There is a lot to think about when it comes to your Amazon inventory management, and especially where to buy and how you source. With so many different ways of getting products these days (big box stores, clearance aisles, and wholesalers, for example), it can be difficult to find the right method(s) for your business.
Today, we’re taking the guesswork out of all things inventory, so you can find the right products for your business in the way that’s most efficient (and hopefully most profitable) for you.
Before you Source: Research Top Amazon Products & Estimate Profits
Most inventory options require an upfront investment in product — and the hope that you’ll turn a healthy profit. To maximize your chances of actually making sales on Amazon, research the product categories and best items that are currently selling well, then calculate your estimated profits based on those items. Researching the best selling items can help you discover product ideas you may not have thought to sell but that could be profitable.
Here are a few tools to help you get started:
- Jungle Scout: Get ahead of the competition by using Jungle Scout, which shows you the products that sell the most and will make you the most money.
- Camelcamelcamel.com: A free Amazon price tracker that helps you decide when to buy your inventory — it monitors millions of products and alerts you when prices drop.
- InventoryLab: A solution that syncs directly with Amazon Seller Central to help you research and source profitable inventory, and list and manage your current inventory. Start a 30 day free trial today.
- Amazon Scanner App: As an Amazon seller, you have access to their scanner app on iPhone or Android phones, which lets you scan an item’s barcode to see its pricing and selling history on Amazon before you actually invest in it yourself.
- Amazon FBA Calculator: If you’re an FBA seller, use Amazon’s FBA Calculator to estimate what your profits might be on a certain product, less your FBA and sourcing fees.
Did You Know: We recently conducted a survey of our customers to find the top selling items on Amazon. The top five product categories include Home Goods, Health & Personal Care, Toys, Kitchen, and Beauty — so keep these in mind as you are buying inventory. Just don’t forget that Amazon restricts certain categories (and brands) during the holiday season, such as beauty, jewelry, toys, and video games.
Pro Tip: Start small. As you’re testing new products or categories, find a couple that sell well, purchase a 2-3 weeks supply, price competitively and keep a keen eye on your sales metrics. . Then once your profits are coming in at a steady pace (and at a margin that works for your business), consider expanding your inventory — and always keep tabs on it so you don’t risk going out of stock. Marcey Barichello, Payability customer and owner of Coffeevines on Amazon, shares her inventory lessons learned: “Lessons learned have come from knowing what your inventory levels need to be maintained as and knowing when to place orders so we do not run out of product which is always a challenge.”
10 Inventory Sourcing Options
So now that you have a sense for what products you want to sell and how much you could make, it’s time to figure out the best way to source them. Here are the 10 most common sourcing methods:
1: Retail Arbitrage
Buying discounted products from retail stores and reselling them on Amazon for a profit.
Sellers that follow the retail arbitrage model often scour the clearance aisles at big box stores like Walmart, Target, Big Lots, CVS, and Walgreens – to name a few. Liquidation and surplus stores are also common inventory-shopping destinations because everything they sell is pretty heavily discounted (sometimes even 75% off retail). No matter where you go to buy your inventory, don’t forget to save all of your invoices and receipts.
Before you consider making purchases on your credit card, make sure you know the pro’s and con’s of using business credit cards to finance your inventory.
Sourcing your inventory this way can be time-consuming but it typically doesn’t require a large upfront investment since you’re most likely not buying in bulk.
Pro Tip: Leonard Pearson, Payability customer and owner of Velocity Stores on Amazon, uses retail arbitrage for some of his inventory. He buys store clearance items at roughly 75% off and resells them on Amazon. He says, “With certain stores this is repeated because chain stores carry the same items and generally clearance them at the same time. This leads to a lot of driving around to get all of the items you can, but the payoff can be really good.”
2: Online Arbitrage
Buying discounted products online and reselling them on Amazon for a profit.
Online arbitrage is exactly like retail arbitrage, only you’re shopping online for your inventory instead of in person. To help you find the right e-retailer, check out one of these 17 tools for online sourcing or consider The Selling Family’s online course The ABCs of Online Sourcing.
3: Drop Shipping
Buying products from a retailer or wholesaler after you’ve made a sale on Amazon, and having the items sent directly to your customer.
If you don’t want the responsibility of storing inventory yourself or at an Amazon warehouse, drop shipping might be the right option for you. By drop shipping you’d essentially act as a middleman between a product and its buyer without handling the product at all.
However, there are two risks involved with this: First, since you’re not seeing the product before it’s sold, you can’t guarantee it’s in quality sell-able shape or verify that it isn’t a knockoff; and second, an item could go out of stock before you’ve made a sale — and a sale could still go through.
Pro Tip: Mark Dorsey, Payability customer and owner of Najee Holdings LLC on Amazon, offers his three step approach to dropshipping: “1. I go on Amazon.com and find items that match the criteria I look for (sales rank, number of sellers, is Amazon a seller?, price history, etc.). 2. I look to see if I can find the product at another source at a discounted rate. 3) Once located, I check the numbers to make sure I can make a decent profit while also being in the top five spots of sellers.
Buy name brand products directly from the manufacturer/brand owner, most often in bulk and therefore at a discount
Buying wholesale is arguably the most scalable inventory sourcing method — or at the very least, it has the most potential for scalability. You buy large quantities of a product directly from a single source, and if you establish a positive business relationship with the manufacturer, you could earn better deals in the future or negotiate better terms on existing products now.
As a wholesaler, you should always make sure to go through the necessary approval channels to resell a particular product or brand. If you’re not an authorized seller, you risk getting flagged for copyright infringement and could be suspended from Amazon.
With the potential to sell in the millions annually, wholesale could be the right option for you. Just ask Dan & Eric, the wildly successful Amazon sellers behind The Wholesale Formula, a training program for other sellers to learn their secrets.
5: Private Label
Buy generic products directly from the manufacturer, add your own labels and sell under your brand
Selling private label means you’re still sourcing from a wholesaler, but you have an added step of re-branding an item with your logo. Listen to the Private Label Podcast weekly to hear from other sellers and get tips for running a private label business.
As Leonard Pearson says “Private labeling eliminates competition and ensures repetition of your sourcing efforts. This doesn’t cost as much as a lot of people think, it just takes some research and patience. If you can find an item that is not on Amazon, or not well represented on Amazon, or even one that you can make improvements on, this is a great business model. You may need to build a team to assist you with everything involved (photos, sales copy, package design, etc) but a lot of that can be outsourced.”
Pro Tip: Check out our recent post “Trademarks and Amazon: Everything You Need to Know About Selling Private Label and Name Brands” for tips on setting up a private label business.
Buy in bulk (and for a discount) from wholesale marketplaces overseas
Alibaba is one of the largest online marketplaces in the world — in fact, it is often referred to as the “Chinese Amazon”. Many retailers – including Amazon sellers – source their products from Alibaba because of their inexpensive prices.
Learn more about Alibaba in our post from earlier this year “Tips for Amazon Inventory Management Before Chinese New Year”. Other overseas marketplaces like Alibaba include Export Portal, ImportGenius.com and Dragon Sourcing.
Pro Tip: According to the Amazon seller forums, Alibaba has a reputation for selling counterfeits and knock-offs, so be careful if and when you choose to buy your inventory from them. Alibaba has spent time and money to test-buy suspected counterfeit products in an effort to find scam sellers, but this is still a widespread issue among e-commerce sites, including Amazon (source: CNBC).
7: Auctions and Thrift Stores
A type of retail arbitrage that is specific to auctions and thrift stores
While the most common form of retail arbitrage is perusing clearance aisles, discount stores and liquidation sales, some Amazon sellers have found high-profit items by going to auctions, garage sales and thrift stores. Web Retailer and Feedvisor’s 2016 Amazon Seller survey reported that 35% of Amazon Sellers are selling used goods. A good place to start here is to visit Auctionzip.com, a directory of local and online auctions.
Pro Tip: “When I began selling on Amazon, I went to auctions and thrift stores and found items that were not well represented on Amazon, and thereby commanded a high price. This requires a lot of hunting and research, but, the payoff is pretty good. The downside of this is that you rarely find more than one of a really profitable item, so you cannot duplicate your efforts every day.” – Leonard Pearson.
A type of online arbitrage that is specific to eBay
If you can’t make it to an auction in person, there is of course eBay. You could find one-of-a-kind items at discounted prices, or at the very least, check the eBay completed listings to get a sense for items that aren’t yet on Amazon and that might sell well as a result.
Pro Tip: Understand the differences between Amazon and eBay in our blog post “Selling on Amazon vs. eBay – Comparing Marketplaces for Online Sellers”.
Fully control the manufacturing of a particular item
If you want to have total control over your products, you could go the advanced route and manufacture your own branded products. Take cosmetics, for example. You could develop your own formula for foundations, mascaras, lipsticks, etc., find a manufacturer that will make and package the products for you, then sell them on Amazon. Or if you’re creative and crafty, you can make and brand your own products to sell on Amazon – or even Etsy.
This of course is more expensive and time consuming than buying generic or name-brand items from manufacturers but it does guarantee less competition.
10: Virtual Assistants/Outsource
Outsource your inventory acquisition to an employee or virtual assistant
Don’t want to do any of the work? On the other end of the inventory sourcing spectrum is outsourcing. Depending on the scale of your business, you might be able to hire an employee or a virtual assistant to source products for you via any number of the methods listed here. Check out our friends at Freeeup.
Pro Tip: If you’re not sure where to start on the virtual assistant front, you can start by applying for The Selling Family’s shared VA program.
What methods do you use for your Amazon inventory sourcing? Share with us on Twitter at @GetPayability using #getpayability.