A major problem we see in new wholesale sellers is understanding how to “scale up” new products. Many just assume you find a profitable product and purchase as much as possible and ship into Amazon.

 

Wrong. On so many levels, wrong.

 

 

Why? Because it’s a very quick way to lose money. Variables such as price, volume, and competition can change very quickly and because of that, we suggest placing a test order.

 

Our test orders are typically a week’s worth of inventory, depending on the volume. I personally have a max of 50 units or $1,000 as a test order. This greatly limits your risk on a new product that could go south very fast. On average, I order 24 units as a test order, but ultimately it’s up to you.

 

Mitigating Risk and Scaling Up Wholesale Products

 

Scaling up a product is very easy, but difficult psychologically because we feel like we’re leaving money on the table and missing out on profit. Although this could be true, it’s also equally true that you could be saving yourself from losing thousands of dollars by NOT going “all in” in a product you’ve yet to test.

 

It’s like buying 1,000 units of a coffee mug from Alibaba because you see other coffee mugs on Amazon selling like hot-cakes. Not exactly a winning strategy now is it?

 

Let’s say your initial research shows you should be able to move 1,000 units of a product with the current competition. Great! How much do you order? If it’s me, 50 units.

 

“But you’re leaving thousands of dollars in profit on the table!”, you say. How do you truly know that? Is it possible it’s a story you’re telling yourself instead of being a hard fact and truth? Let’s assume so.

 

So I order 50 units and within two days they’re sold out. At this point, I’m pretty confident in this product, not confident enough to place a 1,000 unit order, but confident in 50 units in 2 days. So, let’s scale it up.

 

Next, I’ll most likely place an order for 150 units, assuming nothing has changed like competition, price or BSR.

 

The product lands and sells through in a week! “Time for 1,000?!”, you may be asking. Not quite yet, but we’re close.

 

100 units is vastly different than 1,000 units

 

You see, a product’s data points at 50-150 units are vastly different than that same product at 1,000 units. It’s a long lead time, a longer hold time on your capital and a much larger risk. So my next order would be 300-400 units. Again, assuming nothing has changed (this is of the utmost importance).

 

Once I get to an order of 500 units, I won’t raise it any higher. Instead of placing one large order of 1,000 units, I’d much rather place two orders at 500 units. Why? Because it’s all about mitigating risk. If something goes wrong, the most it can go wrong on is 500 units, rather than double that. Also, by ordering inventory that sells through 15-20 days rather than 30, you churn your capital much faster and can spread it a bit better across other products to diversify your inventory as well.

 

This was a major turning point for me where I began to see sales really take quantum leap. Before, I wanted to place one large order per supplier to cover the whole month, not realizing the math actually works out much better when you split those orders in half.

 

Instead of spending $10,000 one a month and getting a 20% return, you could be spending $10,000 twice a month and getting a 20% return, you guessed it, twice (assuming you roll nothing back into the business. If you do, it actually compounds a small amount depending on how what percentage you put back in).

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