Before you can sell things on Amazon, you have to have something to sell and buy it for a lot less than what you can sell it for. Product sourcing is a fancy word for getting products to sell at a markup.
There is a lot of stuff in the world, and there are many places to get it, such as manufacturers, wholesalers, other retailers, drop-shippers, auctions, antique shops, factory outlets, you (if you make things), and more.
This article tells you about some common ways to find products, some of which you may not have thought of before. It also talks about some of the pros and cons of each method. We also show you how to find suppliers and make the most of your options for getting products.
1. Retail Arbitrage
Retail arbitrage is when you buy something at a local store, raise the price, and then sell it for a profit. For instance, you go to a local department store with a bin of DVDs that are on sale. You look in the bin and find ten copies of a popular movie on Amazon.
You buy each one for $3. You put a price of $19 on them on Amazon. After taking out the price of the item, shipping costs, and Amazon’s selling fees, which add up to about $9, you make $10 per disc, or $100 in total.
Because it gives a low-cost, low-risk entry point, retail arbitrage is one of the finest ways for beginners to start selling on Amazon. We want you to think about the pros and cons of retail arbitrage, give you tips on how to do retail arbitrage with brick-and-mortar and online stores, and tell you why it’s important to get purchase orders or receipts for everything you buy.
Make sure you have a receipt or purchase order for any item you want to sell on Amazon. This shows that you bought the item from someone else. Amazon may ask for a purchase order to help solve any problems between the buyer and seller about the product or to find out where it came from.
To be successful at retail arbitrage, you should be ready to have a portfolio of products from many different categories instead of just one. A diversified portfolio helps you deal with risks better and keeps your profit margins even across different types of products.
Buying from brick-and-mortar retailers
Large brick-and-mortar stores, which are often called “big-box stores,” are the best place to start if you want to do retail arbitrage. These stores are easy to get to and often have a lot of different items on sale or on clearance. Some of the biggest and most popular stores with real locations are
- Big Lots
- Dollar General
- Home Depot
- Office Depot
- Sears Holdings
- TJ Maxx
Go to any big-box store and look through the aisles for deeply discounted items, like ones that have been taken off the shelves. Some stores put these things on shelves or racks that are marked down, which makes your job easier. Then, you can buy the items at a big discount and sell them for close to their regular price, especially if they are popular in your area but hard to find in other parts of the country.
If you find an item that seems like a good deal, you can scan its barcode with the Amazon Seller Mobile App on your phone. The Mobile App shows any product sold on Amazon that matches the bar code.
If you see the matching product, tap the arrow to the right of it to see more information about it, including the following very useful details.
- Sales rank in its product category
- Product rating
- The lowest price the item is currently listed at
- Estimated Amazon selling fees
- Gross proceeds (estimated profit; tap the arrow to the right of Gross Proceeds for additional details)
- Seller eligibility, which indicates whether you’re permitted to list the product for sale
This information helps you figure out how well the product will sell and how much money you can make from it.
If the product isn’t already listed on Amazon, you’ll be the only one selling it, which means you won’t have any competition. Even if you don’t have any competitors, you might be able to corner the market for a while if you think you can sell the product at a price that will make you a good profit.
Buying from online retailers
Online arbitrage is when you buy something cheaply on one online marketplace and then sell it for a profit on another. Most online arbitrage is done between Amazon and eBay, eBay and Amazon, and Amazon and other marketplaces.
The process is the same as when you buy things from real stores and sell them on Amazon. The only difference is that you can’t just scan a bar code to find out most of the information you need to figure out how profitable a product is.
- Before you do online arbitrage, make sure that the method you want to use is allowed by the rules of both the source market and the target market. Here are some policies that try to stop online arbitrage:
- Amazon’s Prime members can’t buy things from Amazon with the intention of selling them somewhere else. But if you’re not a Prime member and you buy things on Amazon as a regular customer, you can sell the things you buy.
- eBay doesn’t let its sellers take orders on eBay, then buy the product in another marketplace and have that seller ship it directly to the customer.
When you do online arbitrage, you might run into problems that are less likely to happen when you use more traditional ways to find products, such as:
- Refund delays: When a customer asks for a refund, it can take four to six weeks to process it because payment cycles vary from marketplace to marketplace. When there are delays, customers may become unhappy and tell others about it. One way to solve this problem is to give the customer a refund right away and then wait for the money to come back (for example, from the eBay seller who sold you the item and shipped it to your customer).
- Uncertain levels of stock: When you get products from retailers in other marketplaces, it’s hard to keep your stock levels up to date on the target marketplace, which can lead to cancellations and refunds. You can avoid having to cancel an order by buying the item from a different seller at a higher price, but this will hurt your profits and may even cause you to lose money.
- Inconsistent packaging: If you have eBay sellers ship products to your Amazon customers, your customers may receive products packed in eBay boxes. This can be confusing for your customers, embarrassing for you, and against Amazon’s policies.
- Policies on marketplaces change over time. Amazon and eBay, which are the main sites for online arbitrage, change their policies often to make sure their customers are happy. If you don’t know what the rules are on either platform and don’t follow them, you could have one or both of your accounts closed.
Recognizing the importance of having a purchase order (PO) or receipt
A purchase order (PO) is an official document that shows the types, quantities, and agreed-upon prices of goods or services. It is made by a buyer and sent to a seller. When you buy things to sell on Amazon, make sure you get a purchase order or receipt and keep it as proof that you bought the items. It is important to have proof of purchase for the following reasons:
- Approvals by category: In some categories, new sellers might not be able to sell items until they can show proof that the items came from approved channels. A PO or receipt is proof of this.
- Legal protection: If there is a dispute about where a product was made or if it is real, Amazon will ask for a copy of the purchase order or receipt to help verify the claims made in your product listing.
Besides arbitrage, POs are useful for the following reasons:
- Tracking inventory and protecting prices: Amazon wants to know that its third-party sellers can fill orders and give customers some price stability, which also affects your success. Having a PO with prices and quantities shows that you have a relationship with a supplier who can make sure you have enough stock at prices you can afford.
- Inventory management: Purchase orders (POs) let you know how much of a product is needed based on when it is ordered and how often it is ordered. This lets you make more accurate sales projections and avoid overstocking or understocking.
- Accurate record of transactions: Purchase orders give you a record of transactions that you can use when you audit your inventory. With your POs and inventory reports in hand, you can figure out why your inventory records don’t match up.
2. Sourcing Products at Auctions and Liquidation Sales
Auctions and liquidation sales can provide great opportunities for you to snag great deals on products, assuming you know what you’re doing. You should be able to find a number of local auctions, estate sales, and liquidation sales in your town or city or in nearby locations. Just search online for the terms “auction,” “estate sale,” or “liquidation sale” followed by your location (for example, city and state) or followed by “near me,” if you’re using a GPS-enabled device.
In addition to local auctions, your search is likely to turn up several websites where auctions and sales are conducted online. Of course, you can go directly to popular online auction or liquidation sales sites, such as eBay and Liquidation.
Whether you’re bidding in person or online, heed the following advice to improve your odds of getting potentially profitable products at a good price:
- Do your homework. Know which products are in high demand on Amazon, the price they generally sell for, and whether you can list the product for sale on Amazon (eligibility). Before you bid on or buy a product, know how you’re going to sell it and for how much; in other words, know your exit strategy. People who earn lots of money buying and selling stuff always know how much something is worth before they buy it.
- Verify that the product complies with all Amazon policies. Amazon has strict policies on product expiration, authenticity, product safety, and warranties. Any product refunds resulting from policy violations can prove to be a double whammy, because you’re required to issue a refund to the buyer as well as pay Amazon’s penalties for policy violations.
- Inspect the goods. Whenever possible, get a look at the product(s) before bidding. Check product condition and look for any hidden damage that could prove to be costly. If you’re bidding on a pallet of items, be sure the pallet has the products you want without undesirable products mixed in; check product tags to be sure.
- Don’t exceed your maximum bid. Prior to bidding, establish the maximum you can pay to earn the desired profit when you sell, and don’t exceed that amount. If you’re a competitive person, you may be driven to “win” the bidding war, but that could mean losing your shirt.
- If a required opening bid seems too high, wait. Sometimes, the required opening bid may be lowered later.
- Pay with a credit card if possible. Credit card payments have an extra layer of protection. If you encounter an issue with the seller or marketplace and are unable to resolve it, your credit card company may be able to resolve the issue or process a chargeback to credit your account.
Here are some additional tips for gaining the upper hand in online auctions:
- Deal only with reputable sellers. Review seller profiles, ratings, and feedback.
- Look for auctions that end in the wee hours of the morning. Bidding after midnight and before five or six o’clock in the morning reduces the competition.
- Bid in the final moments of an auction. Bidding usually heats up near the end of an auction, so don’t waste your time bidding in the early stages.
- Bid in odd amounts (such as a few cents) around your target price. This technique may help you outbid others who bid in round (even) numbers.
3. Consider Dropshipping
Dropshipping is a product sourcing option in which the seller takes a customer’s order and passes it to the drop-shipper for order fulfillment. The dropshipper picks, packs, and ships the product to the buyer in packaging that makes the product appear as though it came directly from the seller. It’s the ultimate in no-hassle product sourcing.
Before hopping aboard the drop-ship bandwagon, carefully weigh the potential advantages and disadvantages. Here are some of the key benefits of drop-shipping:
- Quick and easy startup: All you need to do is find a reliable drop-ship supplier that carries a broad selection of products.
- Low initial investment: You don’t have to buy inventory in bulk. Whenever you sell a product, you buy the product from the drop-ship supplier at a discount and keep the profit.
- Low risk: Because you don’t carry inventory, you avoid the risks of buying and storying inventory you can’t sell and having products lost or damaged in storage.
- Broader selection of products: Because you don’t have to invest in inventory, you can afford to offer a broad selection of products.
- No warehouse required: You don’t need to store products in your living room or garage. The drop-shipper has its own warehouse facilities and ships the products for you.
At this point, drop-shipping may sound too good to be true, but you may change your mind after considering the potential drawbacks, including the following:
- High costs: You pay for the convenience in the form of one or more of the following fees: per-item markup, shipping and handling fee, account setup fee, and monthly or annual membership fee.
- Little or no control over product sourcing: Drop-shippers contract with various suppliers, some of which may not comply with Amazon policies or quality standards, which can result in disgruntled customers and policy violations charged against your account.
- No control over inventory: If a drop-shipper runs out of stock of an item you sell, you’re out of luck if you can’t find a supplier who carries the product.
- No control over shipping or returns: If the drop-shipper drops the ball on shipping the item or ships to the wrong address, you’re held responsible. In addition, when a customer returns a product, you’re likely to be charged a restocking fee, which complicates your relationship with the drop-shipper and your accounting.
- Customer dissatisfaction: With little to no control over product quality, inventory, or shipping, you’re likely to disappoint many customers and suffer the consequences — negative seller feedback, which could lead to having your seller account suspended.
4. Buying from Manufacturers, Distributors, and Wholesalers
Sourcing products directly from reputable suppliers is one of the best ways to build a thriving eCommerce business and ensure its long-term success. In addition to giving you more control over product quality, inventory, and shipping, teaming up with established suppliers can bring experienced partners on board to propel your success.
When you’re in the market for a supplier, you can narrow your search by first deciding the type of supplier you’re interested in partnering with — manufacturer, distributor, or wholesaler. In the following sections, we explain how they differ.
Deciding whether a manufacturer is best
A manufacturer is an individual or company that makes products for sale. Large manufacturers typically mass-produce merchandise in factories. The big benefit of sourcing directly from a manufacturer is cost; because manufacturers are at the bottom of the value chain, they sell products for less, enabling you to offer lower prices or boost your profit margins. However, manufacturers may not be the ideal choice for small retailers for the following reasons:
- Manufacturers may have exclusive deals with brands or distributors; they may not even sell merchandise directly to retailers like you.
- Most manufacturers stipulate a minimum order quantity (MOQ), which can be risky; you could get stuck with a large quantity of items you can’t sell.
Working with a manufacturer is usually best if you have a design for a product you need mass produced.
Several online cources are available for locating a manufacturer, including the following:
- Maker’s Row connects entrepreneurs with U.S. manufacturers.
- Global Sourcing Specialists helps inventors bring their ideas to fruition from design to production.
- MFG.com enables you to search for manufacturers, obtain competitive bids, and find the right manufacturer for your product.
Prior to sharing your idea with a manufacturer, hire a lawyer to write up a contract that protects your intellectual property rights and includes a detailed non-compete clause and nondisclosure agreement (NDA). Have the manufacturer sign the agreement before sharing any detailed information or product designs.
Knowing when to opt for a distributor
If you track down the manufacturer that makes the product you want to sell and find out that it contracts exclusively with a select group of distributors, ask for the list of authorized distributors. You can then contact distributors on the list to determine whether they’re willing to sell the product to you. By working directly with authorized distributors, you avoid the risk of listing and selling counterfeit products obtained from unauthorized dealers.
A manufacturer may make a product exclusively for a brand, in which case the brand owner is likely to have a list of authorized distributors or may sell products only to authorized retailers.
Deciding when a wholesaler is best
If you’re just getting your feet wet as an Amazon Seller, you probably want to source your products from one or more wholesalers. A wholesaler is an individual or company that buys merchandise in large quantities and sells smaller quantities to retailers at a slight markup.
Wholesale prices are largely a factor of volume. Expect higher prices when you’re just getting started and ordering lower quantities. As you grow your business and gain the confidence to order in larger quantities, you’ll be able to negotiate lower prices.
Steering clear of posers
Be wary of individuals who pose as wholesalers but actually serve as intermediaries between wholesalers and retailers like you. They take your order, pass it to the wholesaler, and then sell the products to you at a higher price, squeezing your margins.
Look for the following signs of fake wholesalers:
- No contact information on the individual’s or company’s website.
- No street address or a fake address.
- You’re not asked for any business documentation or sales tax info.
- The prices seem too good to be true.
Finding reliable wholesalers
Finding reliable wholesalers can be challenging. Here are a few suggestions to steer you in the right direction:
- Start your search on business-to-business (B2B) sites such as Alibaba.com and TradeWheel.com, where wholesalers are vetted to some degree. (See the later section “Sourcing Products from Alibaba.”)
- Research the wholesaler online and pay special attention to customer ratings and reviews.
- Ask for and check business references to find out what other retailers have to say about working with the wholesaler.
- If you know any other online sellers, ask them about the wholesalers they use, or visit online seller or business forums and look for discussions about wholesalers or suppliers.
When you find a wholesaler who seems to be a good match, be sure to get answers to the following questions:
- Do you have any MOQs or minimum spend (on the purchase of multiple products)?
- How often and in what way do you communicate information on product updates, product discontinuations, and other key issues with your retail clients?
- Am I required to sign a contract? (If the answer is yes, obtain a copy of the contract for you and your attorney to review.)
- What is your order fulfillment period and what are the logistics involved? If you’re registered for Fulfillment by Amazon (FBA), ask whether the wholesaler can ship products directly to Amazon fulfillment centers and what you need to do on your end to facilitate that process.
- What is the total price and what factors into that price, such as production costs, shipping and handling fees, and any other fees not yet mentioned?
Also, before contracting with a wholesaler, order samples of products you’re interested in selling. Getting your hands on actual products is a great quality assurance precaution. Most suppliers charge for product samples. As long as the price is reasonable, you’re wise to order product samples, so you can check product quality before ordering a large quantity.
5. Sourcing Products from Alibaba
Alibaba is a Chinese eCommerce giant that serves both consumers and businesses. It has changed the way businesses find products by giving hundreds of thousands of businesses around the world access to millions of products at prices that were once only available to big-box stores. If you want to do well as an Amazon seller, you should learn as much as you can about Alibaba, where you can often find the best deals.
Start by doing some basic research on the product to answer the following:
- What do you want to sell? Do you want to sell clothes, tools, toys, or things for the house?
- Which products have the most potential to sell and make money?
- How much do people want to pay for each product?
- How much will each item cost me to sell? Think about how much the product costs, as well as any Amazon selling fees and FBA fees.
When you have a good idea of what you want to sell, go to Alibaba.com, open the drop-down menu to the left of the Search box, and choose Suppliers. Click in the box that says “Search,” type a short description of the product, and then click the “Search” button. You can search for a product by uploading a picture of it by tapping the camera icon next to the Search box.
Alibaba shows you a broad list of suppliers who sell products similar to the one you searched for. You can narrow your search by using the filters above the list of suppliers and on the left side of the page. You can refine your search by product category, supplier type and region, firm size (by revenue or number of workers), and other criteria.
For each supplier on the list, Alibaba shows its name, how long it has been in business, and other information to help you choose a supplier wisely. These things are known about each supplier:
Badges: A supplier can show that it is trustworthy by having one or more of the following badges:
- Trade Assurance means that the seller supports Alibaba’s Trade Assurance service, which protects your order from the time you pay for it until the time it arrives at your door.
- Gold Supplier means that the supplier supports Trade Assurance and has passed one or more on-site checks to verify the business type and commercial or industrial capabilities. The Gold Supplier badge gives the seller more credibility, but it doesn’t guarantee the quality or authenticity of the products.
- Verified Supplier means that the supplier has been checked out and approved by a third party, either online or in person. Again, this badge makes a supplier seem more trustworthy, but it doesn’t guarantee that a product is good or real.
- Transaction Level: A supplier has more transactions on the Alibaba platform if it has more diamonds.
- Response Rate: This metric shows how many buyers got a response from the supplier within 24 hours of contacting them.
- Transactions: This metric shows how many transactions there have been and how much money they have cost in the last six months.
If you need more information from a supplier, click the button that says “Contact Supplier” next to the supplier you want to talk to. Then, use the form that comes up to write and send your question.
- Set up a phone call or videoconference with the supplier before you place an order so you can get a sense of how trustworthy the supplier is.
- Ask questions to find out everything you need to know to make a good decision. Legitimate suppliers won’t be afraid to give you the information you need.
- If you can, you should go to the warehouse of the supplier. If you can’t visit the building in person, ask for a video tour.
- Check online for the warehouse and business location to make sure they exist.
- Compare the name and address on the supplier’s website and any letters you get from the supplier to the name and address on Alibaba.
- Check the email address and website of the supplier. Most email addresses for reputable suppliers start with the domain name instead of “google.com” or “yahoo.com.”
- If an offer seems too good to be true, you should probably think twice before taking it.
- Stay away from suppliers who want to be paid early, because scammers often want to take the money and run. Legitimate suppliers won’t ask for money before an agreement is signed.
Also, order product samples from a supplier before you sign a contract with them. Getting your hands on real products is a good way to make sure the quality is good.
After choosing a supplier, you can start negotiations and work out the logistics, such as agreeing on payment terms and methods, the customs and import process, and any plans to ship products to Amazon fulfillment centers.
6. Finding Suppliers at Tradeshows
A great way to find reputable suppliers is to attend eCommerce tradeshows, where suppliers gather to sell their products and services to online retailers like you. Don’t underestimate the importance of tradeshows in this era of online suppliers and directories like Alibaba. For various reasons, online retailers who attend tradeshows tend to be more successful than those who don’t.
Tradeshows deliver many of the same benefits as online supplier directories like Alibaba with the additional benefit of enabling you to meet suppliers in person.
Unfortunately, tradeshows run for a limited number of days and some attract hundreds of thousands of visitors, so you can waste considerable time just finding your way around. To get the most out of a tradeshow, prepare in advance. Here are a few tips:
- Register early. Most tradeshows let you preregister online, so you don’t have to wait in a long line to register on opening day.
- Filter the exhibitors list. Download and print the list of participating suppliers and major exhibitors and highlight those that interest you most.
- Survey the tradeshow map. Highlight the exhibition halls and booths that interest you most and plot an efficient route so you don’t waste time wandering aimlessly through hallways and rooms.
- Introduce yourself to suppliers before the tradeshow. Get past the preliminaries so you can engage in more productive talks in person and have more time to scope out other suppliers.
- Be prepared. Create an alternate email address for tradeshows, so that your primary email account isn’t inundated with unsolicited promotional messages. Carry some business cards with the alternate email address on them.
- A smartphone, notebook, or tablet computer with a note-taking app to capture ideas, tips, and crucial details of any meetings.
- Chargers for your electronic devices.
- Power and outlet converters if the destination country’s power service differs from that of your home country.
- A virtual private network (VPN) service, which enables secure connections over public Wi-Fi and enables you to connect to sites that may be blocked in the destination country. (Practice with the VPN before your trip to make sure it’s working smoothly and you understand how to use it.)
To avoid wasting your time and the time of prospective suppliers, ask questions specifically worded to weed out suppliers who can’t meet your needs, such as the following:
- Can you supply me with <specific product>?
- Are you a manufacturer, distributor, or wholesaler?
- Do you export to retailers in <my country>?
- Are you able to ship directly to Amazon fulfillment centers?
- Are you equipped to make custom or private label products?
- What is your MOQ, if any?
- What is your estimated price with all fees included?
Your time is limited, so don’t waste it engaging in unfruitful discussions with suppliers who can’t meet your needs. If the answer to any of the questions eliminates the supplier as a candidate, move on to the next supplier on your list.
Here are a few additional tips for successfully navigating a tradeshow without making any major mistakes:
- Don’t make snap purchase decisions, especially if you feel pressured to do so. You’re on a reconnaissance mission to collect information. Leave the decisions for later.
- Don’t start the negotiation process. Get ballpark quotes, MOQs, and contact information and move on.
- Photograph products, booths, or people to help you recall later what you learned at the tradeshow and whom you need to follow up with.
- After the tradeshow but while they’re still fresh in your mind, review your notes, photographs, and contact information and organize them for following up with suppliers.
- Follow up with any suppliers you’re interested in partnering with.
7. Making and Selling Your Own Products: Amazon Handmade and Custom
Amazon features a couple product categories that allow you to source your own products — either by crafting them by hand or enabling shoppers to customize their own products. In this section, we bring you up to speed on these two product-sourcing methods.
Selling your own hand-crafted products
If you’re one of the lucky few whose passionate creativity merges with an entrepreneurial zeal, Amazon provides the perfect platform for you to deliver handcrafted love to customers. As Amazon states so succinctly:
We empower Artisans with the tools necessary to showcase their products to Customers around the world. Together we are growing craft communities and successful businesses.
To build a thriving community of artisans, encourage their creativity, and provide them the financial means to support their crafts, Amazon’s handmade category offers the following benefits:
- Artisan only: Amazon carefully screens applicants to ensure that only artisans are allowed to list products in the handmade category, thus eliminating competition from commercial products.
- Flat fee: Artisans pay a flat 15 percent fee on every sale, no monthly fees or referral fees.
- Artisan profile: Artisans can create their own profiles each with a unique URL to help shoppers find them on Amazon.
- A sizeable community of shoppers hungry for handcrafted products: Shoppers are ready to pay a premium for the quality, handmade products, paving way for earning higher profit margins.
- No Universal Product Code (UPC) required: This removes one of the hassles of selling products on Amazon.
- Customer customizations allowed: You can add fields to your product listing that enable shoppers to request product customizations, such as having their name added to a product.
- Fulfillment by Amazon (FBA): You can ship products to Amazon fulfillment centers to have orders packed and shipped by Amazon. Doing so enables you to display the Amazon Prime Badge on your listings, which is likely to boost sales.
- Sell across North America: You can sell products in Canada, the United States, and Mexico all from a single account.
Products must meet strict specifications to qualify as handmade. Every handmade product must be created, altered, and assembled almost entirely by hand (hand tools and light machinery are permitted). Mass-produced items don’t qualify. For more about the handmade eligibility criteria, open the Search bar at the top of Seller Central, search for Amazon Handmade Terms, and select Amazon Handmade Terms.
To get a glimpse of the types of products sold under this category, log in to the Amazon shopping site, open the main menu (upper-left corner of the page), choose Handmade, and then All Handmade. For more details about the program and a link to register as an artisan, visit https://services.amazon.com/handmade/handmade.html.
Selling customized products on Amazon
Amazon’s custom category enables you to offer products that are customized or personalized to the customer’s specifications. This is a great category for listing personalized gifts for special occasions, such as Valentine’s Day, Mother’s Day, and Father’s Day.
As of this writing, you can offer shoppers the following customization options:
- Text customization: Shoppers can add text to an item and select from color and font options you specify. Text customization is great for engraving, embroidery, printing, painting, and more.
- Image customization: Shoppers can upload an image or logo and have it applied to the product, such as a coffee mug, T-shirt, smartphone case, or pillow. They can also add text to display in the foreground.
- Product configurations: You can add to your product listing a drop-down list of options that customers can select to build their own product.
For more details about the custom category and instructions on how to register to have the Custom feature set applied to your Professional Seller account, visit https://services.amazon.com/custom.html. (Note that only Professional Sellers are permitted to list products in this category.)
Learn more about what you can and can’t sell on Amazon.