5 Quick Steps to Buying Wholesale Products
I was shaking. The head haunch over this multi-million dollar company was going to be calling me any minute. We had set up our meeting last week and I desperately wanted his approval. After hours of pouring over a presentation (that we didn’t even get through), I knew that I could fix their problems, and I wanted to be their solution.
Not to mention that we would both make bank at the same time!
The phone rang, and I hit “answer”.
After forty-five minutes and a few stumbles of nervous, anxiety induced word-vomit, we thanked each other and got off the phone.
After a few deep breaths of relief – I ran around the house dancing and shouting!
I GOT THE ACCOUNT!
Now, it’s time to get to work.
What was I doing?
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I was negotiating and proving to a company that I could sell his product and that I could give him and his company value and solutions by working with me as a retailer.
I was getting a wholesale account approved out of hundreds of other lost value resellers who couldn’t provide him with enough value to his products and company.
I was starting the first steps in the process of beginning a relationship with a wholesaler so that I could sell his product retail!
And, because you’re reading this – I assume you want to dip your toes in the wholesaling business! I’ll walk you through how to do just that in 5 easy steps.
Why did I begin this post with a terrifying story of negotiating on the phone?
Because that’s essentially what wholesaling is: providing value in exchange for negotiating a great price on a product, so that you and the brand owner can both make money and grow your businesses.
If you don’t provide some sort of value to your brands and create a good working relationship with your brand owners, you’re simply buying and selling product only for the short term. If you want to start a successful wholesale business, you should be in it for the long haul.
This blog post is for those who are:
- Already set up with a legal business, resellers certificate or licensing to sell wholesale based on your state (read my post on how to do this here!)
- Have a website or shop set up either your own shop online, or a storefront on Amazon or Ebay.
- For those who have experience selling online and want to extend into the wholesale realm
When you start dipping your toes in wholesale, you have to understand that you’re in the business of negotiating and selling. If you don’t like sales, this may not be the right method for you. You will need to not only sell your products to your customers but sell yourself and your company to the brand owners you work with.
The process of wholesale looks like this:
- Find a product you want to sell
- Find a distributor, brand owner, or manufacturer
- Get approved for a wholesale account with them
- Calculate your return and negotiate pricing
- Arrange shipping and place your order
So let’s get started!
1 | Decide on what products you want to buy wholesale and sell retail and vet your market
First, you need to decide on what products are going to sell for your shop or online store. You should be curating a select group of products that match your store’s overarching themes and aligns directly with your ideal customers.
Search your customers, survey them, stalk your Facebook groups where your customers hang out and see what ears you can put on the ground for what products they need. If you are a pet shop, hang out in pet Facebook groups and see what your customers are needing.
Pro tip: you can then do targeted Facebook ads to those particular people to start marketing your new product once it’s in your shop!
I recommend staying away from those larger name-brands that we are all familiar with such as Purina or Iams. First, a very small business isn’t going to be very valuable in the eyes of their brand. Second, you are going to have very high competition for those items. Look for smaller mom-and-pop shop brands that you can really bring value to and help grow their business!
2 | Research for distributors for that product
Now you need to find someone who has already created the product you want to sell. It’s as simple as searching “product wholesale” to try and find wholesale distributors. You can also search for brands that are currently selling well on Amazon of that product and contact them.
You really want to find the manufacturer and go straight to the source first. The key is that you want to minimize any middle men as much as possible. Any extra people in your line of distribution is going to add extra fees. This means that if you were to contact a distributor, instead of the brand owner, you will likely have an increased cost per item, so look to talk with the actual brand owner if possible.
3 | Apply for your wholesale account
So, once you’ve found a distributor or a brand owner who sells the product you want to buy, you can contact them and try to get an account! A common misconception that brand owners have is that you can simply call and just place an order.
Unfortunately wholesale isn’t as easy as that – especially if you sell on a platform such as Amazon. The best way to go about this will be to contact the brand owner by phone.
I know, I know, it’s old fashioned, but look at it from the brands point of view: They’re essentially interviewing the companies that are going to sell their product to make sure that their brand image will be maintained and taken care of. They don’t want to sell to someone who might put them in a “bad neighborhood” so to speak.
They also want to product their product and brand image’s integrity to be upheld when it comes to pricing, so that their customers aren’t losing brand image value based on pricing.
In other words, if you buy their product and start selling it at very low pricing, their other retailers may not be able to sell as many, and it overall lowers the perceived value of the product, and causing the marketplace pricing to fluctuate, and eventually fall.
But, I’m getting ahead of myself!
First, you want to apply to get a wholesale account.
When you first contact their brand, they will ask you a few questions as to what kind of business you are, where you sell online, and sometimes they want to see your store. You may need to email or call them in order to do that, or they might send you a form to fill out for their wholesale application.
Here’s what you’ll do:
- Call them and ask to set up a wholesale account.
- Give them information that they ask for or fill out any forms and return them
- Wait to hear back if you’re approved.
You can also email the brand owners, however the chances of getting approved based on email is outrageously lower compared to calling on the phone.
4 | Negotiate pricing with your distributor and verify your ROI
After your wholesale account is approved, you will get a line item sheet or list of products with pricing. You can take this and compare it with the current market pricing on multiple platforms. Then, decide what you will be selling the product at. You will want to calculate all costs associated with the product:
- Product wholesale price
- Cost of shipping to you
- Cost of shipping from you to your shop (or if you store it in-house, cost of shipping to your customer)
- Any cost of product prepping such as a polybag or bubble wrap, product labels, tags, etc
Other costs such as per hour prepping and cost of packing tape or shipping should go under different categories in your accounting. It will be too hard to calculate the minutes or overhead required for each product. Only keep the essential product costs in your calculations.
To calculate your products ROI (return on investment):
Now you need to calculate how much it will cost to sell and your profit return!
Say your product and its associated costs were $50 and you sold it for $80. This leaves you with a $30 profit.
The calculation is ROI = Profit/COGS (cost of goods)
In other words, it’s ($30/$50) = 0.6 which is 60% ROI
Or, you can use a calculator like this one over at Calculator Soup.
Make sure to double check everything. Purchasing a product and then not having enough margin to fluctuate with shipping costs or market pricing changes will be problematic if you run out of margin and have all this leftover product in your shop!
Negotiating Pricing With Your Distributor
I would aim to get at LEAST 30% ROI for wholesale products. However, this can be dependent on your products sales volume. If your product sells more, you will be okay with a lower ROI, but if your product sells slower, you’ll want to aim for a higher margin.
Here’s a pro tip: NEVER take the first price from your wholesaler.
What to do if your margins are too low
If your margins aren’t going to work for you, you will need to call and speak with your account manager to try and improve the price, so you can sell it. This is where you make your brand shine, and you explain how you can help their products, how you plan on marketing their products and your future plans for their brand. This will help you in getting a lower price.
Some brand owners are happier after a few orders when you’ve proven your trustworthiness and ordering rate that they will help you on pricing. Other ways you can get discounts is by ordering in more volume, or by offering something in exchange such as paying for advertising.
5 | Order and arrange shipping
Next, you will want to make arrangements for shipping your wholesale products. Your wholesale company may offer free shipping or have a “free freight threshold” that you can meet and get free shipping to you. If you don’t, you’ll need to get a shipping account. Depending on how much product you’re ordering (I recommend starting small and growing as your product sells out) you will need to decide if you need a small parcel shipment or freight shipping.
Small Parcel Shipping
Small parcel is usually less than 70 pounds, and 108’ in length. You will want to verify the dimensions and length requirements with your shipping company’s account manager. Small parcel shipping is done by companies like UPS, FedEx or DHL.
Freight Shipping and Freight Forwarders
Freight shipping is usually a less-than-truckload (LTL) or a full truckload (FTL). Freight shipping is done by freight forwarders.
You will want to negotiate wholesale pricing with your shipping company as well. They will typically ask you how much volume you will be doing and what the typical sizes of your products will be, along with how often you plan on shipping.
My tip is that you should lean on telling your shipping manager the higher amounts you plan on doing, so that they can give you the best rate per pound!
To calculate shipping for your product, you will need to get the weight and dimensions from your wholesale company, and then you’ll call your shipping company and get a quote for your shipment. Use this to calculate!
How to place a wholesale order
To place an order, you will want to confirm how they accept wholesale orders. Depending on the type of ordering system they have, they may request that you send over a purchase order and pay with a credit card, or you can order on due credit, or you may purchase directly online on their website.
To recap, this is how you buy wholesale products:
- Vet your market and decide on a product
- Find a wholesaler
- Apply for a wholesale account
- Calculate pricing and negotiate if needed
- Arrange shipping and place your order!
Wholesale is a fantastic way to scale your business quickly and being able to find the products that your customers will really love is such a fun process! There are great places online to find wholesalers, you can find brand owners at trade shows, expos, forums, or on your stores shelves!
It’s actually really easy to find wholesalers and companies to reach out to for starting your wholesale business, and I hope that this was a good article to get your start in buying wholesale to sell retail!
What questions do you have on purchasing wholesale products? I’d love to answer them and I want to help you start your wholesale business! Send me a comment below with anything you’re struggling with and I can help you out!
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