An often overlooked business model on Amazon is the business model of buy low, sell higher, and sell what already sells. It’s a business model I call “Online Retail.”
Online retail consists of selling brand name products sourced from authorized brand name suppliers and retailing them on Amazon.com.
What is an Authorized Brand Name Supplier?
An authorized supplier is one who has the full rights from the brand to distribute products to retailers. These suppliers are typically U.S. based distributors, middlemen, and wholesalers for large brands.
What makes them Authorized?
Many suppliers have to go through a vetting process with Amazon so that their invoices can be approved when sellers use their invoices for ungating purposes. According to one of my suppliers, one of the requirements in the vetting process is to apply 40 trade references to Amazon.
That might be a pain for these suppliers, however, it is worth it for them and for you! Once a supplier has gone through that process, their invoices will be approved almost automatically when a seller (you) applies to get ungated for the specific brand that was on their paid invoice.
One of my students who had never sold a product on Amazon, got in contact with one of my suppliers and was approved in the brand Nerf within 15 minutes.
The reasons working with authorized suppliers is important, is for competition, pricing and Amazon policies.
Competition: There are many cases of restricted brands on Amazon, with some of those brands Amazon will only approve certain sellers using invoices from certain suppliers. Due to the restrictions Amazon has, being approved on any of these brands will reduce competition.
Pricing: Even with Amazon grossing over $136 billion in 2016, the brick and mortar retail space still trumps online. As brick and mortar is still in the $4-5 trillion range.
However, FBA’s services have allowed online retailers to reduce logistics, warehousing, and employee expenses compared to a typical brick and mortar store.
This has opened a large business for many suppliers in the U.S. It has allowed suppliers to ship huge shipments directly into their clients’ FBA accounts, reducing shipping costs to pennies per unit. It has allowed online retailers to be able to compete with the prices at Walmart, Sears, Target, GameStop, and many other retail outlets.
Amazon’s policies: As Amazon strives to provide the best customer experience possible, they need to make sure that every product in their catalog is authentic and provides the best experience for consumers.
This is why many arbitrage sellers in recent years have seen their Amazon accounts get shut down and suspended for “Copyright Claims.”
Registered brands have the full right to make a copyright claim to any Amazon seller that they are unaware is buying from authorized sources. Usually in this case, Amazon will close the sellers listing until they can provide an invoice or letter of authorization from the brand owner.
A way to protect all of these issues from happening, is by buying from only authorized brand name suppliers.
As Amazon grows for sellers, there will always be a new tool, new business model, new software, and new information out there.
For an Amazon Seller to set themselves up for an even more profitable future, they need to be doing what Amazon wants them to do. However, the retail and online retail business principals will never change. All you need to do is buy low, sell higher, and sell what already sells. For more information on authorized suppliers and online retail check out Beau Crabill and Online Retail Mastery at youtube.com/beaucrabill.