Seven Places to Find New Products for Resale

Locating reasonably priced resale merchandise can make or break your biz. Here's where to look.

By James Stephenson

Opinions expressed by Entrepreneur contributors are their own.

The mantra of every successful entrepreneur who sells productsis the same--buy low and sell high. Your ability to buy cheap is ofparamount importance; after all, it makes up 50 percent of thesuccess equation.

If you plan to buy and sell new products, your buying sourceswill include manufacturers, sales agents, craftspeople,wholesalers, importers, distributors and liquidators. Deciding whomyou will buy from will be largely based on criteria relative toyour specific needs, and revolve around product price, supplierreliability, product quality, product and supplier guarantee,supplier terms, and supplier fulfillment. For instance, if you areshort on storage space and adequate transportation, then supplierswho drop-ship orders directly to your paying customers will be afar more attractive supply source, even if their unit costs arehigher than suppliers who do not offer drop-shipping options.

Buying previously owned items for resale is an entirelydifferent ball game because the product sources are much different.There are no wholesalers, manufacturers and sales agents to supplyyou with cheap products for resale. Instead, you have to rely onyour detective abilities and negotiation skills to track down thebest items to purchase cheaply. These sources will include privatesellers, auctions, flea markets, online marketplaces, garage sales,and thrift shops.

Buying Wholesale

Traditional channels of distribution have greatly changed. Atone time, all levels of distribution served an important functionin the marketplace. Importers scoured the globe, visitingmanufacturers for specific products, which they bought in largequantities and imported to their own countries. Nationalwholesalers would then sell to local distributors, who sold todealers or retailers, who in turn sold directly to businesses orconsumers. It was not uncommon for a product to pass through fouror five levels of distribution on its way from factory to endconsumer, with each level adding a markup to cover expenses andprofit.

Today, distribution roles are somewhat blurred, and there isoverlap among wholesaler, distributor, importer and liquidator. Butthe end game of each is the same--sell products in volume toresellers at less than retail, enabling the resellers to sell toconsumers and businesses for a profit. The information belowfocuses on three wholesale buying sources: wholesalers,liquidators, and importers. I must stress, however, that when youbuy from these sources, you are not buying wholesale, but ratherfrom a discount retailer, if they do not require a sales tax IDnumber. I mention this because recently there has been an increasein online businesses claiming to sell wholesale, when in fact theyare discount retailers advertising as wholesalers. So alwaysremember that if you are not asked for your sales tax ID number,you are not buying from a legitimate wholesale source. Truewholesalers do not sell to the general public--only dealers,retailers, and resellers--and are referred to asbusiness-to-business (B2B) wholesale sources.

  • Wholesalers. Your first option for buying new productsat less than retail is from wholesalers, who generally offer abroader range of merchandise than importers and manufacturers.General-merchandise wholesalers are the most common, and they stockand sell a vast range of household products. The next type ofwholesaler is industry-specific, such as food wholesalers, toolsand equipment wholesalers, or clothing and textilewholesalers.

There are really no tricks to buying from wholesalers as theprocess is pretty straightforward--find one who carries the type ofmerchandise you want to sell, open an account, and start buyingwholesale. It is always a good idea to open accounts with more thanone so you can shop for lowest price, take advantage of thespecials each offers, and ensure that you always have a reliablesupply in case one runs out.

  • Liquidators. Next to factory direct, buying merchandisefrom liquidators will generally be your cheapest wholesale sourceof new products. Liquidators differ from wholesalers, distributors,and importers in that they do not carry a steady supply of the sameitems all the time. They purchase many types of merchandise fromvarious sources, including retailers trying to unload out-of-seasongoods, returns, and slow-moving inventory; manufacturers sellingseconds and end-of-run; insurance companies disposing of damagedand recovered merchandise; and inventory of all sorts from bankruptretailers, wholesalers, distributors, and manufacturers. Thevariety of products that can be purchased from liquidators knows nolimits--clothing, electronics, dollar-store items, sporting goods,kitchen and bath accessories, toys, books, and the list goes on.However, all merchandise is new, though it may be slightly damaged,seconds, store returns, out-of-season, or discontinued.
  • Importers. Importers are another source of newmerchandise at wholesale prices. As a rule of thumb, however,importers are usually product- or industry-specific. There aregeneral merchandise importers, but they are not common. Most dealin specific products and sometimes very highly specialized productssuch as surgical rubber hose, or in specific subsections ofindustries such as hand tools. Buying from importers is the same asbuying from wholesalers, distributors, or manufacturers. Source oneor more and open a buying account. However, don't be surprisedif more than one importer refuses to supply you. This is becausesome importers only work with large-volume clients. In time andwith a little legwork, you will find an importer who will sell youthe type of product you want to buy and sell. You will, of course,also want to consider factors such as price, quality, andreliability before choosing an importer.

Buying From Manufacturers

Another buying source for new products is manufacturers, whoalso include farmers, producers, craftspeople, growers, and salesor manufacturers' agents. But I have chosen to concentrate onbuying factory direct, manufacturers' agents, and craftspeoplebecause they are the most likely buying sources. When buying frommanufacturers, the inevitable questions arise: Should you buy fromlocal or domestic manufacturing sources and support your owneconomy, or should you shop overseas manufacturers in hopes oflower prices? The answer is that each person will have to make thatdecision individually, but there is a strong argument forsupporting your own economy, especially in light of labor laws andpractices in some foreign countries. It is no mystery that productsgenerally cost less from foreign manufacturing sources thandomestic sources. On the other hand, domestically manufactured andproduced goods are generally of much higher quality. Ultimately,your target audience will play a large role in determining whereyou buy.

  • Buying factory direct. The first option is to purchasedirectly from the factory--no middlemen, agents, distributors,importers, or wholesalers of any kind. Buying factory direct forthe small operator was not an easy or very accessible option asrecently as five to ten years ago. What once took days, weeks, andeven months and considerable expense to track down can now beaccomplished in a few hours or less online, and all with the simpleclick of a mouse. With the aid of the Internet, you can sourceproduct manufacturers from around the globe and buy direct.

Even with the assistance of the internet, however, the factremains that you often have to buy in large quantities, especiallyfrom overseas manufacturers who need to sell by the container loadto justify expenses and their competitive pricing. The Internet hasnot changed this. Still, there are thousands, perhaps hundreds ofthousands, of manufacturers nationally and internationally whowelcome new customers with open arms, regardless of their currentbuying power. It will just require a little more homework by you toflush them out.

Still, you do need certain things for the relationship with themanufacturer to be successful, especially when starting out,including:

  • Fair pricing. You need the ability to buy frommanufacturers at a price level that enables you to resellcompetitively while still retaining the ability to profit. Neverassume manufacturers will not negotiate on their list or catalogpricing. All manufacturers will negotiate to a certain degree. Theyare like any other businesspeople, and need paying customers toremain viable.
  • Quality products. You need quality products, withinreason, to sell. They do not have to be the best, but they must beable to stand up to consumer scrutiny. A super-low price is of nobenefit to you if the product quality is so poor people won'tbuy.
  • Reliability. You need a reliable buying source. Themanufacturer(s) you choose to work with must be able to supply theproducts you need when you need them, and in a timely fashion.Buying and selling is very much a now, or impulse, business. Youcannot ask customers to wait days or weeks for products.
  • Terms. You need manufacturers who will offer you paymentterms on purchases. Initially, in most cases you will have to applyfor and be approved for credit or establish a payment record bypaying in full for your first few orders. However, beyond this youshould expect manufacturers to extend 30-, 60-, and even 90-daypayment terms. The longer the better, from your perspective.Payment terms enable you to resell inventory and pay suppliers withyour customer's money, not your own.
  • Manufacturers' agents. Many manufacturers,especially small ones, enlist the services of sales agents,otherwise known as manufacturers' agents, to find new customersfor their product(s) in new geographic markets, nationally, andinternationally. This is especially true of manufacturers who donot have the financial resources or people inhouse to undertakeestablishing distributorships in far-flung locations, or whocurrently have a limited product line, too small to grab theinterest or attention of major wholesalers and distributors. Thejob of the agent is to prospect for new business for themanufacturer, often establishing accounts with retailers to buyproducts on a frequent basis. Buying through a manufacturer'sagent generally means you will be paying slightly more for theproduct on a per-unit basis, but over time, as your buying volumesincrease, incremental discounts will reduce unit costs. The bestway to source manufacturers' agents is to harness the power ofthe Internet and search manufacturers' agents directories, orto contact manufacturers' agents associations.
  • Craftspeople. Talented craftspeople across North Americamake everything from custom furniture to woodcraft decorations,garden ornaments, stained-glass items, and everything imaginable inbetween. According to the Craft Organization Directors Association(CODA), the crafts industry generates $14 billion in salesannually. Needless to say, crafts are very big business in America.But how do craftspeople distribute their goods? Once again,according to CODA, approximately 60 percent of them retail theirgoods directly to consumers through craft shows, mail order, andonline marketplaces. A further 10 percent place their products onconsignment with retailers, such as gift shops, furniture stores,and fashion retailers. And the remaining 30 percent wholesale theircrafts to retailers and resellers of all sizes. This 30 percentwholesale market adds up to a whopping $4 billion-plus worth ofwholesale crafts up for grabs every year for resale!

Keep in mind that most craftspeople who do retail direct toconsumers are the first to admit they are not the best marketers oftheir own goods, and miss out on a lot of profit because of theirlack of sales and marketing skills. Therefore, persuading them tosell to you wholesale should not prove difficult. Start by talkingwith craftspeople right in your own area to inquire about the goodsthey make and their wholesaling policies. You can also contactcraft guilds and associations to track down people who makespecific products you would like to buy and sell. And rather thanbuy crafts wholesale for cash, consider working out a revenue splitarrangement for all goods sold. This way, you'll to minimizethe amount of start-up investment needed to get rolling. Theysupply, you sell, and both of you profit.

eBay and Other Online Auction Sites

Most people think of eBay as a great place to buy products forpersonal use or a great place to sell products, not necessarily asa venue to buy new products for resale purposes. But eBay providesgreat opportunities to buy new products wholesale at adiscount.

New products in bulk are listed under the Wholesale link in thenavigation bar on the eBay home page. The wholesale lots page issegmented into numerous product categories, including electronics,home furnishings, jewelry and watches, clothing, health and beauty,and sporting goods, each with its own subcategories of products.Via the wholesale lots page you can purchase new products,liquidated merchandise, seconds, pallet lots, remainders, andreturns posted by wholesalers, liquidators, and manufacturers. Someproducts are available by way of no-reserve and reserve-bidauctions, while others have volume pricing through individual eBaystores.

Excerpted from 202 Things You Can Buy and Sell for Big Profitsfrom Entrepreneur Press

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