Before spending a lot of time looking into a specific product to sell on Amazon, you should first check if you can 1) buy it from the manufacturer, and 2) sell it on Amazon. That may seem obvious, but when I first started selling on Amazon there were a couple of times I spent a lot of time checking if a particular product would be good to carry, only to discover that for one reason or another I couldn’t.
Occasionally I run across a manufacturer that doesn’t sell to online-only merchants. It’s been fairly rare for me, though I hear about it from other sellers more frequently than it has happened to me. Never the less, you can expect this to happen to you as well. Some manufacturers believe that having their products sell online makes them look cheap. Others are trying to protect their brick and mortar retailers from online price competition.
You may be thinking about how to get around reluctant manufacturers, but my suggestion is don’t. If a manufacturer doesn’t want to sell to you because you’re an online retailer, respect their wishes. A big part of retail success is reputation, you don’t want to risk your reputation to sell any one particular product – it isn’t worth it. There are plenty of products you can sell without objection from the manufacturer, choose from among them.
When I contact a manufacturer to see about selling their products I keep the information I provide simple (name, contact information, resellers certificate number, and what information I’m looking for). If they don’t want to sell to online retailers they’ll ask if you are one (well, most will, I had one manufacturer that dragged it out for quite a while, and then told me they don’t sell to online retailers). Answer all of their questions fully and honestly, if they choose not to sell to you then that’s life, move on.
Amazon has restrictions on what can be sold on their website, additional restrictions on what can be sold through FBA, and additional restrictions on who can sell certain products.
I’m not going to copy the current list of restrictions here, check the Amazon website for the latest updates. What I am going to do is suggest that before you spend much time or money investigating a product to see if you want to sell it, make sure you can sell it on Amazon. If there’s already a listing on Amazon for the product, try to add the product to your inventory. If you’re going to use FBA, try creating a shipment with the product (shipments are used to send your inventory to an Amazon warehouse). If you can’t sell it on Amazon, or sell it through FBA, the system will kick it out and you’ve saved yourself some time and money. If it lets you add the listing and create a shipment, and ultimately you decide not to sell the product, you can cancel your listing and shipments, it costs you nothing.
If there isn’t already a listing for the product you’re considering, look for similar products, and carefully check Amazon’s restrictions on what can be sold on their website. Many of Amazon’s restrictions are what you would expect – hazardous products and the like. But others seem quite arbitrary and may surprise you. Amazon suspended FBA sales of one product I carried because it came in a 4.5 oz bottle of liquid, and they have a limit of 3.0 oz.
A couple of months ago I started to work with a new manufacturer whose products sold well for me. The margins were a little thinner than I usually like, but volume was on the high side. This manufacturer requires orders to be placed online. They show the MSRP on the product page, and when you go to check out it applies the wholesale discount, so all you see is the total price they’re charging you. When I initially set up an account with them they supplied me with a chart showing the wholesale discount vs. order size.
When I logged on to place an order last week, though, the wholesale price was a few percent higher than what I was expecting. I updated the quantities a few times to see what prices it generated, but it just didn’t match up with the discount chart they had given me earlier.
I decided it was better to find out what was going on before proceeding, so I cancelled the order, and sent a note to the manufacturer asking them if something had changed. Previously this manufacturer had responded within a few hours to queries, even on holidays and weekends (which is impressive and unusual). This time, though, a couple of days went by before I got a reply. The response said they had updated their wholesale discount pricing structure, and they included a copy of the new pricing.
In sum, they had modified their pricing structure to effectively squeeze out any but the largest of retailers from selling their products online.
Obviously I wasn’t happy about losing a good product, but that happens sometimes. Large retailers can pressure manufacturers for higher discounts for themselves and lower discounts for smaller retailers to reduce competition and garner better margins, which I’m going to guess is what happened here. The way they handled it, though, left a very bad impression. Normally when a manufacturer changes their prices they notify retailers months in advance. And if you buy through a distributor the distributor notifies you as well. Typically I get several notifications about any price change before the change actually takes effect.
This manufacturer, however, changed it without any notification at all. The way they happen to run their order placement made it particularly obscure, never showing the per-item wholesale price, the percent discount being applied, or the wholesale price and MSRP on the same page.
I don’t know why they didn’t say anything about changing their pricing. It’s a smaller manufacturer, possibly it’s just inexperience and they don’t realize how their actions make them look.
I mention this incident for two reasons. First is so that you’re aware manufacturers will sometimes consciously price out smaller online retailers. The second reason is to point out the importance of being completely open and upfront with your own customers about bad news. Even if it’s clear you have every right to take the actions you’re taking, it will leave a negative impression with your customers if you try to silently slip bad news in without them noticing it. It’s better to highlight bad news openly, even if it means taking some flak from unhappy customers, than to try to avoid confrontation and have them discover the bad news on their own.