What Is Amazon FBA Product Sourcing and How to Do It Correctly

The process of sourcing products plays an essential aspect in selling successfully on Amazon. There are currently more than 2 million sellers active on the market, which makes the competition very fierce. A retailer’s success often is dependent on the ability to source reasonably priced quality items.

To reduce the cost of inventory businesses can pass the savings to customers without affecting margins for profit. Amazon FBA product sourcing should be a top priority for any retailer who plans to market their products.

This article provides a list of the factors that influence Amazon the sourcing of its products, such as identifying the most important metrics, determining competition, and overall best practices in procurement.

What is Amazon FBA Product Sourcing?

Amazon FBA’s Product Sourcing offers a way for retailers to make the most of the logistics capabilities offered by Amazon’s marketplace.

With this scheme, retailers can transfer their inventory to Amazon’s fulfillment centers to store. 

Choosing to use Amazon FBA product sourcing allows sellers to avoid the expense of renting their own storage space, creating a fulfillment facility, as well as managing customer service. 

Because not every seller makes their products, Amazon FBA sellers can concentrate their efforts on finding high-quality inventory at more affordable costs.

Amazon FBA Product Sourcing: How to Determine Profitable Products

The success of your business on Amazon is contingent on a variety of elements. Offering items that are well-loved by Amazon customers is essential in turning inventory into profits. In the majority of cases three aspects affect the success of certain items:

Calculating Profit Margins

Profit margins are the total amount of money earned from the sale of a product, after the cost of inventory, shipping charges, and other costs. 

Retailers must ensure high-profit margins to make sure that the relevant people within the company get a profit from each sale.

Selling on Amazon involves incorporating an impressive profit margin due to various reasons. As we mentioned previously, the competition in the Amazon marketplace is extremely fierce. 

The inventory could be stored in the warehouse for quite a long time. Also, high-profit margins shield the sellers from loss of revenue in the event of a mishap.

Assessing Demand

Demand fluctuates and changes. No product can be in constant demand. There are seasons for consumer behavior, and retailers need to be conscious of trends in the buying habits of consumers.

When looking at the demand on Amazon selling a sought-after product isn’t always the most effective choice. Demand is high, which means that there’s more competition.

Retailers can sell special products that markets require or those that are well-loved by customers.

Accounting for Competition

Making sure you are aware of the competitors is an important aspect in determining which products are profitable that can be sold on Amazon. 

Retailers must conduct a competitor analysis before they commit to buying inventory. This will shed light on the other brands doing well, as well as additional revenue streams and channels.

What Amazon FBA Product Sourcing Inventory Options Are There?

Making the right choices for profitable products to offer on Amazon is only the beginning of the iceberg, at the very least, as far as procurement is involved. 

The items that the retailer decides to carry typically determine the way these products are procured.

Retail Arbitrage

The practice of buying heavily discounted goods and selling the items on Amazon to earn profits. Retailers who choose this method usually have connections with excess or liquidation stores to gain first-hand access to discounted goods.

It’s an excellent option, however, this process takes a lot of time. However, the majority of emerging eCommerce sellers choose this option because it doesn’t require an enormous initial expenditure.

Pro tip: Check out Seller App’s Alibaba to Amazon FBA guide to know how to source products from Alibaba to Amazon.

Online Arbitrage

The name suggests that online arbitrage is like retail arbitrage, except that the purchases are made online. Retailers who opt for this method go-to online shops with bulk pricing or are having sales.

Drop shipping

More than just an alternative to sourcing inventory drop shipping is a fulfillment process that lets retailers avoid the hassle of storing and maintaining inventory. 

Drop shipping lets eCommerce retailers can use an intermediary to deliver products directly to their customers.

Retailers don’t need to invest an enormous amount of capital upfront. The majority of drop shipping agreements are for pay-per-product.

Private Label

Private label sellers buy products from manufacturers. However, unlike drop shipping and wholesale, sellers can create and market their products. Sellers control the specifications, quality, and brand of the items they buy.

Manufacturing Products

Manufacturing products are the ideal option for retailers who need total control over the products they plan to market on Amazon. This is however the most costly option since manufacturers have to design and develop new products completely from scratch.