Import from Manufacturer in bulk and outsource fullfillment to Amazon

Background

I'm not quitting my day job, but it would be fun to do some trading on the nights and weekends. My basic idea was to buy direct from manufacturer using sites like Alibaba.com and then send to Amazon for full Amazon fulfillment.

Risks

Vendor scam on Alibaba

• Receive no products
• Receive defective products

• Purchase too much to meet manufacturer quantity limits, but pick the wrong items,sizes, styles.

• Amazon fulfillment seems like an operation advantage, but depending on Amazon for sales may be asking too much.

• International trade has unexpected overhead
• Catch22, need products to be in relations with Amazon, need Amazon relationship before buying products

• 200-300% markup on products that sell for full market price

What are some additional risks? What are some basic ways to mitigate these risks? What are some good books/resources?

My gut is to say, "If it was as easy as it appears, Everyone would do it". Having dabbled in the "buy wholesale, sell retail" market for a short time, (Note: I handled my own fulfillment) I found out the following:

1. The reason the "wholesaler" was selling it so cheaply was because no one was buying it.
2. Quality on many items was substandard
3. Doc on many items were substandard and had to be re-written (if you want repeat customers)
4. Fulfillment costs (Packaging, insurance, Cost of processing payments) ate up most of the margin on the item.
5. In order to understand when something is a good deal, you really have to focus (lots of time) on a niche and understand what stuff is selling for at the retail level

You can also consider "drop-ship" companies to handle fulfillment instead of alibaba/amazon

One risk you didn't mention is competition. What you are proposing seems simple enough for other people to imitate. Arbitrage opportunities (buying cheap on one market and selling for more on another) are hard to find, and usually don't stay available for very long.

Also, vendors usually want a minimum capacity before they give discounts, which means you need to make sure that your products are popular enough or you will be stuck with lots of merchandise.

I am not sue you will get the needed margins to make it work. I would also look into buying on http://www.globalsources.com/ and selling on eBay.

Another risk with Amazon is that you are dependent on them to do your sales and marketing. If you have your own website and use another fulfillment house, like SBC Fulfillment, (shameless plug) then you have the opportunity to market your products yourself and take more control of your own destiny. I have worked with entrepreneurs that have moved their products from an Amazon store to their own Magento store and seen sales volumes increase. Granted they have had to work and driving that traffic, but total reliance on Amazon to sell and market your products is a risky proposition.

So you are basically the middle man, right? Middle men are easily dispensable so you may wanna keep that in mind.

Shipping stuff from overseas is also risky. You will need a very good insurance, and also figure out the method of payment, probably letter of credit (at least the first time).

Good luck!!