Running a wholesale business requires a good amount of capital upfront, but not as much as other business models like opening a restaurant. Wholesaling can also be scaled quickly, once you finalize your online store and establish strong connections with buyers. It allows for a lot of flexibility in the products you sell and who you sell them to.
Learning how to become a wholesaler and how to run a wholesale distribution business can be overwhelming. There’s paperwork to complete, a website to set up, eCommerce software to select, eCommerce marketing strategy to plan, and customers to keep happy. Knowing how to buy wholesale items also means you know how to find vendors and understand the wholesale definition before taking other actions.
The wholesale market has never offered more opportunities to ambitious individuals than it does today. Thousands of suppliers offer partial and complete goods through wholesale directories and global distributor networks.
Wholesale Products: Process for Buying Wholesale Items
Buying wholesale items is a simple process once you have your priorities figured out. Here is how to find and buy quality wholesale products:
- Perform market research. In the US alone, the wholesale market is growing at about 1.2% per year, contributing to predictable eCommerce growth. You’ll be competing against hundreds of other brands and both B2B vs B2C, so you need a vigorous marketing plan and a clear target audience to build traction.
- Establish a professional brand image upfront. Many suppliers have requirements in place to limit any inexperienced resellers they work with. If you have a professional image from day one, suppliers will be more motivated to work with you. Make sure that you have an account setup with one of the best bank for online transactions, and if required, have gotten an eCommerce business license.
- Decide on a niche. If you don’t yet know what wholesale items to sell, you should pick a category. There are thousands of quality products you can sell, including wholesale meat, wholesale seafood, wholesale dairy, and wholesale produce. Modern customers are heavily discerning in their purchases and won’t buy cheap goods simply for the money savings. Select a niche market and supplier that is as quality as your budget can afford.
- Browse a wholesale directory. This is any website that offers information on wholesale suppliers, their goods, average price, and how to contact them. It’s an easy way to get your foot in the door and start building relationships. Note that the harder a supplier is to get in contact with, the more likely they are to be someone you want to work with because this indicates their products, both existing and new, are in demand. On the other hand, it could mean their customer service is not up to par for your needs. Conduct your own research in these circumstances and only buy quality products with a reasonable wholesale price.
- Obtain your reseller’s permit and/or licensing agreement. A reseller’s permit is required to sell wholesale goods because it shows suppliers that you are a real business. A licensing agreement is similar to a permit. It’s used by suppliers to control the type, amount, and sometimes the market a product is sold in. Generally, licensing agreements apply to products where intellectual property or stiff competition is concerned.
- Attend trade shows and relevant events. There are few better ways to get your wholesale business started than by attending trade shows. This is where suppliers and handmade product creators display their goods and develop sales relationships. Look for owners who offer a low minimum order quantity, or MOQ, and want to work with new resellers.
Now that you’re familiar with how to buy wholesale products, it’s useful to expand your knowledge according to your niche. Let’s look at best practices for buying specific types of wholesale goods.
How to Buy Wholesale Grocery Items
There are numerous ways to buy wholesale grocery items, and your buying approach will depend on what you’re selling. If you’re selling dried, packaged, or dehydrated goods, you can get these great items from hundreds of suppliers online. Wholesale directories make it easy to browse food and beverage industry categories, and you may discover 2022 food trends or related information while you're at it. Make sure that you have the warehousing capabilities to store products like this.
If you want to sell fresh produce or perishable goods wholesale, you’ll need to build a relationship with local farmers and growers. There are dozens of farmers’ markets nationwide that partner with wholesale suppliers. Research what farmers expect of their wholesale relationships beforehand. This helps you get started with professional questions and an appealing offer.
How to Buy Bulk Wholesale Items
Buying wholesale items in bulk is where most wholesalers begin. The MOQs of most suppliers mandate that new products are ordered in bulk; typically 100 units or more. Bulk shipping usually accompanies this approach, as well.
Start by looking for bulk suppliers. This isn’t difficult, as most suppliers understand resellers want bulk goods. This also allows you to pay minimal shipping prices and maximize resale profit. eCommerce shipping costs are calculated using a shipping cost estimator.
Once you’ve found an appealing supplier, ask them what their MOQs and AOQs (average order quantities) are. This will give you a feel for how much you may order from them, and how often. Also, familiarize yourself with what is lead time and inquire about your suppliers’ lead times for delivering products to you.
How to Buy Name Brand Items Wholesale
If you want to stand out from the masses of wholesale businesses more easily, you may be interested in name-brand products. Doing thorough research on the products you want to sell and the companies that supply them is crucial here.
Some wholesale directories offer established, quality products through a wholesale or online marketplace. Websites like eWorldTrade, DHgate, and Tradewheel are some well-known directories. Take your time in researching suppliers and understanding their expectations so you can get off to a good start.
Remember that the more specific and branded products get, the more likely a supplier is to have stringent licensing agreements. Name-brand wholesalers may require you to have a proven selling history or certain monthly volume before they partner with you. Selling name-brand goods can be a lucrative subscription box business model if you’re interested in kitting.
Do I Need a Wholesale License to Buy Wholesale Products?
If you’re wondering, “Do I need a wholesale license to buy wholesale?” The short answer is yes. Different states may call wholesale licenses a reseller’s license, reseller’s permit, a wholesale ID, or something similar.
There are a few reasons wholesale licenses are required for businesses:
- It allows suppliers to know who they’re working with. It’s much harder to control supply and demand when unregistered individuals are buying at random.
- The government requires businesses to adhere to tax laws. If a business isn’t registered on paper, this can be considered tax evasion (among other concerns) and will be punishable by law.
- It encourages positive relationships on both sides of the supply chain. This includes the food supply chain. Getting a license makes you a known business entity. This means both you and your supplier can adjust your workflow to mutually benefit your business outcomes.
The only legal way to buy wholesale without a license is if you’re a consumer. If you’re a customer of a business that resells wholesale goods to the public, this is not a problem. There are hundreds of wholesale businesses that simply import goods and turn them around at a profit.
How to Become a Wholesale Items Buyer
Becoming a wholesale buyer is a relatively inexpensive and fast process, but it does require doing your homework and having enough money. Here’s how to become a registered wholesale buyer:
- Get your employer identification number (EIN). This document shows the government you’re a real company doing business. You can’t begin selling products or hiring employees until you have your EIN, so make this a top priority.
- Acquire a sales license. This legally permits your business to make sales. The fee and application process differs based on where your business operates.
- Obtain your sales tax ID. A sales tax ID will vary state by state but is required for any business. The government approves a business to collect and submit state taxes based on this information.
- Apply for a wholesale license. Each state has slightly different requirements for wholesale resellers. To learn how to get a wholesale license, go to your state’s tax or revenue website and fill out the reseller application. Typically there is a fee associated, so be prepared for that.
Once all of these steps are complete and your application has been approved, you’ve become a registered wholesale buyer! You can now start contacting suppliers, developing relationships, and helping your online business thrive.
How to Buy Wholesale Items Without a Business
When researching how to buy wholesale without a business, there are at least three scenarios you may come across:
- Buying wholesale as a reseller without a sales ID or EIN
- Buying wholesale as a reseller with a sales ID or EIN but no registered business
- Buying wholesale products as a consumer
Each of these circumstances implies different actions and outcomes. In the first scenario, a businessperson is purchasing goods that they sell without the government’s knowledge. In the second scenario, a wholesaler is selling goods with some of the legal paperwork filed but not all. In the third scenario, a customer is buying wholesale goods for their own private use.
The most common (and only legal method) of these three scenarios is the third, buying wholesale products for personal use. You can find businesses that sell wholesale goods to the public through a variety of methods. These include searching through a B2B online marketplaces and online marketplaces, checking local event listings, browsing online forums, and asking friends or family for references.
Here are just a few popular sources of wholesale goods:
- eBay
- Rose Wholesale
- Loffer
- American Freight
- SS Activewear
- Trade shows
- Craft fairs
- Local events
- Farmers’ markets
- Mom and pop shops
How to Buy Wholesale Products for Resale
Knowing how to buy wholesale for resale is nearly the same process as buying general wholesale. There’s paperwork to fill out, retail business relationships to develop, products to find and acquire, and inventory management to practice.
The main difference between buying wholesale goods for your use and buying wholesale for resale is the reselling permits involved. If you work with a great, popular supplier, these companies often have more stringent requirements than up-and-coming suppliers.
Your reselling permit likely includes information about the markets you can sell direct to consumer, what types of products you can sell, and sometimes the volume of products you’re allowed to sell. Make sure prospective suppliers answer all your questions before you sign on as a reseller. The supplier you partner with is a pivotal moment for your online business.
Use the following steps to guide you as you prepare to sell:
- Confirm that your business paperwork has been approved by your state’s governing bodies.
- Review the products you’re selling and confirm supplier contact information.
- Draft or finalize your budget and double-check that sales forecasts are realistic.
- Confirm that your online store, website, or both are prepared for sales.
- Get your B2B marketing or DTC marketing plan in place and start reaching customers.
- Strive for a high fill rate. This means you're able to ship products to customers on time, at all times, without resorting to backordering or having to pre order.
Buying Wholesale Is a Great Deal
Once you have the paperwork completed and a buying process figured out, making wholesale sales becomes rather exciting. You have a wide degree of control over the products you resell and your wholesale marketing plan. Use these steps to start or grow your online business and reach new customers. You can even test them out for a new dropshipping venture.
Frequently Asked Questions About Buying Wholesale Products
If you want to build a wholesale online business, it’s important to have a firm understanding of the products you want to sell. Learn more about buying and selling wholesale with the commonly asked questions here:
How Do You Buy Wholesale?
Buying wholesale is the process of purchasing items in bulk in order to resell them to consumers for profit. The wholesale price for goods is typically cheaper than retail price.
Is It Legal to Buy Wholesale and Resell?
Yes, it is legal to buy wholesale and resell. In order to do so, you must have a wholesale license and a business license that corresponds with your type of company.
For example, if you only sell online, you’ll need an eCommerce business license. If you sell in a brick-and-mortar location, you’ll need a retail license of some kind.
Make sure you also have an employer identification number or federal tax ID. This is how the government tracks your business income and assigns taxes accordingly.
How Do You Qualify to Buy Wholesale?
In order to buy wholesale you must have a wholesale license. This is important for a couple of reasons.
One, it shows manufacturers, retailers, and the government that you’re a lawful dealer of wholesale items. You’re a known entity that’s doing business in an ethical manner.
Two, it reduces and often eliminates sales tax. Most governments treat the expense of a wholesale license as a replacement for sales tax, which eliminates per-unit taxes (which add up quickly).
Is Amazon a Wholesaler?
Amazon is not a wholesale company; they are a B2B and B2C online retail business. Companies that offer goods on Amazon either manufacture their own products, or buy items in bulk from wholesalers and sell them to consumers.
How Do You Buy Wholesale Without a Business License?
To buy wholesale without a business license will require you to purchase items as a consumer; in other words, in a retail environment. You can search for items through B2B online marketplaces, browse online forums, check local event listings, and more. This is also how you can buy wholesale without a tax ID number.
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FAQs
How do wholesalers buy products? ›
Retail wholesalers bulk buy from manufacturers and their network of distributors. Like retailers, they benefit from the advantages of bulk buying. Retail wholesalers then go on to resell to retailers. Merchant wholesalers buy wholesale products directly from manufacturers.
How does buying wholesale and reselling work? ›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.
Is buying items in bulk amounts what wholesalers do? ›Wholesaling is the act of buying goods in bulk from a manufacturer at a discounted price and selling to a retailer for a higher price, for them to repackage and in turn resell in smaller quantities at an even higher price to consumers.
How to buy from a wholesaler without a business? ›- You have the option of purchasing as a reseller without having a Sales ID or EIN.
- The second option is to buy as a reseller with a Sales ID or EIN without having your business registered.
- The third and final option is to buy in bulk as a consumer, i.e., a third party.
What Is Wholesaling or Wholesale Distribution? Wholesalers operate as middlemen between product manufacturers and retailers or other businesses. They make a profit by buying products in bulk at a discount and reselling them in smaller quantities at a higher price to individual retailers.
Can a normal person buy wholesale? ›The only legal way to buy wholesale without a license is if you're a consumer. If you're a customer of a business that resells wholesale goods to the public, this is not a problem. There are hundreds of wholesale businesses that simply import goods and turn them around at a profit.
What products can I buy wholesale and resell? ›- Educational materials, toys, and books. ...
- Candles, fragrance products, and home decor items. ...
- Clothing, shoes, jewelry, and accessories. ...
- Food, especially dried and prepackaged food. ...
- Purses, bags, backpacks, and handbags. ...
- Kitchen materials and auxiliary supplies.
Technically, you don't need any money at all to start wholesaling. Since a wholesaler isn't buying and flipping the property, simply creating a contract and then finding a buyer for that contract, a wholesaler doesn't need to invest any of their own capital into the property.
What percentage should you sell wholesale? ›Set your wholesale price
Apparel retail brands typically aim for a 30% to 50% wholesale profit margin, while direct-to-consumer retailers aim for a profit margin of 55% to 65%. (A margin is sometimes also referred to as “markup percentage.”)
The average retail price increase from a wholesale product is 30-50%, or at least 1.66 multiplied by the wholesale item's cost. The reason for this minimum is that it tends to cover expenses, generate profit, and also draw customers in.
What is wholesale buying price? ›
Wholesale price is the price charged for a product as sold in bulk to large trade or distributor groups as opposed to what is charged to consumers. The wholesale price is the sum of a given product's cost price plus the manufacturer's profit margin.
What is the minimum order for wholesale? ›Minimum Order Quantity refers to the minimum amount that can be ordered from a wholesaler supplier. For example, if you have an MOQ of 100 units or $100, your customers must be able to purchase at least 100 units or spend $100 to be able to buy from you.
What are the benefits of shopping wholesale? ›- Lower costs. As you lower your unit costs with wholesale purchases, related expenses go down. ...
- Better product selection. Wholesale buying gives you a wider product selection to choose from. ...
- Ability to scale up. Wholesale buying lets you scale up your business as it grows.
Buying in bulk saves money per unit, but consumers must be wary of the utility of the extra goods. Although the per-unit price may be low, the overall purchase price is higher than the price of just buying what you need for the week or month.
Is Costco a wholesaler? ›Costco might seem like a wholesaler, but it's actually a retailer since it sells goods directly to customers. Costco is able to use its revenue from membership fees to offset the cost of the goods it procures, leading to lower prices.
What not to do as a wholesaler? ›- Mistake #1: Not Understanding Your Market.
- Mistake #2: Not Understanding Your Buyers.
- Mistake #3: Poor End-to-End Due Diligence.
- Mistake #4: Complacency When It Comes to Your Buyer(s)
- Mistake #5: Getting Too Reliant Upon One Contractor in Fix & Flip.
A wholesaler is a person or company who sells products in bulk to various outlets or retailers for onward sale, either directly or through a middleman. Wholesalers are able to sell their products for a lower price as they are selling in bulk, which reduces the handling time and costs involved.
What is an example of a wholesaler? ›Examples of wholesalers include: Christmas-tree wholesalers who buy from growers and sell to retail outlets. Restaurant food suppliers. Clothing wholesalers who sell to retailers.
How much profit do wholesalers make? ›However, wholesalers generally have a lower profit margin than retailers. The percentage range varies by product, but wholesalers typically earn between 15% and 30% profit, while retailers typically earn between 20% and 50% profit on the wholesale price when selling products to consumers.
What is the profit percentage for wholesale? ›Wholesalers typically have less of a profit margin when selling to retailers. While the percentage range will vary depending on the product, wholesalers usually make between 15% and 30% in profit, while retailers may typically make between 20% and 50% profit on the wholesale price when selling goods to consumers.
What is better wholesale or retail? ›
The wholesale is cheaper because they buy the products in bulk directly from the manufacturer and get large discounts for buying large quantities of goods.
Can I buy directly from manufacturers? ›Depending on the business and type of products, most of the manufacturers won't sell products in small quantities. So, it won't be possible for an individual consumer to buy directly from the manufacturer. In that case, you should go to the distributor (who purchases products in bulk) to buy the product you need.
How to start a business selling wholesale items? ›- Decide what you want to sell.
- Choose a business name and entity.
- Write a business plan.
- Get a wholesale license and other permits.
- Apply for an employer identification number.
- Figure out logistics.
- Expand your product lines and service.
- Increase your marketing efforts.
One way to find suppliers is to first narrow down what you want to sell. Then, research supply companies that offer those products. Going to trade shows, asking for referrals, and joining professional networks are three examples of conventional ways to connect with suppliers.
What is the difference between a resale and a wholesaler? ›Wholesalers and resellers fulfill different roles in the chain of logistics that stretches from producer to consumer. A wholesaler buys goods from their creator and sells them to the reseller, who then turns around and sells the goods to the general public.
Can you buy and resell items as a business? ›Generally, it's not illegal to resell a product. Restrictions normally come from the platform themselves and not the manufacturer of the company. The truth is that most brands are safe to resell. You're just not allowed to claim “brand new” or “straight from the manufacturer” because that just wouldn't be true.
What is the 70% rule in wholesaling? ›Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.
Is wholesaling good for beginners? ›Anyone can start doing it and make money at it. It's especially attractive to new investors since you can get started with very little upfront capital. However, it will take time to make money as a wholesaler, and you may make some mistakes in the beginning.
Is wholesaling really that easy? ›Running a wholesaling business can be challenging because you must be able to identify properties being sold for well under market value, negotiate deals with sellers, and target cash buyers who are willing to purchase those properties.
What is the formula for wholesale price? ›Wholesale Price = Total Cost Price + Profit Margin
Note: Variable cost is the fluctuating cost of the product that changes as per the result of the change in demand in the market.
What is the formula for calculating wholesale price? ›
Sometimes, a retail price that offers a comfortable profit becomes too low for wholesale pricing due to the additional costs involved. After all, the most common way to calculate your wholesale price is by simply dividing your retail price by half.
Is 40% a good wholesale discount? ›If possible, we recommend setting a wholesale price of around 40% off the retail price. This allows both you and your wholesale customers to have up to 30% off the retail price that you can use for promotional activities.
What is an example of a wholesale price? ›The goal of wholesale pricing is to make a profit by selling consumer goods at a higher price than it costs to manufacture them. For example, if making one product costs you $10 in labor and materials, you could set a wholesale price of $20, giving you a $10 per unit gross profit.
How much profit should you make on a product? ›But in general, a healthy profit margin for a small business tends to range anywhere between 7% to 10%. Keep in mind, though, that certain businesses may see lower margins, such as retail or food-related companies.
How do you determine the price of a product? ›- Add up variable costs per product. Variable costs are directly tied to the product. ...
- Add in your profit margin. ...
- Factor in fixed costs. ...
- Test and adjust accordingly. ...
- Understand common pricing strategies in your industry. ...
- Conduct market research. ...
- Experiment with pricing. ...
- Focus on long-term business profit.
Also called demand pricing, value-based wholesale pricing is determined by the value of your products. More precisely, it's based on what you expect is your customers' perceived value of your products.
How do small business get their products? ›The products are often obtained from reliable retail suppliers and manufacturers at a reasonable price. The method includes researching, calculating the product's price and acquisition costs, vetting reputable suppliers, and negotiating to get the best deals.
What is short for wholesale price? ›WSP (wholesale price) – this indicates that the entry in the PriceValue column will be a wholesale price. DMRP (deemed minimum retail price) – this indicates that the entry in the PriceValue column will be a retail price.
What is the minimum quantity to order? ›A Minimum Order Quantity is the minimum amount of product that a supplier is willing to sell in a single order. Typically set by suppliers or manufacturers, the purpose of the MOQ is to ensure the supplier can make a profit on the sale and justify the costs associated with producing or delivering the product.
What is a minimum order amount? ›Minimum Order Value is the minimum amount that you require the customers to spend on your website before you are able to ship their products for free or at an additional price.
What is minimum order quantity price? ›
Minimum order quantity (MOQ) is the smallest number of units a business will sell to a single customer in a single order. There's no one number that's the right MOQ. Each business has to figure out its own MOQ based on time-sensitive dependencies like customer demand, inventory holding costs, and the break-even point.
What are the disadvantages of wholesaling? ›Wholesaling cons
Depending on your cost of goods, your profits could be substantially impacted. Another potential con is that you have less control over the pricing of your goods. While you can set an MSRP, some retailers, such as Walmart or Target, routinely sell items at a lower price as part of their business model.
The wholesale price is lower than the retail price for a few reasons: Bulk purchases: Wholesalers sell bulk items to retailers for a lower cost to create a profit for their business. By ensuring a bulk order (often with a minimum purchase), wholesalers can reduce shipping and handling times and the overall cost.
What is the goal of wholesale business? ›- Sell anytime while driving cost savings. ...
- Gain strategic sales focus. ...
- Extend your reach to new retail customers. ...
- Support & expand existing B2B relationships. ...
- Drive adoption of your platform. ...
- Improve customer experience & satisfaction.
When you buy an item in bulk, you're almost always saving money on each use of that product. This might be a small difference per use – perhaps only a few pennies – but if it's an item you use frequently, those pennies add up rapidly. If you save 10 cents on something you use daily, that's $36.50 in savings per year.
How does a product get from a manufacturer to a wholesaler? ›In this case, wholesalers buy in bulk from manufacturers and sell in units to retailers who end up selling it to end customers. Here the manufacturers work with an agent or distributor who assists in selling goods to wholesalers. The wholesaler then sells to retailers, who eventually sell to end customers.
Do wholesalers sell directly to consumers? ›A wholesaler is a person or company who sells products in bulk to various outlets or retailers for onward sale, either directly or through a middleman. Wholesalers are able to sell their products for a lower price as they are selling in bulk, which reduces the handling time and costs involved.
Where do wholesalers buy their stock from? ›They buy from manufacturers in such large quantities that they get a significant discount, which they can then pass on to retailers. They normally have a product license, and as such, their products are not available to regular customers—or at least not at the same price points they offer to their retailer partners.
What is minimum buy from wholesale? ›Minimum order quantity, or MOQ, is the lowest number of products a buyer can purchase from a wholesaler at one time. Sometimes this is also referred to as case size. When you see a minimum case size on a product page, that means you must buy multiples of that number in order to purchase from that wholesaler.
What is an example of wholesaling? ›Wholesale Merchants: They sell to retailers and are common in hardware, pharmaceuticals, clothes, and seafood businesses. Industrial Merchants: They sell to producers and are common in consumer durables, engineering, machinery, and equipment businesses.
What is a wholesale price? ›
Wholesale price is the price charged for a product as sold in bulk to large trade or distributor groups as opposed to what is charged to consumers.
What is wholesale strategy? ›A wholesale strategy is a business model in which a company sells products to retailers who then resell them to the public. This strategy involves selling large quantities of goods at a discounted rate to retailers and distributors, who then add their own markup to the products and sell them to consumers.
What do wholesalers buyers do? ›A wholesale buyer is a person who is responsible for researching brands to find out what they are selling and what their prices are. Once the wholesale buyer has completed the initial analysis, they will meet with brands to view products and gather details, and then place a bulk order.
What are the cons of wholesalers? ›Wholesaling cons
Depending on your cost of goods, your profits could be substantially impacted. Another potential con is that you have less control over the pricing of your goods. While you can set an MSRP, some retailers, such as Walmart or Target, routinely sell items at a lower price as part of their business model.
- eWorldTrade. Famous For: Millions of wholesalers from all around the world. ...
- Tundra. Famous for: Free shipping on a range of products. ...
- Alibaba. Famous for: Range of products and best pricing. ...
- Etsy. Famous for: Source of handmade items and vintage products. ...
- eBay. Famous for: Low rates for shipments. ...
- DHGate. ...
- Faire. ...
- Costco.
The biggest wholesale company in America is Sysco, which distributes several products which include tabletop items, kitchen equipment and food products among others. The company has more than 600,000 clients.
What percentage do wholesalers get? ›Set your wholesale price
Apparel retail brands typically aim for a 30% to 50% wholesale profit margin, while direct-to-consumer retailers aim for a profit margin of 55% to 65%. (A margin is sometimes also referred to as “markup percentage.”)