Whether you sell products online or in a brick-and-mortar store, finding profitable products to sell is probably the most critical factor to success.
Sure, you might be a marketing genius who can sell anything, but consumers are very smart nowadays, and they are savvy deal hunters. You know what they say, "you can't polish a turd."
That's why one of the best, most scalable sourcing models is buying quality wholesale products in bulk quantities.
In this article, we'll dive into how to buy in bulk for resale so you can find great products to sell for big profits.
We'll go into how to find cheap wholesale products for resale and how to get brands actually to want to work with you.
What is Wholesale Sourcing?
Wholesale sourcing is purchasing items at a discount in bulk from wholesale suppliers. The goal is to resell the items for profit.
You're probably wondering why would a supplier sell for less than they could charge if they just sold the items to customers themselves?
Image courtesy of Investopedia.com
To understand this, we need to know that wholesale suppliers capitalize on economies of scale. They can take lower profit margins by selling items to other companies that can sell the products individually. This is the foundation of the supply chain.
Large wholesalers have advantages that smaller companies don't have:
- They can usually store more products than smaller sellers.
- Make huge purchase orders with manufacturers that smaller sellers can't.
- They have more capital available to turn huge net profits even with lower net profit margins.
Wholesale suppliers can sell 1,000 items quickly if they can provide a discounted price that entices smaller businesses to buy, knowing they can sell the items individually for a profit.
There are pros and cons to this, however. Us small fish have to deal with individual customers and other various headaches associated with retailing, whereas the big wholesalers don't have to do that but they take on more risk. They also have the overheads of things like staff and warehouses.
A simple online store operates differently than a wholesale business and they work symbiotically to make each other profitable.
There are 4 basic types of wholesale.
This means you work with a distributor who may represent several lines and can provide you with a more diverse inventory
This is an end of lifecycle product that can be purchased, often, well below traditional wholesale pricing.
This is store based liquidation from returns or shelf pulls, also often well below traditional wholesale pricing.
#4 Direct Manufacturer
This is going directly to the brand owner and becoming an approved seller through them.
Each of these models has its benefits. In some models, you can win with great pricing, in others, you get great selection and consistency. Our model is the Direct Manufacturer model. We work closely with brands to become an approved seller of their goods on Amazon.
The manufacturer direct model is ideal because it ensures you don't have issues with brand restrictions on Amazon.
If done correctly, you will ALWAYS be an approved vendor of the brand you are working with.
Who Can Buy Wholesale Products?
Although some brands will sell their products in bulk to anyone who wants them, most wholesale suppliers have criteria for who they sell to. They look for established companies they can trust and have long-term relationships with.
They'd rather work with fewer large buyers than more small buyers.
Therefore, the average person can't buy from most of the best wholesale suppliers.
Typically, the suppliers that are easily accessible to the masses offer low margins and high competition.
I'll share a list of wholesale suppliers who are more accessible to the average Joe, but just know, suppliers who are picky about who they work with typically are the best to work with.
Where Can I Buy Cheap Wholesale Products to Resell?
I have good news and bad news. The good news is that finding these suppliers is pretty easy. The bad news is that getting them to sell to you is not always easy.
Some of these suppliers are simply online marketplaces that have listings from thousands of different wholesalers, whilst others are simply business directories. Both options are great to start finding cheap wholesale products for resale.
Here's 5 ways to find wholesale products, in no particular order:
Perhaps when of the most well-known wholesale marketplaces, Alibaba is a massive directory and online marketplace for wholesalers based out of China. All you need to do is browse for the products you like and then contact the wholesaler to negotiate your purchase.
Whilst Alibaba has certain verification and guarantee processes in place, be sure to proceed with caution and order samples from wholesalers and manufacturers prior to placing large orders.
Based out of a 250,000 square ft warehouse in Los Angeles, Kole Imports has a long-standing history in wholesale products spanning back to the mid 1980s. Their website has thousands of products you can simply add to cart and purchase without too much hassle.
Wholesale Central is a huge B2B directory with thousands of USA based wholesalers. They have a verification process in place for more peace of mind, and retailers can navigate directly to individual wholesaler websites.
The Wholesaler UK
Essentially, the same as Wholesale Central, The Wholesaler UK is a B2B directory for wholesalers based in the United Kingdom.
Online forums such as Reddit or more wholesale specific forums like Wholesale Forum are a good place to ask questions, network and find suppliers.
How to Find Suppliers That Aren't As Accessible
The rule of thumb in wholesale is that the more difficult it is to work with a company, the better they are to work with.
To find these companies, you really just have to get your hands dirty.
My good friend Chris Grant made a fantastic video (that is not publicly available) that shows how to find wholesale suppliers with a tool called Keepa.
We can go even further than Keepa.
Here's a video I made that shows how to find wholesale suppliers with some basic Google searching.
If you don't watch the video, I show how you can browse the web to find wholesale suppliers to reach out to. I provided a large list of search phrases you can enter into Google to find leads.
The complete list of phrases is in the drop-down below.
How Can I Get Wholesale Businesses to Work with Me?
Online marketplaces don't really have too much of a barrier to entry, so in most cases, you can just purchase products immediately. There is a slight downside, however, as they are still similar to a "retail" ecommerce platform in nature, so you may not get the full benefit of purchasing from a true wholesaler.
Kole Imports will sell to anyone for a discount. However, you may not get a true "wholesale" price compared to larger wholesale deals.
Many larger wholesalers will require some of the following information, depending on where you are located:
- EIN/Sales Tax ID
- Seller's Permit/Certificate
- Other State/Province Requirements
- Track Record & Reputation
Many of these requirements will depend on where you are located and where you are selling into, but my advice here is to seek the advice from your local authorities or government agencies.
You should also reach out directly to your wholesaler of choice.
You will get far more rejections that approvals. This requires a lot of patience and resilience.
Some sellers recommend creating a template email you send to potential suppliers. I don't like this approach. I think each supplier should receive a personalized contact that shows why they should work with you.
My friend Dan Meadors explained the outreach success rate in an interview I had with him.
You will find that your success rate is low, maybe 3% of people will actually work with you and have products worth carrying. However, creating these initial relationships will help you to start developing a steady stream of suppliers who will give you the income needed to focus more aggressively on wholesale and develop better conversion strategy!
8 Figure Amazon Wholesale Seller
Regarding my last point, track record and reputation, this one can be a lot more crucial than many people think. A wholesaler wants to know that you are reputable, so having your online assets in place, like a professional website and a complete LinkedIn profile, can help your cause greatly.
How Can I Find Out If Wholesale Products Are Profitable?
The formula on the surface is relatively straightforward.
Your selling price minus the product costs = your profit. If you sell in a brick-and-mortar retailer, this is pretty straightforward and easy to estimate. The only thing you'll need to be careful of is that you factor in shipping costs, selling and payment gateway fees, and a few returns.
There are many other variables at play that make this not as simple if you sell the products online with a retailer like Amazon (my recommended place for selling wholesale).
For example, if you decide to build your own branded e-commerce store using a platform like Shopify, you're in for a lot more than just your product purchase costs. Whilst something like Shopify only costs you $29 per month to start, and the website itself is pretty easy to build, your biggest cost is going to be advertising.
Amazon. com monthly website visitors according to SimilarWeb
To get suitable traffic and sales, you need to invest heavily into something like Facebook Ads or Google Shopping Ads. Plus, you may also need a designer to create Facebook Ad creatives for you. The costs just keep mounting.
Before you know it, you could spend hundreds or thousands a day without the guarantee of a profitable outcome.
So anyway, I digress. Let's get back into the wholesale discussion.
What Are The Best Products to Buy in Bulk?
It would be easy for me to say that certain product categories like beauty products or pet supplies are the most popular and the best products to sell. However, in reality, any product or niche has the potential to be profitable.
The key here is to do your due diligence and ensure that the demand for the product is sufficient.
One way of finding top sellers is to browse various "mover and shaker" categories on Amazon. Amazon Movers and Shakers tell you the top selling products in any category for the past 24 hours.
Another great way is to browse Amazon and then head on over to Google Trends to go deeper in your research. Take, for example, this trend that I discovered.
At first, I typed in coffee machines that have maintained consistent popularity over a long period, with peaks during holiday gifting periods. This led me to find the topic "descaling agent," which is something you use to clean your coffee machine.
Google Trends is awesome, but if you want a premium source of trends and market updates, check out a tool called Exploding Topics. They show products and companies that are trending. They also provide deep insights into where they see trends going every month.
This trending topic represents a potentially lucrative opportunity. Selling descaling kits could be a great option because they may be less competitive than coffee machines themselves, and they are also a "replen" which means they need to be bought regularly by consumers.
Obviously, I'm not encouraging you to go out and buy a truckload of descaling kits, but you get the point I'm trying to make. Follow the clues and find products that represent a potential opportunity.
Criteria for Finding Winning Products in bulk
Rather than purely hunting for winning products, it's also wise to evaluate a range of factors that will affect your overall bulk buying experience, such as...
Does the wholesale price allow enough margin for you to make a decent return? This is basic due diligence, but make sure you double and triple-check this before purchasing.
Consider your margins if you are stuck with excess stock and you need to lower prices. Will you still make a profit or at least break even? You should always have a buffer in your ROI calculations if you need to sell below the retail price.
How big is the product? Is it fragile? These factors determine shipping costs and can diminish your profit margins rapidly if not considered.
Much like shipping considerations, storage costs need to be considered. Factors like size and perishability should be considered so you can determine storage costs.
Without demand, then none of the other factors really matter, do they? Before buying wholesale products, you need to have either tested selling this product already or, at the very least, do your due diligence to ensure there's suitable demand.
How to Buy in Bulk for Resale
Before you take out your wallet and start buying cheap wholesale products, make sure you go through all potential factors at play.
Some of the most important considerations are:
Minimum Order Quantity (MOQ)
Does your wholesale supplier have minimum order quantities you need to be aware of? Many wholesalers offer a better deal if you purchase more, but they also may not allow you to purchase below a certain amount.
Where are the items coming from? Make sure you receive a quote for shipping before placing any orders. Consider also where you are shipping them to. Yourself? A third-party warehouse or Amazon FBA prep center?
Will you be storing the items yourself or sending them to a prep center to get the products ready to sell on Amazon FBA? Either way, you need to consider storage costs for your wholesale goods.
What payment terms does your wholesaler offer? Do you need to pay in advance, or is cash-on-delivery an option? These aren't deal breakers, but it's vital information that you should still know.
Online marketplaces like Alibaba have supplier ratings and guarantees for buyer peace of mind, but other marketplaces may not. No matter who you purchase from, be sure to do some due diligence before handing over a large sum of money for a load of bulk items.
Before you buy wholesale for resale, it might be worth checking if you can purchase sample products first. There's nothing worse than taking possession of a load of inferior products.
Most wholesalers will have a return and refund policy that you can refer to. If they don't, its a huge red flag. Make sure you understand the terms before dealing with a wholesale business.
- Secret Sauce Strategy
Using Tactical Arbitrage to Find Cheap Wholesale Products
If you're serious about Amazon FBA and wholesale sourcing, you need to know about a killer strategy called 'reverse sourcing' that we do with a little help from Tactical Arbitrage.
Reverse sourcing is a simple yet powerful method of finding top-selling products on Amazon first and then sourcing them via wholesale channels.
Amazon has an incredible amount of valuable data that sellers can tap into, and that's what we use Tactical Arbitrage for.
Tactical Arbitrage provides an easy-to-use wholesale search function
There's no point re-inventing the wheel and risking your livelihood on a new and untested product, so we may as well harness that power of Amazon data and tip the odds in our favor for finding top-selling products.
Let's get into the nuts and bolts of this reverse sourcing strategy.
How Reverse Sourcing on Amazon Works
- Find a category on Amazon that you want to explore and use a tool like Storefront Stalker Pro, now known as Tactical Expander Lite, to download thousands of ASINs as a .csv file. You can also just plug the category straight into Tactical Arbitrage if you want to skip the .csv part.
- Upload your .csv as the source in Tactical Arbitrage's wholesale search tool and set your parameters.
- Tactical Arbitrage will return a heap of data and will tell you exactly where you can purchase profitable products from.
How Does Tactical Arbitrage Provide This Information?
Tactical Arbitrage has a whopping 850+ sites in its database of wholesalers, so it can scan millions of products at light speed, returning results relevant to your search query.
As your business grows and you discover your own wholesale contacts, you can add these into Tactical Arbitrage and make it into your own bespoke, reverse wholesale sourcing secret weapon.
Reverse sourcing isn't the only thing you can use Tactical Arbitrage for; you can deploy a bunch of sourcing strategies for your Amazon business too.
To wrap up this article, let's answer some questions that you might have about buying and selling wholesale products on Amazon.
How Much Do Amazon Wholesale Sellers Make?
While the amount can vary wildly, some of the largest brands on Amazon operate on a wholesale model. These are 8 and even 9 figure businesses. Buying wholesale is one of the best models for scaling an Amazon reselling business beyond 6 figures.
How Much Do Amazon Wholesale Business's Sell For?
Creating a profitable wholesale business can set owners up for lucrative exits. I've written about selling an Amazon business in the past, but just know that you can sell a wholesale business for between 36x and 48x+ your monthly net profits.
Here's an example of a listing on Empire Flippers that is seeking a 49x multiplier.
If a business is making $20,000 in net profit per month, it could easily sell for between $720,000 and $960,000. In some recent cases, they've sold for even higher prices on sites like Empire Flippers and Flippa.
Do I Need a Wholesale License to Buy and Sell Wholesale Products?
Anyone can buy and sell wholesale items, and wholesale prices are not limited to licensed wholesalers. Most online retailers do not have a wholesale license.
A wholesale license is something for companies that are purchasing directly from suppliers or manufacturers. It is helpful because it allows companies to avoid sales tax on their wholesale products that they can then sell at retail price.
As a wholesale seller, you are sourcing wholesale products and the wholesale price is available to you without a wholesale license.
Most of the best wholesale distributors will want to see proof that you're a legitimate business, though, before working with you, so you will, of course, want to ensure that you have a legal business entity and formal presence to show to suppliers.
What Are Good Profit Margins for Wholesale Products?
As we discussed earlier, the wholesale model relies on economies of scale. This means taking lower profit margins since you can buy items in bulk.
Some wholesale sellers report they will accept margins close to 10% while others aim for closer to 25%.
This article attempts to give a solid answer. They state that the average is around $32,000 in startup costs. That number checks out with us.
How Much Money Do I Need to Buy Wholesale Products for Resale?
Capital is king in buying wholesale. The more capital you have, the better prices you can get from wholesale suppliers.
The Final Word on Wholesale Purchases
It might sound like there's a lot to it, but the reality is you're not going to come straight out of the gates screaming right into big wholesale deals. You need to cut your teeth first with something like retail arbitrage or my favorite, online arbitrage.
Once you get the hang of how Amazon FBA works and your surround yourself with like-minded individuals, like those in our FBA Today Facebook Group, you'll soon be wheeling and dealing on those wholesale ventures before you know it.