If you already sell wholesale on Amazon, have you considered being the wholesaler while importing your own private label products? If not, then you might want to learn some of the reasons why Andy Slamans and Liran Hirschkorn wholesale their PL products. Andy has been wholesaling his own brand of private label products to fellow Amazon sellers for a few years already. In this interview transcript, both Andy and Liran share why they think it’s such a good business practice:
Andy, can you tell us when you first started getting into this concept, what it is, and how it works for you?
Andy: There is a quote that says, “Necessity is the Mother of Invention”. I have a particular product that sells really well on Amazon, and I wanted to bring a large quantity over. But in order to bring that large quantity over, I had to have the cash flow to be able to bankroll it. So I started to think well you know ‘how can I do this,’ because I wanted to have better margin. There were a few variations that I wanted to rank, and so in that process of ranking you know when you’re using a large amount of Amazon PPC ads, or you’re launching products and giving some away.
You obviously want to pay for those units, you know, as least expensive as possible. And so I started to think about other sellers that I could whole-sell my product to, which would allow me to recoup the cash flow right away. Because if you’re doing this already you know that you have to pay a deposit, usually 30% down. And then you have to pay the remaining 70% right before it ships. So, you’re basically floating you know that large amount for sometimes 30 to 45 days before you actually start to see sales.
And what I was able to do is, through some trusted partnerships or some folks that I know who are sellers on Amazon, I was able to show them great history of my current product because Amazon gives us that data. So I could show them, you know, what I sold the last two years, what I sold just recently in the last month. It gave them a really good idea of what their profit was going to be on the units that they purchased from me. And then, I was able to get my money back right away.
So I didn’t have to wait you know 45 days to recoup that $150,000. That’s how much the shipment was. And then I was able to make a little bit of money on that on top of that. That’s why, for me, wholesaling has actually been a really great thing.
The first point that you talk about here cash flow really answers one of the biggest critics or things that people are concerned about or they think ‘why should I even think about wholesaling products?’
And that is that if you are wholesaling why would you do that, why wouldn’t you sell it yourself? You know if you can make more money, if your margins would be better if you were just private labeling your own products, why not just do that?
CASHFLOW–the amount of cash that you have available in your business.
- It doesn’t matter if you can sell the product for a higher margin yourself if you’re not able to afford those products and possibly afford more product, and other products.
- When you start to do these bigger orders a lot of times you can reach higher MOQs with your supplier, so you can get better prices. It reduces the cost per unit when the orders are much larger.
- Bringing over larger orders also reduces your shipping costs.
Andy: So, on my particular products, the listings were already up and running. We can talk about it later how you do it if you’re building a new listing. But you know we always talk about the power of networking, going to events, going to conferences. Meeting people face-to-face. So all of my partnerships are with people that I met face-to-face that I spent considerable amount of time with. And so there’s definitely a level of trust there.
You know in some big wholesale relationships, say maybe you’re wholesaling product for Mattel, right? They’re probably going to have a lot of paperwork that you need to fill out, saying that you’re going to honor MAP (manufacture’s advertised price). Thankfully, these partnerships that I have with folks that wholesale my products it’s basically a trust-based relationship. And so you know I set MAP and then they honor it. And so, you know, generally at the level that we’re at I think those tend to be the best.
You can really limit who you sell to, and so like I sell to three different people. And so I know who’s on the listing. Again that’s sometimes can be the challenging part for wholesalers. A lot of times, if there’s a bunch of people on the listing, and if one person breaks you know MAP price they don’t necessarily know who that person is. But as a smaller private label seller again selling my products, that’s not an issue.
The ability to set a MAP price is huge. Something that a lot of people don’t think about because we’re not allowed to price fix. But as a wholesaler you can set a MAP price.
If anyone tries to advertise that product below the MAP price, obviously that’s not going to happen because these are people that you have a relationship with. But if they did then you say ‘okay I’m not selling anymore to you,’ right? So that’s kind of a big benefit of being able to have that kind of wholesale relationship and something that’s really cool. I don’t think a lot of people talk about.
We’re also joined by Liran Hirschkorn. Liran you also have experience with wholesaling your products basically to other sellers. You use the influx of capital that you get from selling your products to expand your product line and see faster growth on other products, right?
Liran: Yeah definitely, so you know when you’re in a growth state and in your Amazon business–your physical products business, cashflow becomes an issue that you need to figure out how address. You can self-fund it from your own savings if that’s something you want to do, if you have the ability to do that. You can borrow money. But because you’re in a growth state you don’t necessarily have enough profit coming from your existing product if you suddenly want to grow 5 new products at the same time, right?
Or let’s say you you have a new product that you just launched. You ordered you know 500 units. You’re starting to see that it’s selling really well, right? But you’ve only sold a hundred so far and you haven’t recouped all your profit. But now you want to order another thousand or two thousand units and so you need that cash flow. One of the ways that you can get that is by wholesaling your product.
You know the way the way I’ve done it is that the the parties that are sort of buying the product, they paid me pretty much up front for the product. And they know they’re paying a couple months in advance, but the benefits for somebody buying that product is they know they’re getting like a product with proven rank, sales history. And they know it’s almost like an investment, right? It’s like you know, there are risks in everything you do. But it’s almost like guaranteed return on your investment because it already has proven rank, proven sales. So that’s the benefit to to the buyer.
And so I’ve been able to you know wholesale products to other sellers, get paid up front, and then use those profits to fund new products that I’ve wanted to launch. Even if Amazon suspends your account tomorrow, you can still take your products and wholesale them to other sellers. You can even attend trade shows to continue to make money until your account is up and running again.
If you think about this from the standpoint of a new product, why would you want to start wholesaling this new product right from the start?
Andy: Again, these are all ‘trusted partnerships’, which is how I like to phrase it, so they understand the risk involved. Folks that know me I know them and so they understand the risk that’s involved. So for me, I always want people to understand that there’s a risk, right in every single product that we do.
Even you know my proven products that I’m wholesaling, I want the folks that are going to be purchasing it to understand that there still could be a risk. We’re selling on another platform, so you know for me, when I’m bringing a new product and I am wholesaling that or partnering up with people that’s like the first talk I have. You know like ‘hey look just understand that there’s a risk, you know this is I think the projected profit is going to be this amount however you know we really don’t know’.
Liran: Andy has a product that’s like you know 1,000 rank and he warned me like three times the first time. ‘You know make sure you know you know there is risk involved’. And he’s just you know he’s so caring he wants to make sure you know that like nothing happens.
Andy: But then the great part of that is you know when you’re bringing a new product, that partner that’s going to be purchasing at the wholesale price, they can see the whole process. And so there is a recent one that I did like 7 months ago that I wholesale. I approached the other seller and I said ‘hey look, I think this is going to be a good product you know, are you interested? ‘This is the cost that I could get it to you for’.
You know you’re not guaranteeing anything. And then that seller’s able to see the whole process of me, you know, as I negotiate with the supplier in China, and then as we build the listing, as we work on optimizing the listing. So you know even though he is wholesaling and buying it at the wholesale price he get’s to participate and see the entire process.
When you enter into a partnership, if the listing goes really well, do you always allow that partner to continue wholesaling the product with you?
Andy: I should have added that in. That’s actually part of the first talk that I have is ‘hey this doesn’t lock us into any long-term relationship you know. I’m allowing you to buy 500 units now, that doesn’t guarantee that I will allow you to buy 500 units later’. So and I have that same conversation with products that I’ve purchased at wholesale. You know, I’m very thankful. I say, ‘hey look, thank you for allowing me to buy this. I understand you know that going forward that I may not be able to buy you know this product again’. So you definitely want I think to have that conversation so that folks kind of know up front that when you’re wholesaling it is not a partnership right? You know there’s definitely it’s a different type of relationship.
Liran, let’s also talk about when you wholesale your products to other sellers, it kind of reduces the amount of customer interaction you have to deal with on some level, right?
Liran: Sometimes there are things like questions on the listing. You get an email about a product, and so I can answer questions on other people’s products, and other sellers have answered questions on mine if they are wholesaling it for me. It really is another set of eyes. That seller who is wholesaling your product can also give you some advice on improving the listings, etc. Sometimes, sellers will need to know that they should handle customer returns instead of you. So it’s good to set those terms.
Moving forward, do you guys see yourself continuing with this kind of business model, doing it more or less?
Andy: For sure, it has allowed me to grow a lot faster. I like the comraderie it brings. The fact that you have other folks watching the listing, and competitors.
Liran: Yes, definitely for cashflow purpose and if you’re growing and constantly launching new ASINs on a regular basis. It is definitely helpful to generate that cashflow.
Want to learn more about Private Label? Join our Amazing Freedom Facebook Group.
There are still a few spots left to attend our Private Label Retreat at: www.amazingfreedom.com/retreat.
Subscribe to the Podcast!
Subscribe to catch all our latest episodes!