Amazon Product Sourcing 2021: Choosing The Best Amazon Suppliers For FBA
Jake Rheude – Red Stag Fulfillment, November 4, 2021
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In the early stages of establishing your eCommerce store or Amazon FBA business, product sourcing and deciding which Amazon suppliers to use is crucial. Good Amazon supply is reliable, guarantees high-quality products, ships fast, manages returns well, and is recommended by other sellers. And bad suppliers - well, they can break your business.
Finding the right supplier is essential to protect your bottom line and to ensure your brand grows sustainably. When you're vetting Amazon suppliers, you must account for many factors.
You need to consider which type of supplier best suits your brand, differentiate reliable manufacturers from shady ones, and determine which partnerships reduce your Amazon seller fees. In this article, we'll explore how to find the right Amazon supplier for your business.
Understanding Types of Amazon Suppliers
There are four main types of suppliers that you can choose from for your Amazon FBA sourcing, with each kind offering its own pros and cons. It's essential to consider each type and determine which supplier aligns best with your store's needs.
1. Wholesale Amazon Suppliers
Wholesale suppliers buy products in bulk from distributors and manufacturers and resell them to Amazon store owners. As you might have guessed, wholesale suppliers charge more per item than manufacturers. So why consider buying from them?
Well, wholesale suppliers have lower minimum order volume requirements, meaning you will have a lower up-front investment cost.
Pros & Cons of Wholesale Suppliers
- Lower minimum order volume. If you’re just starting out, this lower minimum could mean a lower up-front investment cost for you.
- Lower margins. Since the per-item cost will be higher, your margins will be lower.
2. Dropship Amazon Suppliers
The global dropshipping industry was valued at above $100 billion in 2020, and the market is projected to grow to around $476 billion by 2026. Dropshipping is a vast, rapidly growing market, making dropship suppliers a popular choice for many entrepreneurs looking for Amazon supply.
In the dropshipping model, suppliers manage the warehousing, inventory, and order fulfillment processes. eCommerce merchants can thus launch dropshipping stores without an upfront investment, as there are fewer operational expenses than if you were to stock a physical inventory.
Pros & Cons of Dropship Suppliers
- Flexibility. You are free to dropship products that perform well and remove the listings for any items that aren’t performing. Since dropshipping merchants don’t stock their own inventory, unwanted listings are quickly retired.
- Lower costs involved. Managing your own order fulfillment processes gets expensive, but dropship suppliers take care of it for you at competitive rates. A dropshipping model also significantly reduces your cost of inventory.
- Lower barrier to entry. Dropshipping requires significantly less investment to get started than most other eCommerce models.
- Limited control over the fulfillment process. While dropship suppliers manage the legwork for you, unhappy customers will hold you accountable for any shortcomings. So if an order runs late or an item is damaged during shipping, managing the situation falls on your shoulders.
- The margins are lower. While a dropshipping model cuts your expenses down, it also reduces your profit margins by missing out on bulk discounts. When sellers buy goods in large quantities, they enjoy significant savings. If you’re dropshipping, you won’t be able to take advantage of the same bulk-buy discounts.
- External reliance. Did your dropship supplier run out of a product that just spiked in demand? Now you have to remove the product listing. Not having control over your own inventory can throw a wrench in your business.
3. Liquidators for Amazon (FBA) sourcing
Liquidators are more formally known as asset recovery specialists. These Amazon suppliers buy products in bulk at low rates by purchasing overstocked items, clearance items, returns, and closeouts. Liquidators then sell the products up in different-sized product bundles.
Pros & Cons of Liquidators as Suppliers
- Good profit margins. Since liquidators are in a hurry to sell (and acquire the products at reduced prices), you can source products from them at competitive rates.
- Risk factor. Liquidators won’t always show you the products beforehand, which means you can’t check the quality. If you end up buying damaged products, it’ll affect your bottom line. Lack of variety. To begin with, finding liquidators isn’t easy, and locating ones that have the products you need is even rarer.
4. Manufacturers for Amazon (FBA) sourcing
Manufacturers are the Amazon suppliers of choice for large retail companies because they offer great bulk discounts and quality assurance. However, manufacturers usually have high minimum order values, which make them less accessible to smaller businesses.
Pros & Cons of Manufacturers
- Better margins. Manufacturers typically offer some of the lowest per-item rates and bulk discounts.
- Customization. If your audience is looking for specific features, you can request custom options from the manufacturer.
- Higher investment required. Manufacturers have high minimum order values, meaning you need the cash to source the products and additional capital to manage inventory.
- Higher entry barriers. Manufacturers usually work with large eCommerce stores and are less enthusiastic about working with newer, smaller Amazon stores.
High-Level Tenets to Keep in Mind When Researching Amazon Supply
It's crucial to find the right Amazon supplier for your business the first time around. Otherwise, you risk damaging your store's reputation and decreasing your bottom line.
Here are some high-level tenets to prioritize when you're searching for the right Amazon product sourcing partner:
Flexibility and ease during the sourcing process are paramount for Amazon product sourcing
Having a flexible relationship with your Amazon supplier helps you better cater to your audience and keep up with changing trends. Consider inquiring about suppliers' return policies, delivery processes, minimum order quotas, and more in your research.
At times, you may need to return stock that isn't selling and change your inventory up to cater to emerging trends. If your supplier isn't flexible, your bottom line will suffer.
Another factor to consider is the ease of the Amazon product sourcing process itself. For example, how fast can the supplier deliver your inventory? What shipment methods do they use? These are some questions to consider.
Cost of goods sold (CoGS) must be low enough for adequate profit margins
The cost of goods sold (CoGS) includes all product-related fees. It makes up a large portion of your Amazon store's expenses because a manufacturer's CoGS directly determines the per-item cost. Your Amazon supplier's CoGS should be low enough to leave room for an appreciable profit margin.
These expenses don't include your distribution costs, marketing, customer service, and more. So, you need enough of a margin to account for all these expenses and make a profit.
Can the manufacturer scale if you grow?
If your eCommerce store is just starting, site traffic and the demand for your products might not be very high. However, as your brand becomes more established and grows, you're going to experience a spike in orders.
If your supplier can't keep up with the demand, you'll be left with unfulfilled orders and a bad reputation. When researching Amazon suppliers, think long-term and look for manufactures that can scale with you.
Create a Spreadsheet and Compare Amazon Suppliers for Amazon Product Sourcing
A comprehensive spreadsheet with details of what each supplier offers makes it easy to compare them visually. Here are important points to compare:
The exact name of the product and pricing
So you can compare the per-item cost that each Amazon supply service offers for your Amazon FBA sourcing.
Quantity discounts and price breaks
Are some suppliers giving you a better deal for your Amazon product sourcing on bulk orders? These suppliers are worth prioritizing because you can benefit from better per-item profit margins.
Order minimum volume
While dropshipping suppliers and liquidators are unlikely to demand a minimum order volume, manufacturers and wholesale suppliers generally have a minimum volume. If you're just starting out, or own a small-to-medium-sized business, comparing minimum order volumes is vital.
Otherwise, managing and housing all the extra inventory could be expensive if your customer's demand is far less than the minimum volume.
Product shipping duration
And are expedited shipping options available? Will your supplier guarantee a shipping SLA?
Product production lead time
How long will dropshipping suppliers take to deliver your orders? How long will manufacturers or wholesale suppliers take to deliver to Amazon's fulfillment centers?
Extra cost for expedited orders
41% of consumers will pay premium rates for same-day delivery, while 24% are open to paying extra for a 1-2 day delivery window. So, providing expedited shipping options is vital in today's market.
As an Amazon FBA business, there are times where you may need to have products urgently sent from suppliers to Amazon's fulfillment centers. However, if the expedited delivery costs are too high, you won't turn a profit.
Payment methods and schedules
How frequently do they expect payment? Is the supplier on a flexible payment schedule, or do they expect advance offerings?
Product specifications (size, color, weight)
Some suppliers might offer you more variety in terms of sizes and color. Product weights are vital because they affect your shipping costs and thus should be factored into their listing price.
Are there private labeling opportunities?
Private labeling opportunities help increase brand awareness and market your eCommerce store. Moreover, private labeling also enables you to reduce consumers' decisions and ease them through their buyer's journey.
How do suppliers track packages?
Package tracking options encourage transparency and help you determine the cause of any potential shipping delays. For example, if your inventory reaches Amazon's fulfillment centers late, tracking packages will help you anticipate customer order delays and get ahead of the problem.
What shipping carriers do they use?
For your Amazon FBA sourcing, suppliers need to deliver your inventory to Amazon's fulfillment centers safely. The carriers that suppliers use determines the shipping costs, times, and additional costs for expedited shipping.
Some carriers offer bulk discounts, while others have special rates for lightweight items. There is no single “best” carrier - only ones that best suit your brand's needs.
What is the return policy?
If you need to send products back that aren't selling or were damaged during delivery, it's a good idea to understand the return policy terms.
Do they have a liability insurance certificate?
All trusted Amazon suppliers have this certificate. If the business doesn't have one, it's a red flag.
Do they have product certificates (and other necessary documentation)?
Unfortunately, there's a large market of fake and unreliable suppliers. Thus, it's important to vet suppliers thoroughly to protect your investment. Product certificates and other documentation help verify a supplier's credibility.
It's also beneficial to ask for a credit check to get an idea of how well a supplier is doing. Otherwise, if a supplier doesn't have a strong cash flow, you don't want to risk them going out of business at a crucial time for your own business.
Do they have references from other sellers?
References go a long way in confirming how reliable and trustworthy a seller is. Partnering with Amazon suppliers recommended by other sellers reduces your risk of a bad experience.
Places to Find Supply for Amazon (FBA) sourcing
Finding suitable suppliers isn't easy, and you might run into a few red flags along the way. Fortunately, there are some more trusted channels in which to hunt suitable suppliers. You can try:
Search engines (Google)
Similar to how eCommerce merchants are looking for suitable Amazon suppliers, providers are also looking to be found. You can use keyword-specific search phrases to discover suppliers that are looking to work with you.
If you use keywords like “industry” + “inventory” and combine them with “CSV” and “xls,” you can find spreadsheets online.
Industry trade publications
Respected publications can put you in touch with trusted suppliers that other sellers recommend. You can look up trade publications that are popular in your industry and subscribe to them.
The global COVID-19 dramatically influenced the events industry, forcing many organizers to shift trade shows and conferences online. Now, businesses regularly conduct corporate events virtually, in person, or a hybrid between the two.
So if you can't make it to your nearest trade show, attending one virtually is still great for networking and for getting in touch with suppliers. You can also request Amazon supplier recommendations from sellers in your industry.
Getting together with other industry professionals presents the perfect opportunity to get supplier recommendations and referrals. Ask about local opportunities, such as nearby wholesalers or those with good reputations in your industry. You might also find a good partner for helping you manage and grow operations through improved marketing and sales tactics.
LinkedIn is an excellent platform for connecting with suppliers. To discover trusted businesses, use keywords in your search like “manufacturer, manufacturing, supplier, wholesale, wholesaler.”
Private label manufacturers
Sometimes private label manufacturers are also the wholesale manufacturer, so it's a good idea to check some out. See if they offer goods you can sell under their brand or even options to whitelabel something. It can be an opportunity for them to move inventory while you carve out your own niche.
Wholesale directories are another great resource because they focus on established brands and companies with existing support infrastructure. Look for partners that specialize in your area of interest and ask them about how they work with FBA. Most should have direct experience and can handle much of the requirements for you, such as prepping and barcoding products. Here a few directories to consider:
Established in 1999, WorldWide brands is a trusted site for discovering wholesale suppliers and manufacturers for your Amazon FBA sourcing. The website vets suppliers that sell to eCommerce merchants and home businesses and lists them on their online directory.
SaleHoo is a global eCommerce platform that connects wholesalers with eCommerce merchants. The platform boasts one of the largest digital wholesale directories, and you can discover vetted wholesalers to fulfill your Amazon supply.
You might also try
There are many reliable but wholesale directories available. Some will cater to a niche while others can have geographic restrictions. Here are a few to research and see if you find a partner to help you grow.
The Wholesale Forums
Facebook groups are an excellent opportunity to get the inside scoop on Amazon suppliers and request recommendations and referrals from fellow sellers. To find relevant Facebook groups, you can search similar to how you would on LinkedIn. You can also localize results by including the city.
B2B wholesale websites
ECommerce giants like Alibaba and Amazon Business provide Amazon supply services. Global Sources, eWorldTrade, and DHgate are also established wholesale suppliers you can consider. These brands have specific groups and business units designed to support dropshippers and FBA operations. You may either have lower margins or need to pay for some services and support, but these behemoths often smooth out processes and help your business run and generate sales.
Finding the right Amazon supplier can take time and a great deal of effort, but it's not a decision that you should rush into. Your partnership with a supplier directly affects your bottom line, influencing product quality, delivery times, returns, and more.
Fortunately, the internet is packed with reliable tools and directories to help you discover the perfect Amazon supplier. It's also good to look for recommendations and referrals because another professional's opinion is invaluable.
To get started or learn more about how Perpetua can help you scale your Amazon Advertising business