Buying wholesale can be a good choice for scaling your business operations while simplifying the inventory sourcing process. Ordering in bulk also reduces the price of each unit, thereby increasing your profit potential.
But wholesale purchases still require a large amount of capital. And once you invest that amount, you can’t earn it back until you’ve cleared a significant portion of the inventory you just acquired.
If this and similar fears plague your mind when you consider wholesale buying and selling, you’ve come to the right place.
In this guide, we share ten tips to help you make better decisions when buying wholesale products.
1. Confirm Reliability of Suppliers
Whether you use your business networks, check customer testimonials, or ask for direct referrals, make sure you confirm supplier trustworthiness before purchasing anything or signing a contract.
Do not hesitate to reach out to other wholesale businesses in your niche and inquire about their experience with a particular supplier. It should not be difficult to find entities that will vouch for or warn you against this or that company.
Your professional network can give you precious insight into your industry that no amount of research can. You can gather helpful information about parties you can trust, and help you learn ways to optimize the ordering process and avoid exploitative contracts.
A reliable supplier should have retail-ready inventory you can access easily. Their terms must be clearly outlined and beneficial to both parties. Ask as many questions as you want and do your due diligence before you finalize an agreement with a supplier.
2. Compare Prices and Profit Margins
Pricing must take center stage when buying wholesale products. The lower the price at which you purchase inventory, the higher the profit margin you can get after the sale.
Most wholesale suppliers provide good-quality products at low prices that sell very well, even with high price markups. But the competition for such deals is fierce, which is why you must invest a good amount of time looking for reliable suppliers that offer the most competitive prices.
Do not fall for suppliers trying to offload a bad shipment of products for unbelievably low prices. Again, do your due diligence before you purchase anything, and make sure you are getting items that you can market and sell.
3. Consider Your Budget
Setting a strict budget can help narrow down your list of suppliers and limit how much you can or should order.
Your budget should take into account the cost of the products, storage, warehousing, employee expenses, packaging, logistics, and all other operational expenses. Then consider the selling price you need to set to recoup your investment. These calculations will give you a set price you should order the wholesale products.
4. Keep an Eye On Industry Trends
Consumer buying practices, as well as manufacturer production lines, are constantly evolving. Both can leave a reseller or retailer in a bind and with a stagnant inventory that has suddenly become obsolete.
While it is difficult to predict such changes, keeping your ears tuned for trends in your niche can help you maintain a profitable ordering strategy with few hiccups. Trend data can save you from locking up all your capital in high-risk inventory.
5. Get the Necessary Licenses
Business license, EIN, tax ID, reseller’s license—there are certain things you need to register for before you can start purchasing wholesale products. These licenses and certificates will significantly reduce your tax liabilities and establish your credibility.
These are mandatory requirements so you must acquire them before you can begin your business operations.
6. Consider Your Storage Capacity
Your storage space and its capacity will also determine the number of products you can order. For example, you need a larger warehouse if you’re buying electronics in bulk, than if you were buying jewelry in bulk.
Remember that your inventory storage space must be entirely separate from the allotted areas for your inventory reception, office, packaging, and delivery stations.
7. Ask For Trial Orders or Samples
Some wholesale companies offer trial orders or sample orders in smaller quantities. This will give you firsthand experience with their ordering process, lead time, and billing structure. A trial will give you an idea of what to expect when working with a supplier and the type of service they provide.
Bringing in a small number of items will also help you plan your ordering structure.
8. Account For Shipping Lead Time and Costs
Some business owners take shipping and logistics for granted, which is a huge mistake.
The shipping process can significantly affect your operations, and you must consider it closely before you partner with a supplier. Shipping costs directly affect your pricing strategy, and the time it takes to ship products will dictate the efficiency of your operations and inventory restocking strategy.
9. Streamline Your Ordering Process
Bulk orders can save you a ton of money on shipping. We suggest ordering as many products as possible from one supplier to streamline your operations.
Take a look at your supplier list and find the one with the largest and most diverse inventory. Ordering a good portion of your inventory from a single supplier will simplify logistics and maximize efficiency.
Have a list of alternate suppliers ready if some orders fall through or if you can’t get enough inventory.
10. Read the Contract Carefully
Before you sign any agreement or contract with a supplier, make sure to nail down terms like minimum order requirement, return policy, delivery delays, etc. You can also negotiate some terms to better suit your business.
Review all the clauses and terms in the contract. A healthy partnership means both parties benefit from the agreement—do not hesitate to ask any questions you might have or to reconsider the offer on the table.
This list of tips will help you analyze every potential supplier and approach each buying decision with all the information you need. You’re now ready to attack the buying process fully prepared, with an eye toward the best deals for your business.
We wish you the best of luck!