazon Seller Strategies – Pros & Cons of Selling Other Brands Products on Amazon
When you think very hard about it, selling on the Amazon marketplace, or any other online marketplace for that matter, is an immensely complicated process. If you think hard about the data management and all other tremendously technical processes that go into managing your products and orders, marketing, and fulfilling them, everything is as complex as it sounds.
And yet, with Amazon’s continuous digital and technological innovations, you can easily use the platform not only to sell your own products on Amazon but also to resell items you purchased from other brands or sellers.
Amazon marketplace itself has its inventory and product offerings and sells on its platform. But it allows just anybody to quickly set up an e-commerce startup on its platform and sell almost every product you can think of that exists. You can choose to sell private label items or branded items. But of course, there are benefits and advantages to selling other brands’ products on Amazon.
What is Amazon marketplace?
Amazon marketplace is the largest online marketplace in the United States and one of the leading giants in e-commerce businesses on a global scale. As of the moment, it has 1.5 million active sellers from its registered 6.2 total sellers globally.
Amazon is known as an “everything” store. It was called such partly because of the wide range of services it offers to many different markets.
The other reason is that you can find almost any product you’re looking for on its platform. Though its motto is “Work Hard. Have fun.
Make History,” it appears to hold true to the symbol on its logo, which translates to the motto, “From A-Z.” You can search the platform for anything you need from A-Z. It is one of Amazon’s successful business strategies that acquired 300 million active customer accounts worldwide, 150 million of which are active Amazon Prime members.
Different Types of Sellers and Business Model on Amazon
Amazon marketplace supports different types of sellers operating on different business models. It is one reason why 375, 000 new sellers, chose to set up business on the marketplace this year. What’s more, Statista reported that 55% of Amazon’s sales in the first quarter of 2021 is contributed by third-party sellers on the platform.
Amazon sellers consist of first-party (1P) and third-party (3P) sellers. 1P sellers are brand manufacturers who sell their products on Amazon for wholesale prices. 3P sellers are independent business owners who sell their products on Amazon for a fee. They operate on different business models that Amazon allows on its platform, such as:
- Private label
Private labels are also called in-store brands. It is a brand owned by the retailer or distributor, only sold in its outlets. Store brands, also called own brands, are private label brands managed solely by retailers and only sold to specific outlets or chains of stores.
Private labels products are products manufactured by a different company and are sent to independent businesses or retailers to be rebranded or renamed and sold to consumers as their own.
- Retail arbitrage
From the name itself, retail arbitrage is an e-commerce business model where a seller buys small quantities of items from other retailers to resell them at a higher price.
Sellers in this business model may buy items from other retail sellers on an e-commerce platform like Amazon then resell them at a slightly higher selling price on the same platform.
The third-party sellers on Amazon marketplace are using the retail arbitrage model for their e-retail startup.
Dropshipping is a business model and retail fulfilment method that involves wholesalers or manufacturers to fulfil the customer’s orders.
In this model, sellers don’t own any inventory. Instead, sellers look for third-party suppliers who are manufacturers or wholesalers, where they would get images and details of products they could sell on their store. Once a customer orders from the seller’s store, the seller passes the order to the third-party supplier along with the customer’s shipping details.
The third-party supplier then fulfils the order and manages the delivery of the item to the consumer. The seller does not take part in any steps of the fulfilment process except to mark their e-commerce store of the order fulfilment and track items to update customers.
The average drop shipping margin on Amazon is between 10%- 30%.
Wholesale is a business model where manufacturers sell their products in bulk to other businesses.
In this e-commerce model, a seller buys large quantities of inventory, known as a bulk order, from companies that manufacture products, often at a discount or reduced price, to sell them at a retail price in their store.
Wholesale price means that items are sold at a discounted or reduced price. In Amazon, 61% of wholesalers more than $5000 per month selling on the platform.
- Online arbitrage
Online arbitrage is another business model you can use on Amazon. In online arbitrage, a seller buys low-cost products from other retailers on one marketplace and sells them at a higher price on another e-commerce platform.
In Amazon’s case, sellers look for product suppliers on a different online marketplace, such as eBay, Walmart, or Alibaba, and sell them on Amazon at a higher price. According to a source, 54% of online Arbitrage sellers on Amazon receive a 16% or more profit margin.
Amazon marketplace has a dedicated page on its platform for handmade items. From the word itself, handmade products are products crafted by hand. Handmade sellers create their own products by hand to sell on their Amazon marketplace store.
52% of Amazon’s total handmade item sellers see profit margins of between11% to 25%.
Print-on-Demand (POD) is where you sell printable products that you customise using your original designs on an online platform. Merch by Amazon is Amazon’s POD program where sellers only need to create a product mockup by uploading their designs to the platform, choosing the products where they want to see the design, and adding descriptions.
The selling, marketing, production, shipping, and customer service is handled by Amazon marketplace. Then, when a product with your design sells, Amazon pays you a royalty.
Moreover, Amazon marketplace offers POD to e-books that you want to publish in paperback but don’t have enough funds to support printing. Profit is earned through royalty. Amazon pays a 60% royalty rate for any sale on Amazon storefronts.
What are Restricted Brands?
Amazon marketplace limits sellers from selling certain brands and sometimes even prohibits selling them on its website. It’s not always the whole brand, however. Sometimes, only certain products of the brand or product-line within it are restricted. Amazon marketplace does this to protect buyers from being scammed and to generally limit counterfeits and fakes from being sold online.
At times, too, Amazon marketplace needs sellers to request approval on selling products from some product categories. It is meant to protect the security and interest of the buyers on their site.
You can see what brands are gated and restricted on Amazon Restricted Brands list.
The Pros and Cons of Selling Other Brands Products on Amazon
There are benefits as well as disadvantages in selling other brands’ products on Amazon marketplace. Below are lists of pros and cons to help you decide whether selling brands could help with your business or not.
If you want to know more on how to sell on Amazon, continue reading this blog: Top-10 Secrets to Selling on Amazon.
Is it illegal to resell products you purchased from other stores on Amazon marketplace?
The short answer is NO. It is not illegal to sell items that you legitimately purchased, technically. However, if you plan to use the logos and other elements that identify the brand from whom you purchase the item, you need to ask for permission from the brand that originally sells the product you are selling.
What are the top-selling product categories on Amazon?
Amazon’s top-selling product categories include beauty and personal care, toys and games, sports and fitness, arts and crafts, health and wellness, laptops, gadget and electronics, fashion, and home and outdoor appliances. There are still manymore, but if you visit the Amazon site, you’ll even find specific top-selling products on its homepage.
Where to Source Products You Can Sell On Amazon?
Aside from Amazon, there are many online marketplaces that provide a vast selection of low cost products and millions of manufacturers and vendors for you to choose from. Alibaba, AliExpress, eBay, Walmart, Target, Global Sources, DHgate, all.biz, and many more.
Amazon allows you to sell products in your own brand or resell products from other brands. Although it has its own product offerings and inventory that can compete with your brand, it offers you a platform with millions of users to establish your brand’s presence and increase your reach.
When planning to sell other brands, you should first look up Amazon Restricted Brands so you won’t waste time planning over a brand that is not allowed on the platform. Finally, take advantage of the resources and materials provided freely on Amazon’s website to learn how to effectively leverage your brand or a brand you’re reselling on the platform.