What is An Amazon Reseller?

In Growth Strategy Consulting by Chris GrayLeave a Comment

What is An Amazon Reseller?

An Amazon reseller is simply someone or some company that buys products and sells them on Amazon. Much of the time, they have purchased items at wholesale or in bulk form a distributor. Many businesses that sell on Amazon know who the resellers of their products are, but at the same time there are resellers who exist as the trolls of Amazon. These pesky resellers will resell their products for less than MAP policy in an attempt to move lots of product quickly, win the Buy Box, or simply to undercut a price.

Resellers Aren’t Inherently a Problem

Technically speaking, retail stores are resellers: thye purchase products from many different manufacturers and distributors. They then markup the prices and sell them to customers. Even grocery stores can fall under the definition of reseller. However, for our concerns, we will stick with the Amazon resellers; namely those that exist to undercut pricing, create poor quality reviews, and move lots of product quickly.

However, there are companies, large companies, that are popping up that are also resellers. They buy another businesses product at wholesale and in bulk and then they sell it under that businesses name. For example, Acme Rubber Duck Co sells its rubber ducks at wholesale to Reseller X, who then works the Amazon channel for Acme Rubber Duck Co on Acme’s behalf. There is no problem with this method of entering the Amazon sales channel, but if we dive a bit deeper we will find that Acme is losing money that way.

Amazon Resellers Taking Business’s Profits

Let’s say Acme sells their ducks at wholesale for $1/duck. Reseller X buys 100 ducks (for $100). At this point, the ducks are Reseller X’s and they can do whatever they want with the ducks. They can list the ducks on Amazon for $10 each, which leaves them with a profit around $5 after Amazon fees, etc. So, on a $100 investment, Reseller X makes $400. Not a bad deal. But what if Acme were to sell their own ducks on Amazon?

For ease of math, we will say that it costs Acme $0.50 to make each duck. So they can either make $0.50 for every duck if they sell it wholesale, or they could potentially make $5.50 for every duck if they sell on Amazon for $10/duck direct to consumer. If we do the math on 100 ducks, we find that Acme stands to make much, much better money by selling the ducks themselves. Instead of $100 for every 100 ducks, they could be making $550 for every 100 ducks (after Amazon fees).

In the retail world, it makes sense to sell your products to distributors because it means that the manufacturer does not need to build and staff a retail store for their products. Acme might be selling a million ducks to a single distributor who puts the ducks on shelves across the country. However, Amazon centralizes all of that. Instead of a hundred stores across the country, Acme can place their product in one store that reaches the whole country.

Amazon Resellers and Supply Chain

Resellers can be a pain when it comes to supply chain management, especially if your distributors are selling to an Amazon reseller. In order to weed out the reseller (if you want), we suggest a top and bottom approach where you talk to the distributor to figure out if they know the reseller while you message the reseller through Amazon. So get to know your distributors and make them sign something that says they will not sell to Amazon resellers without your approval if you want to keep tight control on your supply chain.

To recap: resellers buy products and sell them; they aren’t always bad; businesses stand to make more money by selling on Seller Central; keeping a tight supply chain means knowing who is reselling your items.

If you have any questions about how to make more money on Amazon or how to control your supply chain, contact the pros at Run AMZ!

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