The idea behind wholesale is simple. As a small business owner, you buy bulk quantities at discounted “wholesale” rates. Then you sell those goods at retail market prices. The lower the wholesale rate (and the higher your markup), the more profit you can make.
Although the concept is simple, knowing how to buy wholesale for your small business can be challenging. There are many types of wholesalers – and many details tucked away in the fine print.
This guide explains how to source and qualify for wholesale buying opportunities at your small business.
The ecosystem is large and has many players:
If your goal is to buy in bulk for resale, then trade shows, industry magazines, and manufacturers are all great starting points. A Google search of “wholesale products for retailers” [+ your industry/niche] will also reveal some opportunities.
Choosing a wholesaler ultimately comes down to personal (or professional) preference. For most businesses, price is the No. 1 criterion. Generally, the closer to the source you go, the more intermediaries you eliminate – which is why manufacturers tend to be the most affordable option.
Shopping around for the right partner is perfectly OK. Don’t be afraid to negotiate. It’s important to read the fine print regarding:
Typically, the more items you order at once, the lower the per-unit cost becomes. For instance, a batch of 100 widgets might cost $100 when buying from a wholesaler. As a retailer, this means you’re paying $1 per widget. If you increase the order to 1,000 widgets, the total wholesale price might fall to $800. You’re now only paying 80 cents per unit. This allows you to generate higher profits from each sale – without charging customers more.
However, price alone is not the only criterion to consider when selecting a wholesale partner. COVID-19 has helped highlight the importance of speed and availability. The pandemic disrupted supply chains around the world, resulting in shipping delays and stock-outs. Today, there are likely many business owners who will now gladly pay a premium for guaranteed, on-time delivery. Another strategy involves minimizing the risk by buying the same product from multiple sources (in case one can’t deliver).
When you find a distributor that meets your criteria, it is important to remain in good standing with them. Forging stronger wholesale partnerships is one of the best ways to keep the supplies coming. If you work together long enough, you might eventually qualify for even better discounts.
Technically, no. Anyone can buy at wholesale rates. It’s just that the average consumer rarely has a need for 500 hammers.
However, wholesale licenses exist. As a small business owner, it’s a good idea to obtain one. That’s because having a resale certificate allows you to avoid paying sales tax on any items you intend on selling in the future. While not an official requirement, a wholesale license can indirectly reduce the per-unit cost of any bulk items purchased.
To learn more about how our POS solutions can help save time, reduce costs, and simplify inventory management, request a free personalized demo today.
This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.