Product Sourcing For Amazon – Beware of These 3 Pitfalls

For anyone just starting their Amazon business, the easiest way to make money is by choosing one or two wholesalers for Amazon sellers. However, there are some pitfalls awaiting the unwary. Here is a brief list you need to be careful of when doing product sourcing for Amazon:

1. Compensation procedures – Remember that you are running your Amazon business to make money, not for fun. Different dropship partners operate their compensation programs differently. The most common model allows you to set your own retail rate: your partner’s unit wholesale price for each product plus your own markup. So the minimum bid you will accept in your auctions is your retail rate. Every time you sell an item, you earn at least your markup. This method is straightforward and easy to track. Some wholesalers operate different compensation models, so remember to double-check the terms and conditions. Make sure you understand the compensation model.

Here are some questions you need to ask:

Is payment by check only? Is direct deposit available?
Is there a minimum amount you need to earn before they pay you your commission?
Who handles taxes?
Are you required to make a long term commitment?

2. Shipping, postage and handling – Make sure your partner handles the shipping and handling. Also make sure you pass the postage and handling costs to the customer. One of the main attractions of using a wholesale dropship supply partner is to avoid having to go to the post office yourself. Make sure that your partners directly ship the products from their warehouses within one or two days after the payment is received.

Here are the pitfalls to be aware of:

Do you need to maintain any inventory? The answer had better be “No!”
Do you need to pay postage out of your own pocket? You are supposed to pass this cost directly to your customer.
Does your partner charge you any additional administrative costs?
Do you have to pay any storage costs?
If you have to answer “Yes” to any of the 4 questions above, find another vendor!

3. Sell only what’s hot on Amazon currently – To make money right from the start, you need to offer only the best items to sell on Amazon. Most wholesalers specialize (e.g. a music CDs dropshipper only offers music CDs). When doing sourcing products for Amazon, always find the partner who offers what’s hot on Amazon currently. For example, do not limit yourself to a pet accessories dropshipper during the Christmas season.

Here are some questions to ask yourself before you setup your Amazon shop or auction:

Do you know what is hot this season?
Does this wholesaler offer these items?
Is this model new, or has it been offered the past umpteen years?

When picking your partnerships for product sourcing for Amazon, keep these 2 points in mind – minimum costs and maximum simplicity. Otherwise you may as well set up a workshop to produce your own products for sale.

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