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The "Holy Grail Of Wholesale!"
By: Robert C. Potter
Like the legendary search for the Holy Grail, the cup that Jesus drank from, the same "holy crusade" goes on today by veteran and newly anointed business owners for the perfect wholesale, surplus, and drop-shipping resource. They believe that divine intervention will lead them to suppliers that can defeat the economic laws of supply and demand.
There are more than a few people who try to build an enterprise based on the premise that they will able to purchase any popular retail merchandise for their new business, or auction, at either below wholesale prices, or "pennies on the wholesale dollar." Consider the following offers and product requests:
"Where can I find Seven Jeans for thirty dollars a pair?"
"Where can I find Diesel Jeans for twenty dollars a pair?"
"Willing to pay 50.00 per bag for Louis Vuitton handbags!"
"Sony VAIO Laptops Only 800.00!"
If you think that any of the above mentioned product requests, or offers, are not all that unrealistic, then you truly are a "crusader!" In this article I want to discuss three of the more sought after sources of supply, and the "Pros & Cons" of each. I will also clear up some of the misconceptions that seem to surround the wholesale, surplus, and drop-shipping arena..
Wholesalers: Typically, one of the better places to purchase products for your new found venture. Most true wholesalers will require that you have a "Certificate Of Resale" before you can purchase from them. A Certificate Of Resale, or "Tax & Use Certificate," is not hard to obtain, and costs anywhere from five to twenty dollars depending on the state you live in.
Some states do not require that you even have one. You can obtain a certificate from your State Department of Revenue. For a complete listing of revenue offices in all fifty states, as well as requirements for each, please visit the "State Exemption And Resale Certificates" link below...
State Exemption and Resale Certificates
Depending on the state in which you reside, Resale Cerfiicates can take as little as one day to obtain. All you have to do is go to the state revenue office, fill out the paperwork, and they will issue your number on the spot. Other states might require more time, and the use of a "mail in" form. You do not have to Incorporate in order to obtain a Resale Certificate.
You need to be a Sole Proprietor (at the very least) and have an address where you plan to conduct business. Once you have your number, you will be able to open a business checking account at most local banks. Most do not require more than a few hundred dollars to get started.
Wholesalers will require a minimum purchase price
that can range anywhere from 100 to 1000 dollars.
A true wholesaler is usually one step away
from the original source of the product. For instance, a
manufacturer produces and owns blue widgets.
They will then employ either a sales representatives to get the product into the market, or they will assign a wholesale distributor the exclusive rights to carry and sell their product. Some companies are import wholesalers. While they do not necessarily manufacture a product, they will import products from other manufacturers overseas. A great example of such an Importer - Wholesaler is the Bnfusa.com:
There are a few ways to find wholesale products. Just about every product that is in retail distribution today chain will usually have a dedicated trade association, organization, or trade publication attached to it. You can find such trade information with the help of the following directory information:
National Association Of Wholesale Distributors
The National Association Of Wholesale Distributors link, listed above, will lead you to a their associate members webpage. The listed trade associations range anywhere from Advertising to Woodworking. Some of their member will have their wholesale distributor network listed within the site. Others, you will have to contact them, or join if you want further information about a particular industry. If you want to purchase their membership list of wholesalers, (separate from the association listings), you will have to get in touch with them to check out the kinds of wholesale company listings they are offering, and the prices involved. Other good sources that require a little legwork, and not much in terms of expenses are...
Encyclopedia Of Associations
By: The Gale Group
The Encyclopedia Of Associations lists over 100,000 different for profit, and non-profit American organizations. If you cannot find what you are looking for from the National Association Of Wholesale Distributors in terms of trade associations, then this is the directory for you. However, you will have to go to your library to find this research gem. You can usually find it in the reference section of any large University, or Public Libray.
Trade magazines are another good source. Publist.com allows you to: "Search our database of over 150,000 magazines, journals, newsletters, & other periodicals. Find FREE in-depth information on familiar and hard-to-find publications from around the world, representing thousands of topics." The only downside of this site is that you have to be part of a particular industry before they will give you a free subscription.
Tradepub.com allows you to subscribe to trade periodicals from their web site for FREE! No hidden trial offers to qualify. Even though there is no hidden trial offers, I think that same situation applies here, as with Publist.com. You have to be associated with the industry you want to subscribe to. Nonetheless, it is a good source for finding trade information.
If you are looking for industrial product manufacturers, the Thomas Regional directory is for you. The Thomas Regional directory, will give you access to services from over "550,000 industrial distributors, manufacturers, and service companies." The Thomas Regional will help you find suppliers in your own state or region. Registration is required, and you can use the directory for FREE! Other free online sources of wholesale information and offers are:
Wholesale411.com
Wholesalecentral.com
Bizbb.com
TopTenWholesale.com
GoWholesale.com
PROS AND CONS OF WHOLESALE SUPPLIERS:
One of more pervasive forms of product supply for any type of new business venture. Large and small wholesalers are usually one step away from the manufacturer. They have the advantage of buying large quantities, and, depending on the type of merchandise, they are able to pass along savings to those who are looking for "products for resale."
With wholesalers (in most cases) you can be assured of purchasing new product. I can't think of too many "cons" when dealing with wholesalers--other than pricing. There might be items that could be too expensive to sell in the Ebay auction marketplace.
Surplus & Salvage Merchandise: Another sought after source of supply is retail surplus, closeout, overstock, liquidated, and salvage merchandise. Surplus dealers and brokers, buy shelf-pulled, returned, overstock, closeout, liquidated, and salvage merchandise from manufacturers, retail stores, reclamation centers, and just about any business who has slow moving or salvage merchandise.
Surplus dealers buy these obsolete items in large quantities, and then resell them to just about anyone who wants them for their Ebay Auction, Flea Market, Dollar Store, or Retail Store outlet. One of the largest trade associations for the surplus industry is the International Marketing Association Of Surplus Dealers:
You can find dealers throughout the United States and overseas. Other sources of finding Surplus, Salvage, Closeout, and Liquidated merchandise include the following: Closeoutcentral.com, Liquidation.com, CWSMarketing.com, and National Retail Equipment Liquidators.
PROS AND CONS OF THE SURPLUS & SALVAGE SUPPLIERS:
The "Pros" of the Surplus & Salvage dealers is that they can offer you a variety of products at below wholesale prices. However you "market your merchandise," you should be able to find a product or price that will fit into any merchandising method you happen to employ. You do not need a "Certificate Of Resale" to buy products from most Surplus & Salvage Dealers, or brokers. But, some will require it.
The downside is that you have to do some investigative work. Some dealers will want you to buy merchandise in quantity (a pallet minimum - truckload preferred) and you have to visit the company you are buying from to make sure that the product is, as advertised. Also, more than a few S&S dealers want payment in the form of wire transfer which can be very risky.
DropShipping: Supposedly the perfect business model. No inventory, no trips to the post office or UPS. You just set up shop, take the order for the product you are selling--pass it along to the wholesale drop-shipping company, and they send it out for you.
Some drop-ship distributors will even send you ad copy and pictures to help you advertise their products. They can even put your return address on the package! A lot of Retail Catalog companies use drop-shippers as their means of supply.
PROS AND CONS OF DROP-SHIPPING:
There is one obvious advantage to drop-shipping. It is basically a "product less" venture. No need to tie up your money in inventory. Drop-Shipping can fit into any business model, or advertising method you happen to use. However, if you are an Ebay Auction seller, than you might want to rethink that position.
Finding a drop-shipping company that can deliver on a consistent basis can be hard. It is not impossible, but it requires a lot of trust. Drop-Shipping companies have been known to run out merchandise. If they happen to run out of the product you are selling, asking people to wait on their product because it is "back-ordered," does not inspire confidence. Your negative feedback rating can pile up real quick.
The other problem is expense. Some drop-shippers require a sign-up fee before you even get involved with their company. This means that before you even start to sell their product, you will get hit with a "start-up" fee. You might also have to pay for support materials, pictures, and advertisement brochures for the products you have chosen to sell.
In addition, when you finally do sell a product that the drop-shipper supplies, you will have to pay another fee to have that item sent to your customer. That price can range anywhere from 5.00 to 10.00 dollars, and up, depending on the item.
After Ebay and drop-shipping fees, you can wind up loosing money, or at best, breaking even. Bottom line, drop-shipping and auction selling don't mix. The best bet for any auction venture is to "own what you sell." When you own a product, you control the quality, the shipping, and the customer service.
EVERYTHING CAN BE HAD FOR A PRICE-BUT THERE
IS ALWAYS A PRICE TO PAY FOR EVERYTHING!
Now that we have reviewed the "big three" let me try to clear up some of the popular misconceptions when it comes to purchasing products for resale. There is popular branded merchandise that can be obtained through a few of the featured supply chains, and then there are products that will never make it to the surplus, wholesale, or drop-shipping market. For instance, you will never get Louis Vuitton handbags through a surplus dealer. If a surplus dealer who is promoting LV Handbags they are without a doubt trying to scam you.
Same is true for people who are selling designer handbags on Ebay in mass quantities. The likely scenario is that they are Chinese copies. Over 80 percent of branded retail that are featured in the United States are counterfeited in the People's Republic Of China. Those products include Nike, Reebok, Puma, Adidas, Louis Vuitton, Calloway (Big Bertha) golf clubs, and just about any product that enjoys mass merchandising status.
The Chinese government is a "paper tiger" when it comes to putting a stop to "knockoff" activity. It is a thriving industry that provides employment for the masses. Despite the pleas from American companies to cease and desist, from this activity, as of this writing, there is a tepid response from Chinese officials to do anything about the problem. When raids are conducted, they are public relation ploys designed to create the impression that they are doing something about the problem.
Another indicator of authenticity is price. Louis Vuitton handbags will never be sold for 30, or even 100 dollars. Low end handbags usually start at 500 dollars, and exclusive designs, or limited edition products can go for 10,000 dollar or better.
Do you think you will ever have access to these items in the wholesale, surplus, or drop-shipping market? Forget it! The Louis Vuitton (Moet Hennessy) would rather destroy them, (and do destroy their overstock) rather then let them be circulated to any distributors outside their corporate or boutique network. You will never, I repeat never, get a LV Handbag from any wholesaler, surplus dealer, or dropshipping company.
Don't get me wrong . It's not that you can't get "designer duds," or handbags at wholesale prices. You just won't get, current, "En Vogue" high end clothes and accessories that are featured in your favorite issue of In Style magazine, as a "product for resale" in any wholesale environment! For more information on designer clothing, and to learn about designer "fakes," the please refer to the following website:
For a healthy does of honesty and an eye opening perspective concerning the realities of purchasing designer clothes for resale, the Clothing Broker will definitely explode some popular myths about obtaining such items:
THERE IS GOLD UP IN THEM THERE HILLS!
Now lets address the Surplus & Salvage Industry. When people first encounter some of the offers from Surplus dealers, or brokers, they tend to suffer from what I call the "I just found Gold" syndrome. A feverish excitement permeates their brain cells, and reduces them to a quivering pile of jelly, leaving their reasoning skills inoperable! They recklessly buy what seems like a fantastic deal. A few thousand dollars later, and after coming to the conclusion that their "Golden Opportunity" turned out to be bars of lead, elation, then turns to anger.
It is a cliché, and I hate using it, but it is more than appropriate when it comes to surplus and salvage products. "If it sounds to good to be true, it probably is!" Some Surplus dealers will hone in one at least one of seven deadly sins-greed! As with wholesale, you will never get certain products for "pennies" on the wholesale dollar. One type of surplus product category that has some people loosing their minds is electronics. The problem with electronics in general, is that they have a low profit margin even when they are brand new.
Finding surplus dealers with good, undamaged, electronic products can be a daunting task. Most electronics returns, and overstock can be in pretty rough shape. See Techliquidators.com. What you are getting from most Surplus Dealers, or companies who specialize in electronic selling, is someone's customer returns, i.e., "junk!" Unless you are a electronics technician, or recycler, then I would stay away from "salvage" electronics.
Even product that is not damaged, and still in the box or retail blister pack, can have a pretty high surplus price. If you find that someone is offering you a electronics item-be it a DVD Player, or Xbox, for eight dollars a unit, then "buyer beware." You will more than likely be able to purchase lower end electronic items like vacuum cleaners and cordless phones, at a more reasonable price.
Once again, in demand products like DVD Players, Laptops, and Car Audio Equipment, and Plasma TV's, if you do find them in the Surplus aisle, will still have a "high end" price attached to them, despite their "secondary market" status. For a further explanation of the industry, and how you can avoid "purchasing pitfalls," I would suggest that you read........
"The Ten Tenets Of The Surplus and Salvage Industry"
GETTING DROPPED BY DROPSHIPPING!
My last critique, and word of caution is about drop-shipping. You might have access to information about drop-shipping companies that would prove me wrong. I will not argue with anyone who is dealing with a drop-shipping company who is serving them well. But, I will tell you that drop-shipping is a risk. I really can't recommend any type of guide, or information that would lead you to a smattering of reliable drop-shipping companies.
Unlike surplus and wholesale, where you physically own and control the product, that option has been taken out of your hands when you are dealing with a drop-shipping concern. You are trusting a company to ship products directly to your customers.
If you get involved with a company who cannot deliver, or who is back ordered, you can find yourself with some very irate customers. Sign up fees, shipping fees, and expenses for support materials can really affect the bottom line.
Also, most drop-shipping companies like to send out product in volume. If you are selling just a few items per week, or per month, it might not be worth if for a drop-shipping company to deal with you. Large retail catalog companies use drop-shipping or "fullfillment" houses, but these companies cater to large scale operations. The bottom line is this. When it comes to finding product supply for your business it pays to do your homework.
Visit the company facility when you can. Never wire any money into a company account. Use a credit card, or Escrow service to protect yourself should your supplier not deliver, or send you defective merchandise. Understand that you will not be able to get the latest and greatest technology, or fashions, at surplus and below wholesale prices. If you follow all of these rules, and you use common sense as your "crusade" you just might be able to find your own "Holy Grail," of wholesale product supply!
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