Choosing The Best Sourcing Model

Four models have now been described. This lesson puts them side by side and explains why the course recommends starting at the bottom of the ladder rather than the top.

Count the steps

The clearest way to compare the models is not by profit potential but by how many things have to go right. Here is each one as a sequence.

Retail and online arbitrage: four steps

1. Visit a shop or a website and find a product.
2. Add your offer to the existing Amazon listing.
3. Buy it.
4. Send it to Amazon.

Wholesale: five steps

1. Find and open an account with a supplier.
2. Get their price list.
3. Analyse it to find the profitable lines.
4. Add your offers to existing listings.
5. Buy and send to Amazon.

One more step than arbitrage, and the added difficulty is concentrated in the first: being accepted by a supplier when you have no trading history.

Private label: twelve or more steps

Product research, find a supplier, negotiate, order a sample, order a test batch, arrange an inspection, design a logo and packaging, engage a freight forwarder, commission photography, write and optimise a listing from nothing, ship to Amazon, run pay-per-click advertising, and manage the first reviews.

Each of those costs money, each can be done badly, and a mistake in any one of them can waste the whole investment.

The critical difference: whose listing is it

Notice what arbitrage and wholesale share and private label does not. In the first two, you add your offer to a listing that already exists. That listing already has photographs, a description, reviews, a sales history and a ranking. Somebody else built the demand and you are selling into it.

With private label the listing does not exist until you make it. You are responsible for the photography, the copy, the keyword optimisation, the reviews and the advertising that brings the first visitors. That is where most of the twelve steps come from, and it is the single largest reason the model is harder.

What each one costs to start

Rough figures, in dollars or pounds, from the lesson:

• Retail and online arbitrage: a couple of hundred.
• Wholesale: three hundred upwards, with smaller suppliers often around 200 to 300 plus delivery.
• Private label: three thousand upwards for one product.

The gap between the first and the last is not just money. It is the size of a single mistake. On two hundred, a bad purchase teaches you something. On three thousand it can end the attempt.

Why starting low is the faster route

The argument is not that arbitrage is better than private label. It is that arbitrage teaches you what you need in order to do anything else well, at the lowest possible price.

By the time you have bought, prepped, shipped, listed and sold a few dozen items you know what your fees really come to, how quickly stock turns, what a good sales rank looks like in your categories, what Amazon rejects and why, and how long money stays tied up. Every one of those answers is an input to a wholesale or private label decision.

Going straight to private label means making those same judgements with no evidence and a much larger amount of money committed.

The ladder

1. Retail arbitrage. Learn the cycle on stock you can inspect, with little competition and no supplier to convince.
2. Online arbitrage. Add volume, software and the ability to delegate.
3. Wholesale. Add repeatable supply and access to gated categories.
4. Private label. Add control of the listing, once you can afford to be wrong.

Most sellers end up running more than one at a time, and there is no requirement to climb the whole ladder. Plenty of profitable businesses stay on the first two rungs.

The next modules cover retail arbitrage, then online arbitrage, then wholesale, in that order.