Although there are many similarities between Amazon arbitrage and Amazon wholesale, the two selling strategies have unique advantages and disadvantages for sellers. Regardless of where you are in your selling journey, whether you’re a brand new seller or an Amazon veteran, it’s important to understand the strengths and weaknesses of each in order to choose the selling strategy that best suits the growth of your business, and to determine when it might be time to transition from Amazon arbitrage to wholesale. 

In this blog, we’ll break down the differences between the two, as well as the steps necessary to make the transition from arbitrage to wholesale in order to scale.

Amazon Arbitrage vs. Amazon Wholesale

Before diving into a direct comparison, it’s important to understand how each selling strategy works.

Amazon Arbitrage

Amazon arbitrage sellers purchase name brand products with a high demand from brick-and-mortar retail stores or online stores for a discounted price and then resell them on Amazon at a higher price for profit. Arbitrage sellers capitalize on discrepancies in pricing between stores, thanks to clearance, sales, or general competition. 

Amazon Wholesale

Amazon wholesalers purchase name brand products in bulk directly from the manufacturer or supplier at a discounted wholesale price. Then wholesalers resell their inventory for a slightly higher price to make a profit. Instead of emphasizing high profit margins though, Amazon wholesalers play a quantity over quality game– relying instead on the sheer amount of sales to be successful.

Difference Between Amazon Arbitrage and Amazon Wholesale 

The key difference between Amazon arbitrage and Amazon wholesale is the scale of operations, upfront investment, and rate of growth. While Amazon arbitrage may be easier to start, it rapidly becomes challenging to grow. Arbitrage sellers are constantly required to be purchasing more and more inventory, on top of being limited by cash flow. Wholesalers, on the other hand, make one large purchase each cycle and can reinvest profits to streamline growth. 

How to Move From Arbitrage to Wholesale 

1. Determine what products you want to carry. 

Although the approach to product research for Amazon wholesale is similar to arbitrage, it carries a lot more responsibility. Wholesalers order in bulk, meaning a large investment that you won’t be able to recoup if your product fails to sell. 

While Amazon arbitrage sellers can take advantage of seasonal products and fast trends with a small quantity of products, Amazon wholesalers should think strategically about these types of products. Ensure that you’ll have enough time to sell out of your inventory before the product goes out of season so that you don’t get stuck with capital tied up in products that aren’t selling and unintentionally slow down your cash flow. 

Although there are many ways to research what products are best for your Amazon wholesale business, the most successful products come from well-established and well-known brands. By leveraging a pre established audience and customer base, you can avoid excessive spending on advertising and instead focus on expanding the product into Amazon’s marketplace. 

Since it’s often very competitive to establish a brand deal, especially if you’re looking for exclusivity, it’s smart to focus on how you can provide value to the supplier. Be persistent but polite and offer your Amazon expertise along with potential forecasts that demonstrate increased sales online, along with greater profits for everyone.

2. Prepare your business for suppliers.

Unlike arbitrage, Amazon wholesalers contact suppliers directly and build relationships with them over time. This has several advantages, including the ability to place bulk orders and negotiate cost per item–making wholesale favorable. However, working directly with established brands also requires your Amazon wholesale business to be well established and professional. 

Since inventory purchases for arbitrage are business to consumer (B2C) transactions, retail stores are happy to accept payment via personal credit cards and without any documentation. On the other hand, opening a wholesale account with suppliers for inventory purchases constitutes a business to business (B2B) transaction. As a result, many suppliers require you to be registered as a business or a sole proprietor and have a resale certificate from your state readily available. This helps manufacturers verify that you have a legitimate business and protects them against issues in the future. Manufacturers may also want you to have your EIN or Tax ID readily available to ensure that your business is based in the United States and will not face the challenges that come with international commerce. 

3. Reach out to the product’s manufacturer or supplier.

Once you’ve determined which products you want to purchase and prepared all the necessary documents, it’s time to reach out to the manufacturer or supplier and begin establishing a relationship. 

Well established brands have lots of Amazon sellers competing for wholesale accounts and exclusivity deals so it’s important that you put your best foot forward. Whether you’re reaching out over the phone or email, be patient, polite, and do your best to demonstrate credibility. The bigger the brand is, the more protective they are over their image and reputation– meaning it’s critical that you prove to them how you can be an asset.

The best Amazon sellers will have a plan business prepared to show how Amazon wholesale will help improve the brand’s visibility and increase profits for everyone. It’s also important that you emphasize your willingness to comply with the brand’s rules and regulations, including minimum order quantities and minimum price listing. 

If you can execute your business plan and truly bring value to the manufacturer’s company, this will help your relationship in the long run, including opening the doors for new opportunities like better pricing and exclusivity deals. 

4. Compare offers and negotiate.

Purchasing Amazon wholesale inventory, especially initially, is not as time sensitive as arbitrage. Since you’re no longer at the whims and availability of retail sales, you have the time to compare quotes between suppliers and negotiate the best deals. 

Negotiations typically depend on the size of the order and the length of the relationship. Larger orders provide room for lower cost per item and can help you improve profit margins– meaning more money in your pocket. 

5. Place your order.

Once you’ve finalized negotiations it’s time to place your order. Make sure that you stick to any numbers that you’ve already agreed upon with the supplier in order to maintain trust and keep a healthy line of communication open. 

6. Determine operations and logistics strategy.

Depending on how large your business is, there are a wide variety of operations and logistics strategies available to Amazon wholesale sellers. If you’re just starting out and focusing on a few products, Amazon FBA can be a useful tool, but as your business grows it becomes very expensive. The more inventory you keep in Amazon’s warehouses, the more you’re going to lose from already slim profit margins. 

To help keep costs down, many wholesalers invest in their own warehouses and packaging facilities or look to 3rd Party Logistic (3PL) services. Investing in your own warehouse and packaging facility can be costly upfront, but in the long run helps to mitigate steep recurring expenses. If you have the working capital available, this can be a great opportunity to help scale your business. 

7. Leverage funding to scale your cash flow.

Once you’ve started selling as an Amazon wholesaler, you’ll find that your cash conversion cycle is unique to other Amazon business models. Thanks to high demand from brand name products, many wholesalers can see a complete turnover in their inventory between 6 to 8 weeks–meaning that cash flow is moving constantly. 

What’s great about this type of cash flow cycle is that you can always reinvest capital back into the business to grow. However, your ability to grow the business is limited by the amount of money you can reinvest–meaning that you’ll be incrementally scaling each month. To expedite growth and truly optimize your business, many wholesalers take advantage of funding.

By boosting your cash flow with funding, such as Viably Wholesaler Accelerator, you can purchase more inventory each cash flow cycle. This means more sales, greater profits, and edging out competitors for the Buy Box. Viably is the only eCommerce funding provider with wholesaler specific working capital, ensuring that you can make the most of every dollar.