Wholesale is the business of buying goods in large quantities from manufacturers and selling to retailers. When you start a retail business, you’re going to need products to sell. And, buying wholesale is normally going to be the way to go.
Buying wholesale can be confusing at first. So, we’re sharing our tips on how to find wholesalers, getting the best wholesale prices, and any additional factors you need to know.
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Watch nowWhen you buy merchandise from a wholesaler, you’re buying from the middleman between your retail store and the manufacturer. A wholesale purchase is almost always made in bulk, and because of that, you pay a discounted price for the purchase.
After you buy products from a wholesaler, you can then sell them at your own store at a higher price to make a profit. This higher price is called the retail price. And, it’s what customers will pay when they shop in your store.
The difference between the retail and the wholesale price is called the margin. Basically, it’s the amount of profit that a retailer gets from a sale.
The retail price typically varies between businesses, and there are a few different pricing strategies that can be used to determine the best retail price for you. Once you do this, you can then determine your gross profit.
The wholesale process, typically, looks like this:
The manufacturer creates the products.
The distributor facilitates sales between the manufacturer and the wholesaler and, sometimes, between the manufacturer and retailers.
The wholesaler works with the distributor to buy in bulk.
The retailer buys smaller quantities of the items from the wholesaler (or distributor) to sell individual goods to consumers.
Whenever you’re buying wholesale, you’ll need to consider what price you’re thinking of selling your goods for so you can work out how much profit you will make. You can use this formula as a guide:
Gross Profit = Revenue – Cost of Goods Sold (COGS)
Revenue is equal to the retail price you charge to your customers.
COGS is a high-level metric that covers all of the variable costs associated with producing and selling goods. Fixed costs are not accounted for in gross profit calculations.
If you’re buying from a wholesaler instead of producing a product yourself, you can estimate that your COGS is the price you pay for a product. You can also estimate that your gross profit is the amount of money you make off of a sale.
Retailers, typically, raise (or markup) the price of goods they buy wholesale so that they can make a profit. For example, a retailer may buy a t-shirt at a wholesale price of £2, and then sell the t-shirt in their store for £10. In this case, the markup is £8. And, as a result, the gross profit of that sale is £8.
You should keep this in mind when buying inventory for your store. If your wholesaler’s prices are too high, it will affect the overall profitability of your business.
If you ever find yourself owning too much inventory at once, you’ll likely have to find someplace to put it. We’ve covered different ways retailers can manage surplus inventory here.
Wholesalers aren’t one-size-fits-all. There are a range of wholesale businesses that work with retailers (and, sometimes, consumers).
The type of wholesaler you work with will depend on the specific items you’re buying in bulk, the retail niche you want to fit in, the kinds of relationships you are able to build, and the wholesale ordering technology you want to work with.
Here are the types of wholesalers you can work with:
Some, but not all, manufacturers also act as wholesalers. As there is no middleman, buying directly from a manufacturer may give you lower wholesale prices. However, buying directly isn’t always available as an option and, even when it is, it isn’t always the most convenient.
Retail wholesalers sell products in bulk to retailers at a slight markup from manufacturers. Buying through a retail wholesaler means you can purchase wholesale items from more than one manufacturer.
As opposed to retail wholesalers, merchant wholesalers sell to both retailers and retail customers. They generally have lower minimum order sizes in light of this, and are your direct competition while also being suppliers.
Wholesalers and brands come together on B2B wholesale marketplaces like NuORDER, where retailers can browse and order products much more efficiently than the traditional email-and-purchase-order format.
Your local chamber of commerce is often a good place to start. If you’re in touch with other business owners, crowdsourcing from your network is another great way to get info on which wholesalers you should look into and which ones you should avoid.
If you want to find trustworthy wholesalers online, you should try a B2B wholesale marketplace. B2B marketplaces are a great place to start as you’ll be able to browse catalogues online. However, make sure it has strict standards with the brands it works with.
Once you’ve compiled a list of wholesalers you’re interested in, read reviews from other retailers who have worked with them. This will give you a good sense of whether or not they’re worth reaching out to.
After you’ve narrowed down your list to your top choices, you’ll need to make sure they’re a good fit for your business. Here is a list of questions you can start with when choosing a wholesaler:
What merchandise do you sell?
If you’re selling a wide range of items, or if you plan on keeping your store very specific, you have to choose wholesale partners that carry the products you need.
You can work with as many different wholesalers as you need to in order to get the inventory you want. However, make sure that the kind of merchandise these wholesalers offer aligns with the kind of store you run, so you’re always on-brand.
What is your price point?
You’re selling the merchandise you bought from the wholesaler in order to make a profit. When choosing a supplier, make sure you can get pricing that allows you to hit your desired profit margins.
Is the wholesaler reliable?
Don’t work with people you can’t rely on. Wholesalers who deliver merchandise late, not at all, or consistently show up with damaged goods aren’t good for business.
Do they have great customer service?
Make sure any company you work with has a reliable customer service team you can easily reach when needed. If you have to jump through hoops to have your questions answered, or their customer service is never around when you need them, you may need a new wholesale partner.
How much do they know about the product?
The wholesale partner you choose should have a strong understanding of the products they sell. This has two benefits to you as a retailer. The first is that you can share this product knowledge with your customer. The second is that it ensures your wholesale partner is clued up – and passionate – about the quality of the product they’re selling.
Wholesalers who can’t answer your questions about their product may be aware their merchandise isn’t the best, or a lack of knowledge may mean they just don’t care. Either way, a good business partner will be able to answer your questions..
Can they help you drop ship?
If you sell products online, it might be worth asking if your wholesalers can help you drop ship. Drop shipping is a fulfilment method where the wholesaler stores your inventory and handles your shipping.
When someone places an order from your eCommerce store, you pass on their order information to your wholesaler, and they ship it directly to your customer. Drop shipping is a great option if you want to save on storage and shipping costs, but it’s a much more hands-off way of doing business.
If you decide to drop ship, make sure you ask your wholesaler to send you samples of every single product you sell to ensure that the quality is up to your standards.
Will you be buying wholesale items domestically or internationally?
A domestic supply chain can mean less disruption. But, not all wholesale items are available from domestic manufacturers or suppliers, and prices can be higher.
Meanwhile, while you’ll have a wider (and more affordable) selection from international suppliers, you never know when you’ll run into manufacturing or shipping delays.
Rather than relying too heavily on one or the other, it may be best to ensure you’re sourcing from a mix of international and domestic wholesalers.
The general process for buying bulk items for wholesale is:
Find a wholesaler: check out your local commerce centre, wholesaler sites online, and B2B marketplaces.
Contact the wholesaler: you may be able to skip—or at least streamline—this step if you’re using a B2B marketplace. Otherwise, reach out to the wholesaler over email and introduce yourself and your business.
Show your wholesaler your business licences, if needed: only merchant wholesalers will sell to the end user. Retail wholesalers may ask for proof you’re a legitimate business.
Sign an agreement with the wholesaler: examine the terms carefully; have a solicitor look them over if needed.
Place an order with the wholesaler: the wholesaler will let you know how they prefer you to order. A B2B wholesaler marketplace will be the most convenient. Keep the minimum order quantity in mind—if you’re not ready to place an order that large, ask the wholesaler if you can order a sample first.
Determine your desired price: some manufacturers set prices for their goods—Apple, for example, requires resellers to price their goods similarly. Check your agreement for details.
Place more orders as needed.
Find your reorder points
In addition to figuring out which items to buy, you’ll need to calculate how much you need to buy. Want to know how much you’ll need? Use this free calculator to find your reorder point for each item.
Once you have your reorder points, you can use Lightspeed Retail to help you keep track of which items are at, or below, their desired inventory levels. Once you’ve put your reorder points into your inventory listings, running the Reorder List report will let you know which items are low on stock and how much you need to reorder.
It’s okay to negotiate
Don’t be afraid to negotiate the price of goods when you need to. Let the supplier know if your sales are doing well and how much business they can expect from you in order to get a better deal. Be honest and fair in your negotiations to form a longstanding relationship with your wholesalers.
Organise storage space
Before your wholesale order arrives, you’ll also need to have an organised place to store it (unless you’re drop shipping). Having a storage room with adequate shelving makes finding different parts of your inventory that much easier.
Keeping things labelled will make sure you don’t lose track of anything. If your inventory exceeds the confines of your storage room, consider upgrading to a warehouse equipped with industrial equipment meant to handle large-scale fulfilment needs.
Getting the right products for your store
Figuring out how to buy wholesale to resell merchandise is an important step in increasing your profits and inventory. That’s why it’s important to take the time to do the maths, to make sure you’re buying and selling merchandise at prices that will work for you and your business.
You can use your POS system to help you crunch the numbers. Work with wholesalers who sell high-quality products, are reliable, and can support your growth. By asking the right questions and having the numbers figured out, you’ll be well on your way to making smarter decisions to grow your business.
Managing your inventory and ensuring you have enough stock has never been easier with Lightspeed ePOS for Retail. Want to learn more about how Lightspeed can help you manage, optimise, and scale your business with ease? Watch a free demo today.
Wholesale is big business: the US market size rose to $10.4 trillion in 2022 from $9.9 trillion in 2021.¹
Yet, finding cheap wholesale products for sales in the USA is challenging. There are hundreds, if not thousands, of wholesalers. Choosing the right option isn’t always straightforward.
There are ways to make sure you get the best deal, though. In this post, you’ll learn how and where to find the best cheap wholesale products for resale.
Save money when you pay for international wholesale products with a Wise Business account. Discover Wise Business todayIt’s legal to resell wholesale products as a business, provided you have the correct permits to do so.
Depending on where you are, the license to buy wholesale products to resell may go by a different name. Here are some of the more common terms for the permit:
To get your wholesale reselling business up and running, here’s what you’ll need to do:
To select the right wholesale items to resell at the right price, consider the following factors:
Search for areas where there’s the potential for a high profit margin. If you’re an online retailer, that should be in the region of 41.54%. For in-store retail, it would be closer to 24.32%.²
If you find a product that could yield a high profit margin, you can buy it in bulk for a low cost, and in doing so increase your potential sales revenue.
If competition is stiff for a particular product, you might struggle to make a profit.
As such, the best approach is often to seek out those products that aren’t saturated in the market. You can use online retailers to assess the competition for different products.
If you do manage to find a low competition product, you need to make sure there’s a high level of demand for it.
Many products with low competition don’t meet the market’s needs adequately which means there’s less demand for them. As such, conduct market research to find out whether customers want the product you’re planning to sell online.
While it doesn’t pertain to the quality of the product, the dimensions can be a significant factor to consider.
The heavier or larger the product, the more expensive it will be to ship it to your customers. It can sometimes be a gamble to buy many large products in bulk. You’ll face higher shipping fees which can eat into your profit margins.
🔍 Planning to buy wholesale for resale from China? You can find out about shipping from US to China to see if it's worth it for you.So now you know what to look for, you might be wondering; ‘How do I find cheap wholesale?’
There are many ways to buy cheap wholesale items for resale from around the world.
🔍 Did you know? Asia Pacific is the largest region for buying wholesale goods, accounting for the lion’s share of 51% of the market in 2020.³Buying cheap is essential as purchases account for 78.4% of business costs in the wholesale industry. As such, you need to manage your funds well and spend on the products that’ll lead to the best ROI.⁴
Using online wholesale marketplaces is an increasingly common strategy for finding cheap goods.
Here are some of the most popular online marketplaces for cheap wholesale products for resale:
To give you a concrete idea of what products to look for, here are some of the best wholesale goods to sell:
Apparel, which includes everything from sporting accessories to business attire, is one of the most popular wholesale products to sell. It’s always available, so it can be an easy source of repeat revenue.
Apparel will often give you a favorable profit margin since the cost of buying is low. Yet, you’ll have to buy a lot to generate high revenue.
Health and beauty products are popular as it’s a huge industry. Essentials such as shower gel and soap will always be in high demand.
Buying cheap cosmetic products though might be at odds with what the modern eco-conscious customer wants.
Jewelry can be a lucrative product for resale, and can lead to high markups. You can buy jewelry at a low price and sell it with a high price tag. However, this relies on your ability to negotiate a good deal as fixed prices aren’t common.
Pet supplies always have high demand, and many consumers appreciate low prices for goods they have to constantly restock. They’re often available at low wholesale prices too.
The profit margins will likely be low, which is an important factor to consider.
Electronics are highly popular and valuable. That means if you do the research, you can find products that are low in competition but have the potential for a high profit margin.
Bear in mind, though, that electronics will cost you more to purchase so there is a risk involved.
Much like pet supplies, kids and baby products will always be popular and can help you generate recurring revenue. For toys, though, demand can be highly seasonal, so timing is key.
For the process of buying wholesale to resell, there are various steps you’ll need to take to ensure ongoing success.
One of the first major decisions you’ll have to make is where you source your products: overseas or from your local area.
There are pros and cons to both approaches, so it boils down to what’s best for your business.
When you buy from a local US wholesaler, you may pay a premium due to higher manufacturing costs, but this higher price is often reflected in the product’s high quality.
It’s also a quick way to buy and sell products for a short-term profit spike. You might be limited in what you can find when you shop locally, though.
When you buy from a global wholesaler, you’ll often pay lower prices and have a wide range of products to choose from. Buying from a global supplier can be slower, due to shipping times.
It’s a good idea to deal with several wholesale suppliers. You’re unlikely to find all the products you need with a single vendor.
Plus, if you experience a shortage of products with one supplier, that won’t cut off your revenue stream.
To ensure you get what you pay for with wholesale products it’s wise to request samples. Getting your hands on the product will tell you much more about its quality and viability for resale than an online image and description will.
You’ll also be able to assess the ease of communication and customer service, which can be a deciding factor.
Some wholesale platforms will let you order a free sample of the product upfront, which can help you reach a decision.
Once you’ve chosen a product, you enter the negotiation phase. During this process, you’ll discuss payment terms and volume, among other things.
Make sure you buy enough to satisfy likely consumer demand. Don’t foget to arrange payment terms that suit both parties to avoid issues later down the line.
The last step is to pay for the goods.
Some suppliers will be happy to negotiate on price. If you feel there’s a better deal to strike, it can be worth seeing if they’ll shift on their original asking price.
Many wholesale resellers choose to source from abroad to save money and increase profit margins.
Yet paying with your traditional bank may end up costing you more than you think. Banks can have hidden fees and don’t always use the best exchange rate.
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. With Wise Business, you get the real mid-market rate when you buy from overseas. This helps keep your costs down, leaving more of your profit intact.
It's easy to pay from one account in different currencies, making international business payments easy.
Sources:
All sources checked May 23, 2022.
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