30 Nov
When you are ready with your start-up, you need to figure out where you will source your products. Most retailers don’t produce their merchandise; that’s where they reach out to merchandise wholesalers. Wholesalers are a great source of merchandise, and also, they can support you along the way store as your business grows. This makes them outstanding support in your success.
While starting, wholesale shopping can get tricky, so we will help you and other retailers get through the problems you and others face while buying wholesale.
What is Buying Wholesale?
Buying wholesale, at its core, is purchasing goods directly from a manufacturer or supplier in bulk quantities for resale rather than buying products individually at retail prices. This may conjure up images of cavernous warehouses and forklifts shuttling pallets loaded with cases of merchandise. But buying wholesale has become much more accessible and nuanced today.
On one hand, big-box stores like Costco and Sam’s Club built their business around a wholesale model, requiring paid memberships for customers to access their stores stocked with bulk goods. This enables them to sell products at much lower unit prices compared to traditional retailers. Their scale allows them to buy truckloads of everything from toilet paper to televisions directly from suppliers at steep discounts.
Benefits of Buying Wholesale
Wholesale shopping has become increasingly popular in recent years. More and more consumers are realizing that buying in bulk can save them a tremendous amount of money. But the benefits of wholesale go far beyond the bottom line. There are some less obvious advantages to purchasing wholesale that make it an exceptionally smart strategy for shoppers.
Lower Per-Unit Costs
This one is obvious, but it’s worth stating clearly. When you buy products in bulk at wholesale prices, the per-unit cost is significantly lower. For example, let’s say you need to buy paper towels. At the normal supermarket price, you might pay $1 for each roll. But if you find a wholesaler selling packs of 30 rolls for $20, your per-roll cost is only around 66 cents. The more you buy, the lower that unit cost becomes.
Cost-Efficiency
Lower per-unit costs mean your money simply goes further when buying wholesale. You can stock up on necessities for a fraction of what you’d pay at retail stores. Families and businesses alike can benefit from this cost efficiency. Buying wholesale allows you to get more value out of every dollar you spend.
Convenience
Believe it or not, buying wholesale can also be more convenient than traditional shopping. When you buy products in bulk, one shopping trip can supply you with goods that would normally require several trips to various stores. Fewer shopping trips mean saving time and energy. It’s also convenient to have the items you need always stocked at home or your business. No more running out to the store for one item.
Quality Products
Many wholesalers deal directly with manufacturers, which means they can offer commercial-quality or premium products typically not found in regular retail stores. Wholesale buyers can access higher-end goods for everyday usage, from top-of-the-line electronics to luxury bedding. You get great products for less.
Inventory Options
For businesses, buying wholesale means you can carry a wider variety of inventory to meet diverse customer needs. Carrying bulk inventory also reduces the risk of stock-outs and lost business when a certain product is sold out. Wholesale buying grants flexibility and security for your inventory management.
How to Find and Choose a Wholesaler?
When you’re starting or running a small business, one of the most important decisions you’ll make is finding wholesalers to supply inventory for your store or the products you manufacture or assemble. Selecting the right wholesaler can make or break your business — get it right and you’ll have a steady, affordable supply chain that allows you to focus on sales and customers. Get it wrong and you could face stock shortages, quality control issues, and razor-thin margins.
So how do you go about picking a wholesaler that’s a good match? Here are a few tips on how to find a manufacturing company:
Define Your Needs
First, make a list of everything you’ll require from a wholesaler. This includes:
The types of products you need – electronics, clothing, auto parts, etc. Be as specific as possible.
Order volumes – do you need a few pallets a month or weekly truckloads?
Delivery requirements – to your store, warehouse, or door-to-door to customers?
Payment terms – will you pay on delivery or expect net 30 terms?
Return policy – can you return unused stock? What are the conditions?
Support services – do you need assistance setting up your account or learning to navigate their system?
The more details you can define upfront, the easier it’ll be to find wholesalers who are a good match.
Search Industry Directories
Once you know exactly what you’re looking for, start searching. Industry associations and online directories are good places to find lots of wholesaler options to evaluate. For example, sites like SaleHoo compile detailed lists of wholesalers and let you search by product type, location, minimum orders, and other attributes.
Search for both broad categories like “electronics wholesalers” as well as specific products like “wholesale cell phone distributors.” Make a list of any wholesaler that seems to fit your criteria based on the directory profile.
Ask for Referrals
Your network may provide additional wholesaler options. Ask other business owners in your industry who their suppliers are and if they’d recommend them. Attend trade shows or conferences to meet wholesalers in person and gauge if they’d meet your needs.
Referrals allow you to learn from others’ experiences working with specific wholesalers. Their insight could reveal critical details like how a wholesaler handles shipping problems or return requests.
Research Short List Candidates
Once you have a list of prospective wholesalers, dig deeper into their reputation and capabilities. Search for reviews from past customers to see what their experience was like. Check sites like BBB for any red flags.
Look at the wholesaler’s website in detail – do they stock and ship all the products you need? How efficient and user-friendly is their ordering system? Do they provide customer support if you have issues?
This due diligence will help avoid choosing a wholesaler that looks good on paper but fails to live up to expectations.
Contact to Discuss Your Needs
With a short list of a few promising wholesalers, have detailed conversations to determine if they’re truly fit. Explain your specific business, products required, order volumes, and any unique needs.
Ask lots of questions – are they willing to customize payment terms or support to meet your needs? How do they handle shipping delays or damages? Do they have experience working with businesses like yours?
A good wholesaler will listen to your needs and describe how they can accommodate them. Be wary of any who make vague promises without details.
Order Samples
Before fully committing, place a small trial order with one or two top contenders. Test out their ordering process, delivery speed, product quality, and customer service when you have questions or issues.
This upfront investment of time and a little money could protect you from major headaches down the road if you discover the wholesaler isn’t able to deliver on their promises.
Do I Need a Wholesale License to Buy Wholesale Products?
The short answer is: that it depends on the type of wholesale distributor. Wholesale licensing requirements vary by location and product category. However, in many cases, small businesses and individuals can access wholesale pricing and inventory without needing a special license.
What is a Wholesale License?
A wholesale license or resale certificate is a formal business license that allows the holder to purchase goods wholesale with the intent to resell them. Wholesale licenses exempt businesses from certain sales taxes, because it is assumed they will collect and remit those taxes when they sell the items at retail.
Wholesale licenses are typically required for food retailers like grocery stores, convenience stores, and restaurants. They may also be required for resellers of regulated products like alcohol, tobacco, firearms, and gasoline. Requirements vary widely by state and industry.
Also Read: A Guide to Implementing Penetration Pricing
When is a Wholesale License Required?
In some cases, wholesalers do require resellers to provide a valid resale certificate or wholesale license number before they will approve a wholesale account. This helps them verify the buyer’s intent to resell.
However, many wholesalers – especially those selling less regulated items like clothing, home goods, toys, craft supplies, etc. – do not require a license. They may only require basic business identification like a tax ID number.
So if you are unsure, simply contact the wholesaler and ask about their licensing policies before assuming one is needed. Many are happy to work with small businesses, even home-based ones, without strict reseller requirements.
Do Your Research
The first step is understanding the requirements for a wholesale license in your state and municipality. Laws vary, so you’ll need to check the specific regulations where your business is located. Some key things to research:
- What are the fees for applying? This could range from $25 to several hundred dollars.
- Is a surety bond required? Some states require wholesalers to purchase a bond to operate. This provides consumer protection if the wholesaler goes out of business.
- Are special business licenses or zoning permits needed? For example, if you’ll be selling food or alcohol.
- Does your state have special wholesale laws for certain products? Auto parts and scrap metal often have additional licensing rules.
Thorough research on the front end will ensure you submit a complete application that meets all requirements.
Choose a Business Structure
Wholesale licenses are typically issued to registered businesses, not individuals. So you’ll need to choose a formal business structure before applying. Common options include:
Sole proprietorship – Simplest option for small operators. However, liability protection is limited.
Partnership – Allows multiple owners to share resources and liability. Requires a partnership agreement.
Limited Liability Company (LLC) – Provides personal liability protection for owners. More flexibility than a corporation. A popular choice for small businesses.
Corporation – Most complex but offers the greatest liability protection for owners. Requires more legal paperwork.
Consult with an accountant or attorney to decide which structure best fits your wholesale venture.
Complete the License Application
Now comes the paperwork. While tedious, carefully completing your state’s wholesale license application is crucial. Typical required information includes:
- Business name, address, contact details
- Ownership/management structure
- Tax ID numbers
- Product types you intend to sell
- Projected annual sales
- Bonding documentation (if required)
- Zoning approvals (if required)
- Licensing fees
It can take 2-6 weeks (or longer) for a wholesale license application to be processed and approved. Be sure to submit your paperwork several months in advance of when you want to start wholesale operations.
As your business grows, another key step is automating processes with the right technology. That’s where a quality POS system like Hana Retail comes in. Their integrated solution allows you to seamlessly manage your entire retail operation from one central dashboard. You can place wholesale orders, receive inventory, track sales, and get powerful reporting. It takes the guesswork out of reordering the right amounts at the right times.
