How to Navigate Wholesale Merchandise Markets as a New Retailer

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In the fifth edition of his book Retail in Detail, retail business owner and consultant Ronald L. Bond offers small-business owners an updated, no-nonsense guide to the world of retailing. In this edited excerpt, the author offers a few tips for successfully purchasing goods at regional market centers.

Unless you plan to market a very specialized product, the best place to gain access to products is at regional market centers with showrooms similar to retail shops but that sell only to bona fide retailers. Most showrooms represent many companies and individuals with products to sell. The market centers provide a look at what's happening in your field and help you keep up with trends, stay current with your merchandise and anticipate changing tastes.

The major market centers -- such as Dallas, Atlanta, Chicago, New York and Los Angeles -- are large complexes with goods ranging from jewelry to furniture. Small regional markets are also scattered throughout the U.S. in larger cities. In addition to the permanent showrooms, most market centers have "shows" throughout the year, usually in January, July, and September during which hundreds of "temporary" exhibitors display their work.

Because markets sell only to retailers, you'll be required to produce evidence that you are one. Usually, you must present a sales tax certificate, along with printed checks, letterhead, and/or business cards, in order to gain access as a buyer. You can do this on your first trip or in advance through the mail. You'll be issued a market card, similar to a credit card, for identification.

Related: The 'Etsy Economy' and Changing the Way We Shop

Your first trip to market probably shouldn't be during a show, which is nearly always crowded, hectic and overwhelming, even to experienced buyers. Between shows, the pace at showrooms is slower and sales personnel have more time to answer questions and generally give you helpful advice on your purchases.

Buying at a major market center can be an overwhelming experience, unless you plan your activities carefully and purchase your goods in an organized fashion. Several weeks in advance of the show, begin establishing your budget for purchases. You should first estimate the retail value of your current inventory (zero for your first trip), estimate sales for the months between the upcoming market and the next one, subtract an allowance for goods purchased locally or through sales representatives, and, from these figures, calculate the dollar value of goods you should purchase. Because you won't have a track record on your first trip, you'll have to rely on projections.

To avoid going to market without some idea of what you'll buy, it's helpful to make lists of products that attract your interest, from magazines and other advertising, for several weeks before markets. Many showrooms and manufacturers send out literature on new products before each show and advertise in the trade magazines. After you've been in business awhile, you can use your computer to generate lists of the biggest sellers during the previous year.

You should try to arrive at the market site the afternoon before the first full buying day, register, collect maps and listings of the vendors and showrooms, and visit a few. Before starting your buying in earnest, however, try to gather information and get an overall impression of things.

Many of the booths offer brochures and price lists that you can collect for things that are of interest but you aren't sure you want to carry right now. Accept brochures only if you're truly interested in the wares or else you'll be quickly overloaded with paper.

Related: Big-Box Backlash: The Rebirth of Mom-and-Pop Shops

As you make purchases, store the invoice copies separately from the literature and enter the total purchase on a budget sheet to keep a running total. You should also make sure the invoice identifies the item purchased. Many vendors enter only codes, not descriptions. After buying several thousand dollars' worth, it can be impossible to remember what each invoice covered so enter a short description of the merchandise either on the invoice or the budget sheet.

Most companies will require you to prepay your first order or accept it cash on delivery (COD). After one or two COD or prepaid shipments, most will extend credit, usually on a "net 30" basis, where you pay the full amount within 30 days of the invoice date. Once you establish credit with several companies, you should prepare a credit reference sheet, make copies, and take them with you to market. Many companies will grant credit on your first order if you have several credit references from familiar companies.

You'll find that virtually all companies pass along the freight charges to you (typically 5 percent to 15 percent depending on weight, bulk, and distance). This is important to consider when buying an item that weighs a lot. The wholesale price may sound great, but when you have to figure in the shipping cost, it runs up the retail price considerably.

After you've covered your route, review your purchases, both amounts and kinds. Then visit selected booths to fill in the gaps. A good estimate for time required at market is about three days.

Related: Five Retail Design Myths Debunked

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