What Online Store Model is Right for You? Pt 2: Sell Wholesale Products

August 12, 2014 in Blog, How to sell online.

Thanks to the Internet, you can make money in ways you never could before in the e-commerce sector and even hit the big time if you’re lucky. Selling products through wholesaling is one of those ways.

This sales model isn’t just being used by big businesses anymore. Now just about anyone can harness the power of the net and develop their own online shop through which endless opportunities for profit awaits.

While there are other ways to sell online, in today’s post we’ll look at the world of wholesale products and whether or not it’s the right approach for you.

Is Wholesaling the Right Online Store Model For You?

Instead of creating your own products by hand or hiring a manufacturer to make your products for you, wholesaling involves selling other people’s products. It’s a pretty straightforward selling process, which basically just involves buying your products from a supplier or middleman at a wholesale price point then selling them at a marked up price to make a profit.

This online store model is different than selling your own products – whether made by yourself or a manufacturer – because the product belongs to someone else and is most likely being sold by others too. Since the products in this selling model are already being sold on the market, you already know that it’s in demand. Since other people are already buying them, this a relatively low-risk scenario.

Selling wholesale products is a great option if you’re looking to get your online store up and running rather quickly and want to keep your options open as far as the types of products and brands you want to sell. It’s also an ideal option if you don’t have the time or know-how to create your own products or don’t necessarily want to invest in the huge inventory that manufacturers would typically require when they jump onboard.

What Will You Be Selling?

Choosing what to sell is one of the first steps you’ll need to take when hopping aboard the wholesale train. What you choose to sell and how you plan to get these products can make or break your online business.

While it’s great if you can sell products that you’re already familiar with, if you don’t, you’ll need to do a little research first. Obviously, the product needs to be in demand, but not so much so that your competition will leave you in the dust. Since wholesale products are already being sold elsewhere, you’ll start out with fairly solid footing knowing that the potential for healthy sales is quite good.

Once you’ve zeroed in on a few products you’re interested in selling, you’ll want to look at factors such as the the going retail price, wholesale prices to acquire them, demographics more likely to purchase these products, and so forth.

Let’s say you want to start selling sterling silver jewelry. Start by looking at the latest trends in these pieces. What’s in style at the moment? What would you feel comfortable selling through your online store?

Take advantage of certain online tools to determine demand and competition, including the Google Keyword Tool or Google Trends. These tools are a cinch to use, and give you incredible insight into what products are actively being searched for, how much competition you’re up against, and where these products are selling the most. Such information can be invaluable in choosing the right product to sell.

Setting Your Price

Setting Your PriceYou’re taking up a wholesale business online in order to make a profit, right? Obviously. So setting the right price is critical to make sure you remain competitive while still offering some value to your customers. When selling wholesale items, it’s all about the markup when it comes to setting your price point. A 100-percent markup is typical from wholesale to retail. So, if you buy a product at a wholesale price of $25, you can expect to resell it yourself for about $50 to make a reasonable profit.

One of the great things about the wholesale model is that you can sell either directly to consumers (which is the common approach when buying wholesale products to resell yourself) or to retailers. Or you can do both! This will give you a great opportunity to not only grow your cash flow, but also to get a little extra marketing help from other retailers who may decide to sell your products.

Keep in mind that reselling to retailers is a more advanced approach that requires greater due diligence to determine price points. It often involves working with much larger inventory quantities, as well so this might be something to consider after you’ve been established for some time.

Selling directly to consumers or to retailers will require different price points. The rate you offer to retailers should be lower than what you offer to consumers. After all, retailers are out to make a profit, too.

The Upside to Wholesaling

There are several benefits that make wholesaling an attractive option:

Already Established Brand. Since you’re already selling products that are established in the market, your risk with investing capital in inventory is significantly reduced. Compare this to selling your own products. Brands that are already established and well received by the public mean that you can have more confidence in your product’s salability.

Make More Money While Spending Less. Skipping the middleman and dealing directly with a wholesaler means you can take advantage of rock bottom prices. If you decide to buy in bulk, you’ll typically get to take advantage of further reduced unit prices, since wholesalers charge less per unit with larger orders. By skipping the middleman, you don’t have to worry about any markup fees. Instead, the only one making a buck off of markup fees is you.

Build a Network of Suppliers. By being in contact with a variety of manufacturers, you automatically start to develop a network of suppliers, which will help you to build clout with them. Such rapport can put you in a great position to receive further discounts and first availability on new or up-and-coming products.

Diversify. Starting off small is always a good idea when you’re just starting out in the world of online selling. But once you establish your business, you might want to grow and expand it, which means diversifying to sell more products that are related to your current niche. As your brand gains steam, you can opt to try your hand at other products so long as the demand is there.

The Downside to Wholesaling

No business model is perfect. There are a few drawbacks you should be aware of:

Need for Differentiation. Even though selling an already established product can be advantageous, it can also be a disadvantage. You’re not the only one selling these products. They’re not yours and are being sold by other retailers already – perhaps more successfully. This means you’ve got to work a little harder to stand out from the crowd to convince consumers that they should buy through you instead of your competitors.

Minimum Order Rules. Buying wholesale usually means you’re stocking up large quantities of inventory. Although these minimum order numbers will vary from one manufacturer to the next, you’ll still be left to figure out how and where you’ll house all that inventory.

Price Point Rules. While you are free to set your price tag on the products, this can only be done within parameters that may be set by the brand. Certain brands might not want you to offer discounts on their items, which means you have little flexibility when it comes to sales and offers.

Conclusion

There has never been a better time to sell online than in today’s market. Like anything else, a little homework, careful planning and a solid business model can help you jump into the world of online selling. And that could realistically turn into a viable business.

What online store model do you prefer? Is wholesaling the best option, or are you more apt to sell your own creations? Let me know your thoughts in the comments!

Image sources: epSos.d, Maura Teague

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3 Responses

  1. DriftMgmt
    12 August 2014 at 6:51 pm #

    Does woo offer a wholesale extension for woocommerce?

  2. micel
    17 September 2014 at 11:45 am #

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