Key Tips to Help Make sense out of Wholesale Sourcing

Before you rush out and try to set up as many wholesale accounts as you can, it is essential that you have a grasp of a few wholesale business basics. Wholesalers are businesses authorized to distribute new products from the manufacturer and are licensed by the state in which they reside to sell to retailers without charging sales tax. The wholesaler is responsible for the warehousing of its product lines, establishing and maintaining a sales force as well as arranging shipping and handling and the various means of transportation and the tracking of orders and order fulfillment. The clients of wholesalers are retail business purchasing in bulk quantities. Although many wholesalers have single unit wholesale price, the point of a wholesale business is to sell in as large a volume as possible as that is how it makes a profit.

Because the wholesaler depends on bulk order, wholesalers often reward larger orders with greater discounts and often have levels of pricing. Each wholesaler defines its own levels; for example, quantities of 1 to 25 might sell at one price, quantities of 25 to 50 at a lower price, and quantities of 50 to 100 at a still lower price. Also, some wholesalers may allow their sales force to determine the amount of discount based on their relationship with their client. You can see that prices are flexible and your price will depend on the quantity you purchase as well as how you are valued by your sales representative.

Some wholesalers also give manufacturer rebates, and others offer three day specials, weekend specials, holiday specials where the wholesale prices are even further discounted and where the wholesaler may even offer free shipping. If you are able to buy in large volume, you can really leverage the power of these price breaks. The problem that many single person business and eBay sellers face is that they can’t afford to purchase in quantities that would allow significant price breaks. There really isn’t any mystery to low prices; the secret is generally tied to bulk purchasing.

Legitimate wholesale businesses in the United States are required to see proof of your sales tax permit, sales tax ID, or resale certificate. A sales tax permit is a document from your state department of revenue that allows you to buy products from licensed wholesalers without paying sales tax. It is understood that when you sell your products to residents of your state that you will remit the sales tax to the state treasury at quarterly tax periods. The sales tax permit is an essential document proving that you are a legitimate retail business.

Newcomers to ecommerce are often advised to be aware of “middlemen.” This is an important issue where wholesale supply is concerned. So, what are middlemen and how do you identify them? Keep in mind that you can always identify a true wholesaler because they are required by law to have proof of your sales tax permit. As you research sources of low cost products, you will find some sellers who use the word “wholesale” in their site description and say that they have wholesale prices but otherwise never directly state that they are wholesale distributors. Those sorts of businesses are usually middlemen. In other words, middlemen are retail product distributors selling at a steep discount (but not as cheaply as real wholesalers) to other retailers. This is only bad when a product supplier pretends to be a wholesaler or tries to fool you into thinking it is a wholesaler when in reality it is discount retail outfit. Remember, true wholesale distributors must have a copy of your sales tax permit on file in order to do business with you.

What does it take to set up an account with a wholesale distributor? Generally speaking, they require proof that you are a legitimate business. Minimally, they will need your sales tax permit and proof of your ability to pay. I recall one major DVD and media wholesaler wanted a $ 25,000 letter of credit. Another required that they have a credit card on file. A wholesaler may require references and proof of a business bank account. The exact requirements will vary from wholesaler to wholesaler. Many people want to know if wholesalers will deal with you if you only buy very small quantities. The answer is yes, most will, but keep in mind that as a small, online business, you are not likely to be their primary customer. When setting up an account, always remember to follow their instructions to the letter, and realize that their primary concern will be that you are a real business and meet the legal requirements for their state.