A key step in starting a retail business is finding a source that can provide products to sell. For most business owners, this will be a wholesaler. Wholesalers are go-betweens who buy products from the manufacturer and resell them to retailers (you), who then resell them to the end user.
Before beginning your search for a wholesaler, you need to understand the different types.
Factory-authorized wholesalers are those to which a manufacturer has given certain exclusive rights to sell its product. Authorization requires jumping through a lot of hoops, so authorized wholesalers are typically the most reliable source.
Meanwhile, drop shippers will ship product from their warehouse straight to your customers. Many e-commerce retailers use drop shipping. Since you’re not paying to ship the product to your warehouse, the overhead to then store it, and the costs to ship it again when a customer buys it, you save on inventory, labor, and warehousing. In fact, you don’t even pay for the product until a customer buys it. Because drop shippers handle storage and shipping, they charge more than other wholesalers.
Liquidators sell products from all types of manufacturers–products from companies that are going out of business, closeouts or discontinued items, even damaged goods. Liquidators can be a good source of low-priced products, if you know exactly what you’re getting. (See “How Liquidators Can Benefit Your Business” for more on this option.)
Most wholesalers require very large minimum orders, which is a problem for small startups that don’t need hundreds of thousands of dollars worth of product. There are, however, light bulk wholesalers that sell smaller lots, with minimum orders as low as $500. But even large volume suppliers may be willing to sell a “mixed” order. This means you buy a minimum amount (say, $10,000), but instead of purchasing only one type of product, you can mix $1,000 worth of one item, $1,000 worth of another, and so on.
What about buying directly from the manufacturer? In most cases this isn’t an option for startups. Even manufacturers that do sell direct typically require very large minimum orders. Small manufacturers have smaller minimums, but are less able to meet sudden increases in demand and more likely to go out of business.
Network with people in your industry, read industry trade publications, and look at the suppliers that advertise in those publications. You’ll get a good idea of what type of source most companies in your industry use.
Searching for Wholesalers
The best way to find wholesale suppliers is through the manufacturers of the products you want to sell. If you don’t know the manufacturer, look at the product box or actual product for the manufacturer’s name, or ask a retailer who sells it. The Thomas Register lists contact information for thousands of North American manufacturers, as well as company Web sites and catalogs. If the company’s site doesn’t list its wholesalers, contact its sales department and ask for a list.
You can also find suppliers through industry contacts, such as retailers who aren’t in your local market, members of your trade association, and members of your offline and online networking groups. Check out trade publications, Web sites, and newsletters; they will have ads from wholesalers and manufacturers in your industry.
Worldwide Brands has a comprehensive database of fully verified suppliers, including drop shippers, wholesalers, liquidators, and importers. You must be a member to access the database, but if you don’t want to buy a membership, you can still find a wealth of free information and links about product sourcing on the site.
Many startups search for wholesalers on the Internet, but this can be risky. Online scam artists promote themselves as wholesalers when in fact they’re really just middlemen. They then buy products from legitimate wholesalers, mark them up, and sell them to naïve entrepreneurs. Warning signs that a wholesaler may be a scam artist include charging you fees, failing to ask for your tax ID number or resale certificate, or failing to list the company’s physical contact information. If in doubt, contact the Better Business Bureau, do a Google search for complaints, and ask others in your industry if they know the company.
Choosing a Wholesaler
Once you’ve found some options, it’s time to narrow them down. Research online and talk to references and others in your industry to get answers to these questions:
- How stable is the company? How long have they been in business? What is their reputation?
- What are their shipping options and costs?
- What type of customer service do they offer?
- What type of terms do they offer?
- What is their return policy?
- How helpful is their Web site or online buying system?
- What are their hours?
- What are their minimum order requirements?
- What are their wholesale unit costs?
Answering some of these will require contacting the supplier directly. See “Convincing A Vendor to Do Business with You” for more on this important step.
Karen Axelton is Chief Content Officer at GrowBiz Media (www.growbizmedia.com), a content and consulting company that helps entrepreneurs start and grow their businesses.