How to Source Wholesale Products
To source wholesale products you need to:
- Decide what you are going to sell
- Research supplier types (manufacturer, distributor, importer or liquidator)
- Compare quality, return and payment policies and pricing.
- Do your due diligence before signing a contract with your chosen wholesaler.
Manufacturers vs. Wholesale Suppliers
The key to successfully running an e-commerce shop is having the right inventory that will attract the most buyers. In addition to figuring out what your customers want, you also need to be able to price your items competitively while maintaining high profit margins.
When it comes to acquiring your online store’s inventory, you have the option of going to manufacturers, distributors or to wholesale suppliers, and each of these product sources has its own benefits and drawbacks. What most new sellers find, however, is that wholesale suppliers can make it easier and more affordable to get started. Most of the time, manufacturers sell to distributors, who then sell to wholesale suppliers, who sell to a retailer.
Sourcing Products from Manufacturers
Manufacturers are responsible for producing the products that you will eventually sell in your e-commerce shop. If you can make purchases directly from manufacturers, you could gain access to the lowest prices on the items that you are searching for. After all, the fewer middlemen who take a cut of your earnings, the lower your costs will be, and the higher your profit margins can be. This is especially true if you’re pricing your products at competitive rates and generating a lot of traffic to your shop.
Working with manufacturers is great for your profits, but even though you can sometimes set up contracts with manufacturers to purchase directly from them, you will typically find that they will prefer producing large orders. They often have exclusive arrangements with distributors.
It is certainly a good idea to begin at the actual source for your products, as you never know if you can set up an agreement that will give you access to the inventory that you need at a great price. In the case of branded products, going to the manufacturer and asking them about their minimum order requirements is recommended. However, when you are starting out and your shop and budget are still quite small, a manufacturer may not sell to you directly.
Sourcing Products from Distributors
Sometimes you won’t be able to work directly with a manufacturer, as some manufacturers will only sell their products through established distribution channels, rather than directly to sellers or consumers.
In this case, all you have to do is ask the manufacturer to provide you with a list of their distributors and then contact those distributors to set up contracts with them. The good thing about taking this route is that you’ll access the most reputable distributors, so you won’t waste your time pursuing unreliable or poor quality sources for your inventory.
Sourcing Products from Wholesalers
When you are unable to forge a relationship directly with a manufacturer, or distributor, you may need to go through a wholesaler who can also give you access to the inventory that you need at low prices.
A wholesaler will basically bridge the gap between a manufacturer and you, the customer. You can locate wholesalers that will cater to the specific niche that you are selling in, or you can instead find wholesalers that will provide you with a wide range of product options.
As opposed to buying items at retail prices and reselling them, most e-commerce shop owners prefer sourcing wholesale products for their stores because they can purchase the items in bulk at a discounted rate. When you are not forced to pay the retail prices on your inventory, you will be able to increase your profits because you can still sell them at a competitive price while enjoying a solid margin on every sale.
Those who are first starting off will benefit from working with smaller wholesalers, but you should be prepared to pay higher prices until your inventory volume expands. As your online business grows, you will be able to move on to larger wholesalers, purchase more inventory, and enjoy lower prices
How to Find the Right Wholesalers for Your Business
According to the U.S. Small Business Administration, there are roughly 300,000 wholesale distribution companies in the United States alone, so it is best to take your time when it comes to researching your options until you find the right supplier for your needs and budget.1 If you want to see the inventory up close, you may want to attend annual wholesale conventions, such as the Gem Show or the Gift Show.
Many online sellers are also looking to China to source products at the most affordable prices. You can find these suppliers by searching for them on B2B platforms, such as Made-in-China.com, Global Sources, and Alibaba. You’ll find thousands of suppliers, and you can filter your options by those who are accredited and verified.2
Here are a few of the best ways to start your search for the wholesaler that will perfectly match your online shop’s current needs:
- A good place to start when it comes to finding an industry-specific wholesaler is the internet. You can narrow your search by the products that you want to sell in your shop, and you can also search for wholesalers that are willing to double as drop shipping suppliers. Whether you are on the lookout for local or international wholesalers, a simple internet search can yield results that you can work with.
- Another option would be to browse through wholesale directories like the Wholesale Network or Wholesale Central. This step might help you find the ideal suppliers in a shorter amount of time.
- Reading through trade magazines, and focusing in on their classifieds and ads for wholesalers within your industry, can also yield good results.
- Consider attending some trade shows, as they are good places to find wholesalers who are looking for shop owners just like you to purchase their products. You might even be able to cut a deal while you are at the show. Otherwise, you can jot down some options to perform additional research at your office later on.
- If you are planning on selling brand name items in your shop, contacting the product manufacturers to ask them if they sell wholesale could be just what you need to get the lowest prices possible. If they won’t sell to you directly, you can ask them to refer you to one of their distributors or wholesalers who will work with you.
Beware of Fake Wholesalers
There are plenty of fake wholesalers out there who do their best to appear as though they are legitimate suppliers. Therefore, you need to be aware of the risks of running into a wholesale middleman during your internet search. These scammers could cheat you out of your money by getting in between your business and the real wholesaler for your goods. They will take your order after marking up the price for your items, and they will forward your order to the actual supplier. This means that you pay more than you should and your profit margins will be smaller than they should be.
A few of the signs that a wholesaler is not legitimate include:
- The wholesaler wants to charge you a monthly fee or a sign-up fee.
- You aren’t asked for your sales tax ID.
- The supplier’s website doesn’t provide you with their complete contact info.
- You receive claims regarding just how much money you will be able to make.
- The wholesaler attempts to sell you additional services, or they offer you a deal that just sounds too good to ever be true.
What to Do Once You’ve Found a Wholesale Distributor
Once you think that you have found the right wholesaler for your business, your work isn’t over just yet. To be sure you are making the best decision, you can ask the wholesaler for references, and you can also do some additional research online to see if you can find any reviews or complaints from fellow business owners who have worked with them. Online forums for small business owners are also a good place to get advice from fellow online shop owners. In these online communities, you can post your questions and hear from many different businesses from all over the world.
Also be sure to ask plenty of questions to be absolutely sure you know exactly what you are getting. For example, ask about order processing times, return policies, and discounts based on volume. Order sample items to see exactly what your customers will receive, and to ensure everything is up to your standards for quality.
Don’t be afraid to negotiate the terms of your contract prior to signing. Details like the minimum order quantity, pricing terms, and delivery schedule can all be discussed if they do not work for you. And before signing, you can have your attorney review the contract to be sure you didn’t miss anything.
Diving into the International Marketplace
The great thing about selling online is the fact that you can eventually expand into the international marketplace. In the same way that you can find local wholesalers, you can also locate reliable and reputable drop shipping wholesalers from around the globe to ensure any international orders are fulfilled in a timely fashion.
Once you start making sales, you can then have your profits converted and transferred directly into your local bank account with the help of OFX’s online seller account. While online marketplaces may charge up to 3.9% to have your funds transferred from overseas, OFX can help you save up to 75% on cross-border payments.* If you’re paying overseas suppliers, you can use our risk management tools to protect your business from currency fluctuations.
Be Savvy When Working with Wholesalers
With the right strategy in place, you can more easily locate the ideal suppliers in order to source wholesale products at low prices. Working with multiple wholesalers will cover you in case one supplier raises its prices or goes out of business. If you do work with more than one wholesaler, though, collaborate with suppliers who can deliver consistent quality to all of your customers, regardless of what they order or where the products are coming from. Ultimately, the goal will be to keep your business going strong, and the right partnerships with wholesalers will set you up for success.
Ready to sell more overseas? Get in touch with one of our online selling specialists who can help you take you business to the next level.
*Average savings based on published rates for cross border payments by PayPal.com between 26.10.16 – 8.3.17. Quoted savings are not indicative of future savings.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.