What kind of supplier do you want to work with?
You need to decide what type of supplier you want to work with. There are essentially three types; wholesalers, drop shippers, and manufacturers and there are pros and cons with each of them.
You will be able to find a huge number of suppliers across the world, for all sorts of products, particularly in Asia and the Far East. To get started though, it’s a good idea to stick to suppliers that are local – you should still be able to find plenty of choice and products at competitive prices. Then once you have more experience with wholesalers you can start working with suppliers in places like China, and benefit from the deals they offer.
Wholesalers buy large quantities of goods from the manufacturers and then sell them off in bulk to businesses, who in turn sell the items individually. Because you order items in larger quantities, the wholesaler charges you a cost per unit that will be below the market price; so when you sell each item, you make a profit. The larger the order you can place with the wholesaler, the more discount per unit you are likely to get.
There are pros and cons to using a wholesaler, and deciding if it’s the right choice for you will depend a lot on your situation. On the upside, a good wholesaler can provide a reliable supply of the items you want to sell, at a price that means you will make a profit. On the downside, most wholesalers are likely to have a minimum order size, which could mean you have to invest quite a bit of capital up front, as well as have somewhere to keep your stock, and if for some reason they don’t sell, you could be stuck with them. If you’re importing from abroad, you also need to be aware of any taxes, customs duties and regulations that might apply.
Drop shippers offer a unique twist to sourcing wholesale items. Instead of supplying the goods to you in bulk for you to sell to your customers, they will ship them directly to your customers. Each time you make a sale to your customer, you purchase the item from the drop shipper and provide them with your customers address. The drop shipper then packages and sends the item without you having to get involved. Whilst you’re not placing bulk orders with the drop shipper, they should still offer enough discount on each item for you to make a profit.
Using drop shippers can be a great option when you’re starting out as it takes away some of the risks. You don’t have to invest in lots of stock, you simply buy from the drop shipper when you’ve sold an item. Also, you don’t have to worry about where to keep your stock as the drop shipper sends the goods straight to your customer for you. A slight negative of using drop shippers is that you will make less margin on your sales as drop shippers usually offer lower discounts and need to cover the cost of shipping. You also need to make sure your drop shipper is reliable, as any wrong or lost orders to your customers will reflect badly on you.
Wholesalers and drop shippers work by buying large quantities of products from the manufacturer and then selling them on to traders. Once you’ve got some more experience dealing with suppliers and understand how the process works, there’s no reason why you can’t deal direct with the manufacturers in order to get even greater profit margins. Just as with other suppliers, if you can meet their terms, a lot of manufacturers in places like China will be more than happy to deal with you direct.
When dealing directly with manufacturers you will usually have to make a significant investment in stock, so the issues of working capital and storage come up again. However, if your business is established, you have the space and can afford the investment, this could be a great way to increase your profits because manufacturers can always offer the best prices. Again, you need to make sure you are aware of the taxes, customs duties and other regulations that apply, but dealing with a manufacturer can mean other benefits as well as increased profits, which we’ll look at later.
Finding reliable wholesalers, drop shippers and manufacturers
Once you’ve decided which kind of supplier you want to work with, you then need to find one that can provide a reliable supply of the products you want to sell. Of course the internet has made finding most things a lot easier, but there are still a few of ways you can go about finding your supplier.
The easiest way is to go to Google and search for “wholesalers” or “drop shippers”. But this isn’t necessarily the best way as it really opens you up to the thousands of scams that are operating which target people looking for suppliers. To make sure you’re working with a good wholesaler, you could try using any of the numerous wholesaler and drop shipper directories. These are websites that have hundreds, if not thousands of wholesalers and drop shippers for you to choose from all in one place. These directories are very popular, so you’re unlikely to uncover a supplier that few others are working with, and you might have to pay a membership fee to get access to the information. However, it is a quick and easy way to find wholesalers, and some of the better directories will have done some checks on the suppliers to make sure they’re reliable
If you’re prepared to do a bit more work, a good way to find a reliable wholesaler is to actually get in touch with the manufacturer of the product you want to sell. If you call them up and tell them that you want to sell their product and could they give you a list of their wholesalers, most of them will be happy to give you the information because it’s going to mean more sales. You might need to make a few calls to get through to the person who can give you the details, but it could be worth it as you are likely to get the names of reliable suppliers, which your competition might not know about.
Finding suppliers on eBay
If you’re still unsure about dealing with a wholesaler, or are struggling to find a good drop shipper, there is a readily available source of wholesale products, which you’re already familiar with – eBay. For most of the main eBay categories you can find a sub-category for Wholesale Lots. Here you can find other professional sellers, as well as wholesalers and manufacturers, who are usually offering a number of products in a single lot. You might be able to find the product you want to sell, or other products for your market, buy them as a lot and then sell them on individually to make a profit.