Commodity - a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (such as brand name) other than price - Merriam-Webster
Commodity trader - an individual or business that focuses on investing in physical substances like oil, gold, or agricultural products. The day-to-day buying and selling are often driven by expected economic trends or arbitrage opportunities in the commodities markets.
Reselling on Amazon is no different. You're selling products that have become commoditized on the Amazon marketplace where you typically need to be selling at the lowest price to win sales. You’re usually finding these products to sell through arbitrage opportunities.
First, what exactly is an Amazon Reseller?
As an Amazon reseller, you’re not selling your own branded products. You’re reselling existing brands such as Colgate, Suave, Old Spice, and more on the Amazon marketplace.
Typically, Amazon resellers will establish wholesale accounts with these brands directly, or they’ll seek arbitrage opportunities to buy excess inventory from big box retailers such as Marshalls or TJ Maxx. Then, they’ll list the items on Amazon and ship the inventory to an Amazon fulfillment center (aka Fulfilled By Amazon, or FBA for short). Once the inventory is in an FBA center, it will become available for sale on Amazon.
From there, the Amazon reseller sits back and hopes the inventory starts selling. There isn’t much creativity or branding required. Instead, the business model is more operationally focused.
3 Reasons Reselling on Amazon is Similar to Trading Commodities
1. You’re reselling products that are widely available
Corn is corn. It’s highly demanded and there’s plenty of it. And for the most part, all buyers view all corn virtually the same and don’t care where it comes from - as long as it meets basic quality standards. It’s a commodity.
Reselling an existing branded product such as Suave shampoo on Amazon is no different. It’s a highly demanded product that’s mass produced and there are plenty of businesses reselling it on Amazon and in person (grocery stores, pharmacies, etc). In fact, most consumers don’t even know they’re buying from a “reseller” on Amazon.
Because this is one of the easiest methods to get started selling on Amazon, the barriers to entry are lower. And as a result, there will be more people reselling on Amazon which means more competition on the exact products you’re selling. Per the below image, there are 23 resellers on a CeraVe product! This means if you were to attempt to sell this product, you’d be competing with 23 other sellers. Yikes!
2. The seller of the commodity provides little value
Again, corn is corn. And Suave is Suave. The value is derived from the product itself, which the reseller (or trader) didn’t create.
As a reseller, you don't typically create and optimize the listing on Amazon, or bring customers to Amazon. You’re becoming a seller on a listing that already exists.
You can argue that you’re providing value by sourcing the product, shipping it to an FBA facility, and listing it on Amazon. But you’re really only providing value to Amazon by offloading a few logistical steps for them. Amazon is acquiring the customer, shipping the product to the customer, and also handling all customer support.
3. It’s a price war
Just like commodities trading, reselling on Amazon is all about price. The supply of common brands that are being resold on Amazon is high, so customers aren’t willing to pay a premium for them. Further, because a majority of Amazon sales occur through the Buy Box and the biggest contributing factor to winning the buy box is price, it becomes a price war.
And when there are 20-30 resellers selling the exact same product and competing on price, it becomes a race to the bottom.
How to Succeed as an Amazon Reseller
Reselling is not a game of creative marketing strategies. It’s a game of operational efficiency and data-driven decisions. Here are the key factors to becoming a successful reseller on Amazon plus some Amazon seller software tools you can leverage
We may receive compensation from the tools featured in this guide. However, we do not recommend any tools or services that we do not use in our businesses, have not fully evaluated, or that are not successful for our clients.
Pricing
As previously mentioned, Amazon is a price game. You need to be optimizing your prices 24/7 to ensure you’re winning the buy box and raising your prices when the opportunity arises so you can keep your margins up.
👉 Use Informed.co or Seller Snap to maximize buy box ownership with repricing AI
Selling the Right Products
Because you don’t have much control over your marketing, you need to ensure you’re selling the right products that you know are going to generate meaningful sales. That way you’re not sitting on inventory that you can’t move.
👉 Use Helium 10 to assist with your product research
Inventory
Inventory management on Amazon isn’t easy and because reselling is an efficiency game, you need to be on top of your inventory management so you have an accurate count and know how much to be reordering.
👉 Use InventoryLab or SkuVault
Automate Refunds
If you’re sending inventory into FBA, there’s a good chance some of your inventory is getting lost without you knowing. The good news is that Amazon will refund you for the lost inventory.
👉 Use SellerLocker to automatically calculate and retrieve your lost funds
Cash Flow
You need to optimize your cash flow so you can continue to reinvest in inventory. Amazon makes you wait 2 weeks to get paid for your sold inventory. But did you know you can get paid daily instead?
👉 Use Payability to get paid daily on Amazon and get funding for your inventory
Business Intelligence
There are a lot of fees for selling on Amazon. You need to understand what they are, and how they’re impacting your bottom line so you can truly understand what products or categories are worth continuing to sell into.
👉 Use ManageByStats for the most accurate Amazon reporting
The moral of the story is that reselling on Amazon is similar to commodities trading and is certainly a viable business model, but there’s little room for creativity so you must focus on becoming as operationally efficient as possible. Here are some of the other best Amazon seller tools to help you grow your Amazon business.
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