Seller Essentials is pleased to have this great guest post from Dan Meadors & Eric Lambert of The Wholesale Formula.

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In 2011 Dan Meadors & Eric Lambert started their Amazon business with an original investment of only $600. Today that business generates over $7,000,000 in sales per year.

They now accept students a couple times a year to teach them The Wholesale Formula, a blueprint of the exact steps they used to build their multi-million dollar Amazon business.

Imagine, if you will, a wildly successful gold miner who has spent months(perhaps even years) refining his technique and has become well-trained and experienced in all the intricacies of gold mining, from necessary equipment to the best prospects for finding the precious ore.

One day while having a conversation with a fellow miner our gold miner is asked, “Why don’t you also collect the platinum and silver while mining for gold? I mean, you’ve already put up the site, primed the location, and setup the mine for retrieving gold, so extracting the silver and platinum while already that far into the earth would only require a very small amount of effort!”

If you are a Private Label seller on Amazon you are the gold miner in this story, and not utilizing wholesale sourcing in your business is the equivalent of leaving the other precious metals behind.

As I hope you realize by now, we are successful Amazon sellers who leverage a unique wholesale business model. We are here to tell you the majority of work and skills you have as a private label seller are well-served in application to the way we buy and sell millions of dollars’ worth of goods on Amazon each year.

Your ability to see inherent problems with listings and how to address them is an invaluable skill.It took us months to develop, and is likely leaps and bounds ahead of any level of thinking or recognition an arbitrage-model seller could even begin to understand.

You may not realize it but this skill alone makes you attractive to nearly every brand in the world because you know firsthand the power of having your brand be relevant on the world’s largest and fastest growing marketplace and, more importantly, how to accomplish it. Brands are becoming increasingly more selective in who they partner with and your skill set will give you quite the leg up on your competition.

Take a moment to think about it: what’s the primary goal as a private label seller? Become relevant and convert as many sales as possible, right? Every brand in the world wants the exact same thing and you have already honed skills to achieve those marked improvements, putting you as a prime candidate for any brand currently selling on Amazon.

Private label enjoys some advantages over wholesale to be sure, but there are distinct advantages to wholesale as well:

No need to create a product listing.
No need to spend thousands of dollars in giveaways or advertising to make your product relevant. There is already built-in demand.
No need to place HUGE orders from China and have to wait weeks or months for the products to arrive.

For us, finding products that already have demand and proven sales history eliminates any of the guesswork involved with private label.Not to mention the large capital investment of inventory and advertising further compounds the risk!We tap into existing demand and by utilizing methods similar to those you would incorporate in your private label business

Improving search terms
Optimizing pictures
Revising listing details
Amazon sponsored ads

We make ourselves more valuable to the brand owner and set ourselves out from the competition.

Before I get too far along into convincing you how easy mining the silver and platinum can be, I want to address some of the concerns or objections you may have in your head right now.

Competition stinks!! I don’t want to have to compete for the Buy Box

This objection is far and away the most common from any private label seller we have ever talked with when we broach the subject of adding wholesale to their business and completely understand the underlying misconception.

Properly understanding how the Buy Box works is the key to debunking this logical fallacy.

The wholesale products we target have very consistent sales and with that data, along with knowledge of how the buy box works, you will be able to easily figure out what your share of sales on that product and be able to consistently and repeatedly order that number of units each month, creating a near-constant stream of revenue.

Think of it like this, there are thousands of products on Amazon selling thousands of times each month and you can be one of a handful of sellers on that product getting hundreds of sales each month. It’s basically a mathematical certainty since competition and sales volume are predictably constant with products we target and are able to reliably order and re-order these products to get our hundreds of sales, month over month.

Remember: part of a watermelon is more filling than a whole grape.

I don’t want a warehouse

Unfortunately for us, there weren’t other options when we began.If there is one thing we can wholeheartedly say(having operated a 10,000sq.ft. facility for nearly two years now), having to do it all over again we wouldn’t have a warehouse either. Fortunately for you, these days there are a couple options you can use to handle the processing and outbound shipping of your wholesale inventory. First, you can have your supplier ship directly to Amazon fulfillment centers on your behalf. This practice is much more common now and many vendors already understand the process and will do it at little or no cost to you. Secondly, you can use a prep center like Prime Zero Prep to receive, process, and ship your items to fulfillment centers, all without having to ever touch your own inventory. Outsourcing the prepping aspect of wholesale in one of these ways means you can run the entire operation from a laptop!

Why wouldn’t brand owners just sell the products themselves?

The primary disconnect here for private label sellers is they are unable to understand the scope of operations of most manufacturers. As a private label seller, you have developed a product to sell into a specific market, whereas the companies we work with have developed their products to be marketed and sold in EVERY major marketplace.

For our manufacturers, their efforts are focused on marketing their brand to be relevant to consumers, regardless of which marketplace or retailer it’s purchased from. To put it in perspective, did you buy your Tide detergent from Procter & Gamble? Of course not!You picked it up at a retailer, like Walmart or Target, and in that sense, we are asking manufacturers the opportunity to serve as a conduit to increase traffic and sales on the Amazon marketplace, where we are experts.

To help bring this all together and explain how you are leaving the silver and platinum behind while mining for your gold, I want to present some of the primary aspects where the private label and our wholesale model overlap. Unlike traditional wholesale models, we don’t attend trade shows or spend hours poring over huge catalogs, trying to find the needle in a haystack or diamond in the rough, to continue the mining analogies. Rather, we target products that meet our model’s criteria, then contact the brand owner of the product.

We spend a great deal of our time sourcing and sifting through product pages on Amazon trying to locate products that meet our criteria or specifications. This sound familiar? As a private label seller, you are likely poring over page after page of products and categories looking for products with high demand that you can then manufacture and private label in direct competition to these items.

There is a high likelihood that these products you are trying to emulate, we would be contacting to sell on Amazon. So, this is where you mine the silver and platinum; you have already put in the work to identify a product type with high demand and instead of emulating the product and hauling your gold off, you could source the product itself and make off with all the precious profits!

Imagine getting tons of sales from your sweet new private label product as well as from the brand owner’s product that was your original inspiration!

There is one other benefit I feel I should mention that adding wholesale to your private label business will provide and that’s insulation. As a private label seller, your entire revenue stream in invested into a handful of SKUs and if you are ever unfortunate to have one or all of your listings shut down, it will likely be catastrophic to your business. Adding wholesale as an additional income, which as I’ve highlighted well here is not a far stretch from what you are already doing, will create diversification and provide operating revenue for your business in the unfortunate scenario you face listing restrictions.

I think you can easily see how adding some wholesale products to your private label business is like adding the platinum and silver to your gold haul allowing you to bring up tons of extra profits while implementing minimal change to your current workflow. Now, get your equipment fired up and start mining!

BONUS: If you want to learn more about how wholesale aligns perfectly with private label, check out this webinar that Dan held with JungleScout creator Greg Mercer