I’ll never forget when my very first wholesale order was delivered to my house… Of course, I had to take a picture – that’s me to the right standing in my garage with my first wholesale pallet order. It was the summer of 2015 and I was super excited about receiving my first wholesale order. We worked as fast as we could to prep and send this huge wholesale order to Amazon. As soon as our wholesale shipment arrived at Amazon, we started to see some sales… but then things started to go terribly wrong. Sales started to slow and prices began to tank.
To make a long story short, I ended up actually losing money on my first wholesale order. Sure, I was able to get almost all of the capital back, but overall it was a massive failure.
If you know me, then you know that I’m a “glass half full” kind of guy, and I was able to turn this epic failure into a learning experience. I thought I’d share with you the 6 biggest mistakes I made in my first wholesale order (and the last mistake was the biggest) so that you can set yourself up for successful future wholesale orders.
1. Ordered too many items
When ordering products from wholesalers, the items you buy usually come in cases, so buying only one of an item is usually not a possibility. I knew I was going to need to buy multiples, but I must have had my head in the clouds because I bought way too many items. I honestly should have known better.
Any time you try something new, it’s usually best not to jump headfirst into the deep end… but instead to wade in slowly until you get used to the water. In my first wholesale order, I went way too deep and ended up with plenty of inventory that took forever to sell.
2. Spent too much money
I mean, waaaaaaaaaay too much money. When you’re dealing with a wholesale supplier, they’ll usually have what is called a Minimum Opening Order amount. Different wholesalers will have different minimum amounts that they’ll need for your first order. They have these so the wholesale supplier knows that the buyer is a serious buyer and will be worth the time and energy to work with.
For my first wholesale purchase, the Minimum Opening Order was around $350, but I got caught up in the excitement and totally blew past that minimum. I ended up tying up a lot of my sourcing capital that could have gone to my retail or online arbitrage sourcing.
When you make your first wholesale order, be sure to not go too far above the minimum. Not only do you not want to use too much of your sourcing capital on a method you’re not yet confident in, but you’ll also want to make sure the items you order meet your expectations. Once you find success in your opening wholesale order, then you can go back and get more.
3. Ordered time-sensitive goods
I ordered items that were focused around a specific season, and for the wholesale order to be successful, I needed these items to sell quickly. It turned out they didn’t all sell in time and when the season passed, I had to drastically lower my prices in order to get the sales and to avoid any additional monthly or upcoming long-term storage fees.
It’s probably best to order items that should sell well all year long when it comes to your first wholesale order. I ended up putting all of my eggs into one basket hoping that all these items would sell by the end of that season, and I ended up paying for it.
4. Didn’t negotiate
I’ve negotiated deals to get a better price most of my life. I can do it at garage sales, thrift stores, and at retail stores with store managers. Most of the time I’ll say, “If I buy all these items, will you give me a discount since I’m buying so many?” Most of the time I can get a small percentage off of the overall total. That one question has saved me thousands of dollars… but for some reason, I just never thought about it with this order.
Now, don’t get me wrong, I understand trying to negotiate a better deal on the first order isn’t always the best way to introduce yourself to a supplier, but remember mistake number 1 and 2 from above? I ordered way too many items and spent way too much money. If I was ordering the minimum, I would not have asked for a discount, but since my first order was a great deal higher, I think I could have negotiated a better deal.
5. Made faulty assumptions
I made two very incorrect assumptions that cost me both time and money. My first assumption was assuming that my shipping was going to be free. I guess with all of my online purchases in the past, I assumed an order this big would qualify me for free shipping. I had no basis for this assumption, and when I saw the final shipping costs, it ended up eating into the profits I had calculated.
I also assumed that the items I was buying would not come poly-bagged. My first wholesale order had many items that were going to need poly-bagging in order to send to Amazon. I ordered a ton of poly-bags and suffocation warning labels so that when the items arrived, I could bag them up and ship them to Amazon quickly. As it turned out, the items were sent already poly-bagged and had a printed suffocation warning label on them. So now, I have what seems to be a lifetime supply of poly-bags in my office.
When you are making your first order, don’t be afraid (or too proud) to ask your supplier questions. Even if you think the questions are elementary, go ahead and ask so you are able to make knowledgeable decisions.
6. Didn’t realize difference between a manufacturer and a distributor
This ended up being my biggest mistake. If I could have known this and applied that knowledge to my wholesale sourcing strategy, then most of the other mistakes from above could have been avoided.
When you purchase from a manufacturer, you’re buying directly from the maker of the product. You’ll be able to buy your inventory with the highest possible discounts. You might have to go a little deeper when buying from a manufacturer, but knowing you’re getting the best deals usually outweighs how deep you might have to go.
On the other hand, when you purchase from a wholesale distributor, you’re working with a middle-man who needs to take his cut of the profits. The distributor buys directly from the manufacturer and then marks up the inventory so that he can make a profit. Then the distributor offers up these wholesale items to us with smaller minimum orders than the manufacturer requires.
As you may have guessed by now, my first wholesale order was purchased from a distributor. When I got my huge wholesale order processed and sent to Amazon, I immediately began to see some sales come in, but after a short time the competition started to come in (who probably got their inventory from the manufacturer at better prices) and the prices tanked quickly.
In the end, I was able to recoup almost all of my capital back from that first wholesale order. I know some people will think that it was a waste of time and money, but I don’t see it that way at all. While the order ended up not meeting my expectations, it did provide many valuable lessons. I have taken these lessons and applied them to future orders and have seen great success.
Soon after I made this massive mistake, I stumbled upon The Wholesale Formula. All of the previous wholesale focused courses were not working for me… and even lead me to make the mistakes in wrote about in this blog post. But once I finally took the advise from the guys at The Wholesale Formula, I finally started to see amazing results. I finally understood exactly what it took to find good wholesale accounts, land profitable accounts, make quality buying decisions, and finally start seeing the success that selling on wholesale can offer.
Discover the Secrets of Profitable Wholesale Sourcing
For the longest time I wanted to add wholesale to my Amazon business. I had actually gone through 3 different wholesale courses to teach me how to do it. Each time I went through a new wholesale course I would try what was taught, but I kept coming up empty. It was extremely frustrating… then I scheduled a phone call with Dan Meadors from The Wholesale Formula. That conversation opened up my eyes to things about wholesale I never thought about before (and was never taught). I took his advice and began to find multiple wholesale accounts. Not only did I find wholesale accounts, I was actually able to successfully land the wholesale accounts.
Would you have wanted to listen in on that conversation? Unfortunately, we didn’t record the call, but Dan and his team have created something even better: a free webinar series focused on successfully adding wholesale to your Amazon FBA business. The content in this free video series is the same content that I heard in my phone call with Dan… and more!
Unfortunately, this free webinar series is currently closed, but if you want me to tell you when the doors are open to the free wholesale workshop again, then sign up for the wait list where I’ll email you the moment the free wholesale workshop videos are available again. This free video series that will open your eyes to what is possible with selling wholesale items on Amazon, so take a moment, and sign up for the wait list.
Excellent tips! I have one BIG mistake that is similar to your first one. I sent too many items FBA. Had I paid more attention, I could have placed my minimum order and then only sent in a 30 day supply of items. They were small enough that I had room to store them locally and could have sent more in as the first batch sold. Instead, I didn’t pay attention and got smacked with HUGE storage fees – yikes.
Oh, I’ve done that before in other situations… Lessons learned!
Thanks for the lessons learned! I have been following Dan and Ericfor the last year and I really like their method.Looking forward to the webinar.
I made a similar mistake. Lost a lot of money. That’s how we learn and grow. Dan and Eric are great. They make things easy to understand.
Good tips. My first order was from a supplier that only has shipments of certain products available every 3 months. The products gave the illusion of having low competition and high margins on AZ. As soon as I sent my order to FBA, a ton of competitors popped up and tanked the price as we all received the items at the same time. Thankfully I didn’t go too deep! Love Dan and Eric by the way.
Still debating about signing up for the course. In the course do they go more into how to avoid these costly mistakes for someone who is completely new to selling on Amazon (1st month)? Someone mentioned above sending in smaller amounts and storing the rest to see if it sells, that seems like a smart idea, but I would have made the same mistake and sent the whole order. Long Term Storage fees scare me. Lol
The course tells you, step by step, what you need to do, and if you follow the “formula” you’ll find success. My mistakes were made when I thought I knew better or that I’d “try something else” and that’s where I ran into dead ends. Now is a great time to add wholesale!
Thanks for sharing those valuable information Stephen. Sorry you had to take those lessons on the chin but I bet you are the “man” now when sourcing wholesale. Last time we talked you told me you were starting WS, you’ve come a long way. Thanks for the motivation.
DaveP
These are great tips and in general your blogs are really helpful and informative. I am based outside the US so if you have any tips that would help international sellers gets started and work with US wholesalers that would be super helpful also.
I am in search of a list of wholesalers that specialize in fba..
suggestions welcome.
It would be nice to have a list like this, but there isn’t one. The best thing that comes close to that is this website that gives you wholesale companies and they’ll tell you if the wholesalers allow their items to be sold on Amazon. Check it out here: fulltimefba.com/worldwidebrands
I’ve looked at the wholesale formula webinar but i do have a question for you: How much of your actual business right now is wholesale and what is it about the wholesale that prevents you from doing it 100% or the majority of your business? I would assume that given a lot of the successes people who have enrolled and yourself as well, you would have completely converted to wholesale and do away with RA/OA. I have zero experience and just wanting to know the insights as well as the possibility of going straight this route.
Thanks
Great question! We still do OA along with wholesale and some occasional RA just because I find it super fun. During Q4, RA is about 50% of our sales, and OA and Wholesale about 25% each, but that’s because the profits via RA are incredibly huge during Q4… The rest of the year, RA takes a back seat and runs about 15% of our sales… again, because for me, RA is fun! Our wholesale and OA make up the rest of the 85% and we find incredible success with both. I focus on the Wholesale side (using the Wholesale Formula strategies) and Rebecca (my wife) focuses on OA (mostly selling shoes using these strategies).
Worldwide brands is expensive. Is this really THE BEST? Seems that everyone wants money these days.
The Worldwide Brands website is the closest thing I’ve seen that lists out the contact info for brands who sell to Amazon resellers. You can find out more here: https://www.fulltimefba.com/worldwidebrands Yesm there is a fee, but if you have more money than time, then it’s a decent option. Other than paying for the list, you’ll have to do all of the hard work yourself, which is a great option if you have more time than money.
I like how you mentioned that it’s okay to negotiate on bigger orders, as it will help you get more money. My friend has been wanting to set up a small business, so he’s been looking for a vendor that can help him with snack inventory. Are there any other tips he should keep in mind?
I guess I can ask the guys at TWF, but I ask you first. I want to start using a prep center right off the bat. (I saw your first mistake). Is it cost effective? Is it cheaper that if I used a prep center on my own?
As you know I live in the same area where you live, therefore where are these centers located and what is the real price and discount offered.?
Here are a few posts that will help: https://www.fulltimefba.com/using-a-prep-center-for-your-amazon-fba-business/
https://www.fulltimefba.com/how-to-choose-a-quality-prep-center-for-your-amazon-fba-business/
We’re lucky that we did learn early on that we were dealing with manufacturers from China. I do visit China and our European manufacturers just to meet with them and just check up on the conditions and changes in what they do.
I’ve thought about having a 3 headed dragon wholesale to Amazon online store and flea market sales any tips for me
Good tip
Im looking to start a business and was hoping you can share where can i buy bulk items to resale
Here are some places to find wholesale products to sell: https://www.fulltimefba.com/findwholesale
I signed up for TWF (and your courses) and have been diving into the program. It appears there is a great deal to learn and do for one person. Are you working your wholesale business as taught by TWF alone or have your employed VAs? Are you working TWF to create a lifestyle business or do you hope to scale it up?
Yes, there is a lot of work to be able to make good money. I do most of the work myself, but have a few things outsourced to a VA. The TWF course called VA Launchpad (included in your TWF package) will teach you how to outsource to a VA.
Right now I have tried very hard to get wholesalers to sell to me. But they all say its closed to Amazon eBay third party sellers. This is for any wholesaler or manufacturer that would make the price worth it for me if course the small wholesalers will sell to me but the price is much to high. Anyone have advice for me.
Actually, a wholesale account that says they are not accepting new Amazon or ebay sellers is GOOD NEWS! That means they don’t just sell to anyone. Check out this post (https://fulltimefba.com/landwholesale) and look at #4 for more on how to create value propositions to wholesale brands to earn the right to resell their products. Even more training here at our upcoming wholesale workshop: https://www.fulltimefba.com/wholesaleworkshop.
I am still in the first stage of trying to understand all that is involved in purchasing the goods I want to sell. My intention is to have a small online retail food store offering imported foods. Your article was very helpful and easy to understand so thank you for that. I cannot find any sites that talk about the requirements for retailers once they buy food from wholesale distributers in the US, namely, if it is up to the retailers to create the nutrition labels for each product or will they already have those that meet US requirements? Additionally, why on earth would business opt to purchase directly from oversees themselves instead of using a wholesale distributer in the US who has already brought the products in and taken care of all the paperwork and shipping hassles? I feel like I am missing something that is a big negative to buying from products already brought into the US by a wholesale distribution company. Any ideas or suggestions of helpful websites are much appreciated.
I didn’t confirm the price when I placed the order for 1000 camo infinity scarves! Instead of being 7.50 each they charged me $12.50 each and because it was a special order I didn’t feel like I had recourse. STILL selling those scarves from a big name Outdoor Sporting Goods company as the price was too high and went out of style. It would cost me more to mail them to liquidation at amazon than I would make.