Amazon Product Sourcing: Everything You Need to Know

Selling on Amazon comes with undeniable advantages: access to millions of customers worldwide, a robust fulfillment network, and unparalleled accessibility for sellers. These benefits make the platform an ideal choice for entrepreneurs. However, one critical question stands out: Where do you find the right products to sell?

As your business grows and you plan to scale, sourcing high-quality products transitions from being a simple task to a cornerstone of your success. This article covers everything you need to know about Amazon product sourcing—from practical tips to strategies for working with trustworthy suppliers—to help you build a thriving business. 

Main Takeaways From This Article:

• Effective Amazon product sourcing requires choosing the right business model and performing thorough market research to identify profitable opportunities.
• Selecting reputable suppliers and validating product viability are essential steps to mitigate risks and ensure quality.
• Understanding and avoiding common pitfalls, such as overlooking product restrictions and miscalculating shipping costs, is crucial for success.
• Streamlining the sourcing process with automation tools can enhance efficiency and improve the management of inventory and pricing strategies.

What Is Amazon Product Sourcing?

Amazon product sourcing refers to the process of finding high-quality products to sell on Amazon's competitive marketplace. This involves identifying a profitable product, locating a reliable supplier who can provide the product at a competitive price, and ensuring the product complies with Amazon's listing guidelines.

How to Source Products on Amazon Step-By-Step

A lot of strategic planning and meticulous research goes into successful product sourcing. Let's break this process down into manageable steps. 

1. Decide on a Business Model

The most crucial step in product sourcing is determining your business model. Popular options for Amazon sellers include:

• Retail arbitrage
• Private labeling
• Wholesale sourcing
• Dropshipping
• Online arbitrage

To choose the most suitable sourcing method, you must know your budget, time availability, risk tolerance, and overall business goals. 

2. Perform Market Research

Finding profitable products requires conducting thorough market research. This involves analyzing market trends, identifying potential niches, and evaluating competitor offerings. By understanding the competition and what your target market wants, you can make informed sourcing decisions.

Gain insights into customer demand, sales volume, and customer reviews. Analyze existing products in your chosen niche and consider how these products perform in terms of what they do well and what they could do better. Identify areas where your product can offer something unique. 

3. Set Budget and Profit Goals

Before sourcing any products, work out a clear budget that accounts for all potential expenses. This should include product costs, shipping fees, Amazon fees, marketing expenses, and inventory storage costs (if any). 

Once you have a budget, set realistic profit goals. Determine the desired profit margin per unit or a target monthly revenue. These goals will guide your product selection and pricing strategies, ensuring your business is profitable.

4. Select Products

Now, the fun part begins: product selection. You should choose products that meet specific criteria set by you but the key is to prioritize products with high demand, manageable competition, and attractive profit margins. 

Consider factors like product size and weight, as these can greatly impact shipping and fulfillment costs. 

5. Find Reputable Suppliers 

Prioritizing reliable suppliers is essential when working with online retailers like Amazon. This means taking the time to locate suppliers with positive online reviews and strong industry references. It's also crucial to verify their minimum order quantities (MOQs) and ensure they meet your budget. 

When you work with suppliers with excellent communication skills, you'll find it easier to address any concerns that may come up.

6. Validate Product Viability

Before committing to large orders, validate the viability of your chosen products. You can order samples from your chosen supplier to assess their quality and functionality first. 

Consider conducting limited test marketing campaigns on social media or through Amazon Sponsored Products to gauge customer interest and gather feedback. It's worth taking the time to collect this data before you invest a lot of money!

7. Create a Listing Strategy

A compelling product listing can easily attract buyers who may already be looking for products you sell. Invest in high-quality product photography that showcases the product from multiple angles. 

Product descriptions are more effective when they include detailed information and keywords relevant to what the products do. It’s especially important to use keywords to improve your search visibility and help your products appear higher in the search results.

8. Test Products Before Bulk Orders

Before you place a bulk order for products, test the waters by ordering a smaller quantity first. Doing this will let you verify that your products are of the quality you expect once they arrive and also allow you to gauge if they meet customer preferences. 

If there are any issues with quality or response from buyers, then you can address those concerns with your supplier before you commit to a full order.

9. Leverage Tools for Pricing and Management

Using tools like pricing software and inventory management platforms can make a big difference in streamlining your processes.

For example, Informed Repricer automatically adjusts your product prices to keep you competitive in the market. It’s a smart way to stay ahead of the competition while maximizing your profits—a great addition to any business.

Key Considerations When Sourcing Products

Sourcing products for your Amazon storefront goes beyond selecting suppliers and analyzing market demand. Several other critical factors must be considered, including:

Logistics Management

Efficient logistics are essential to maintaining a reliable supply chain and meeting customer expectations. Consider factors like shipping times, international freight costs, and storage options, especially if you're using Fulfillment by Amazon (FBA). Partner with suppliers who offer flexible shipping options and have contingency plans for potential delays.

Legal Compliance and Product Restrictions

Understanding and adhering to Amazon's regulations, as well as regional and international trade laws, is a must. Ensure that the products you source comply with Amazon's policies and local legal requirements, such as safety certifications or labeling standards. Non-compliance can result in account suspension or product delisting, so thorough research is crucial.

Scalability and Long-Term Viability

When sourcing products, think beyond the initial launch. Assess whether your supplier can handle increasing order volumes as your business grows and whether the product's demand is likely to remain stable or increase. Scalability ensures you can meet customer needs without disruptions or quality issues.

Top Amazon Product Sourcing Methods

Several effective methods exist for sourcing products to sell on Amazon. Each approach has its own unique advantages and disadvantages. Let’s discuss those here:

Retail Arbitrage

In retail arbitrage, sellers purchase clearance items at discounted prices from retail stores or online marketplaces and resell them for a profit on Amazon. This method leverages price discrepancies and deals to generate quick profits.

Pros:

• Low startup costs
• Potential for quick returns
• Minimal initial investment

Cons:

• Requires significant time and effort to find deals
• Potential for price fluctuations
• Competition from other arbitrageurs

Private Labeling

Through private labeling, you can create your own brand by manufacturing or customizing products and selling them under a unique private label. This method offers greater control over branding, pricing, and product quality.

Pros:

• Higher profit margins
• Stronger brand-building potential
• Greater control over the product

Cons:

• Higher startup costs
• Requires investment in product development and inventory management

Wholesale Sourcing

Wholesale sourcing is a method of purchasing products directly from manufacturers or distributors. Many people find wholesale suppliers an effective source to procure products that offer higher profits compared to other sourcing strategies. It allows for buying products in bulk at lower costs, so less time is spent on purchasing. 

Pros:

• Access to lower wholesale prices
• Potential for higher profit margins
• Ability to build long-term relationships with suppliers

Cons:

• Requires larger upfront investment in inventory
• Potential for higher risk due to larger inventory commitments

Dropshipping

Dropshipping involves partnering with a supplier who handles the storage, packaging, and shipping of products while you manage the listing and customer service. This method eliminates the need for inventory management.

Pros:

• Low startup costs
• No inventory management required
• Minimal upfront investment

Cons:

• Lower profit margins compared to other methods
• Less control over product quality and shipping
• Potential for supplier reliability issues

Online Arbitrage

Some Amazon sellers engage in an activity known as online arbitrage. This involves finding products on online markets, such as Alibaba and AliExpress, that they can purchase and resell on Amazon for a profit. This approach can help these sellers achieve access to a broader range of products at a lower price, thus allowing them to make a higher profit.

Pros:

• Access to a wide variety of products at potentially lower prices
• Potential for high-profit margins

Cons:

• Requires careful research to identify reliable suppliers and ensure product quality
• Potential for longer shipping times and customs issues

Common Pitfalls to Avoid

Amazon product sourcing efforts can fall off track due to certain circumstances and issues. By understanding these potential pitfalls, you can proactively take steps to avoid them.

Rushing Supplier Selection

Carefully vetting potential suppliers is crucial. Avoid the temptation to rush the selection process. Thoroughly research and evaluate potential suppliers based on reliability, communication, and product quality.

Overlooking Product Restrictions

There are strict Amazon guidelines and restrictions on the types of products you can sell on the platform. You must research and follow these restrictions, or your products might be removed and your account suspended.

Ignoring Profit Margins

Prioritize products with healthy profit margins after accounting for all associated costs, including purchasing, shipping, Amazon fees, and marketing expenses. Avoid focusing solely on low-cost products if they don't offer sufficient profitability.

Overlooking Product Quality 

Sourcing your products from quality-conscious suppliers is crucial for your brand’s reputation. If you source low-quality products, you run the risk of negative reviews, high return rates, and irreparable damage to your brand’s reputation.

Miscalculating Shipping Costs

Underestimating shipping expenditures can drastically impact your profit margins. When estimating costs, be sure to account for the product's weight, dimensions, and the distance it must travel. A poorly chosen shipping method can result in an item being delivered late or damaged and can negatively impact your bottom line. 

Tools to Streamline Amazon Product Sourcing

In the world of Amazon, the right product research tools can speed up product sourcing so you can find great deals in less time. Here are some tools you should consider to simplify your search:

Market Research Tools

These tools provide valuable data on product demand, sales trends, and competitor analysis, helping you identify profitable product opportunities. 

Here are our top recommendations:

• Jungle Scout: Provides valuable data on product demand, sales trends, and competitor analysis.
• Helium 10: Offers a suite of tools for keyword research, product discovery, and competitor analysis.
• Viral Launch: Provides data-driven insights into product viability, sales trends, and competitor analysis.

Supplier Discovery Platforms

These platforms connect businesses with a wide range of global suppliers, making it easier to find reliable and cost-effective sources for your products.

Here are our top recommendations:

• Alibaba: A vast online marketplace connecting businesses with global suppliers.
• Global Sources: A B2B marketplace featuring a wide range of suppliers and products.
• IndiaMart: An online marketplace for Indian businesses, connecting buyers and sellers.

Pricing and Profitability Calculators

These tools help you estimate potential profits, optimize pricing strategies, and make informed decisions about product sourcing and sales.

Here are our top recommendations:

• SellerApp: Provides a suite of tools, including a profit calculator, to help estimate potential profits and optimize pricing strategies.
• Scopeli: Offers a comprehensive set of tools for product research, competitor analysis, and pricing optimization.

Competitor and Listing Analysis Tools

These tools provide in-depth insights into competitor pricing, sales history, and best-selling products, helping you gain a competitive edge.

Here are our top recommendations:

• Sonar: Provides in-depth competitor analysis, including insights into their pricing, sales history, and best-selling products.
• Keepa: Tracks Amazon product prices over time, providing valuable data for pricing and repricing strategies.

Inventory and Supply Chain Management Tools

These tools streamline inventory management, order fulfillment, and shipping logistics, improving efficiency and reducing operational costs.

Here are our top recommendations:

• SellerCloud: An all-in-one e-commerce platform that integrates with Amazon and provides inventory management, order fulfillment, and customer service features.
• ShipStation: A shipping and fulfillment platform that helps streamline order processing and shipping logistics.

Automation Tools for Repricing

These tools offer competitive pricing solutions by automating price adjustments based on competitor pricing and market dynamics.

Informed Repricer is a powerful repricing tool that automates price adjustments based on competitor pricing and market dynamics. It offers advanced features like dynamic pricing rules, profit protection, and real-time price adjustments to maximize Buy Box eligibility and profitability.

Dropshipping Tools

With these tools, you can simplify the dropshipping process by connecting with reliable suppliers, streamlining order processing, and facilitating efficient order fulfillment.

Here are our top recommendations:

• Spocket: Connects you with high-quality dropshipping suppliers, offering access to a wide range of products and streamlined order fulfillment.
• DSers: A dropshipping tool specifically designed for AliExpress, simplifying order processing and fulfillment.

Boost Amazon Profits with Informed Repricer

While sourcing the right products is key, pricing them competitively is just as important. That’s where Informed Repricer comes in—helping you maximize profits with AI-powered pricing strategies.

Informed Repricer is a powerful repricing tool that automates price adjustments based on real-time market data and competitor pricing. It allows you to:

• Use Dynamic Pricing Rules: Create custom rules to adjust prices based on specific conditions, like product age or competitor behavior.
• Protect Your Profits: Set minimum and maximum price limits to ensure you maintain healthy profit margins.
• Maximize Buy Box Ownership: Stay competitive and increase your chances of winning the coveted Buy Box, which drives a significant portion of Amazon sales.
• Free Up Valuable Time: Focus on other aspects of your business while our software handles the nitty-gritty of repricing.

Want to experience the benefits of automated repricing?

Sign up for a free trial of Informed Repricer today and see how we can boost your Amazon profits.

Start Your Free Trial today!