Running a wholesale business requires a good amount of capital upfront, but not as much as other business models like opening a restaurant. Wholesaling can also be scaled quickly, once you finalize your online store and establish strong connections with buyers. It allows for a lot of flexibility in the products you sell and who you sell them to.
Learning how to become a wholesaler and how to run a wholesale distribution business can be overwhelming. There’s paperwork to complete, a website to set up, eCommerce software to select, eCommerce marketing strategy to plan, and customers to keep happy. Knowing how to buy wholesale items also means you know how to find vendors and understand the wholesale definition before taking other actions.
The wholesale market has never offered more opportunities to ambitious individuals than it does today. Thousands of suppliers offer partial and complete goods through wholesale directories and global wholesale distribution networks.
Wholesale Products: Process for Buying Wholesale Items
Buying wholesale items is a simple process once you have your priorities figured out. Here is how to find and buy quality wholesale products:
- Perform market research. In the US alone, the wholesale market is growing at about 1.2% per year, contributing to predictable eCommerce growth. You’ll be competing against hundreds of other brands and both B2B vs B2C, so you need a vigorous wholesale marketing plan and a clear target audience to build traction.
- Establish a professional brand image upfront. Many suppliers have requirements in place to limit any inexperienced resellers they work with. If you have a professional image from day one, suppliers will be more motivated to work with you. Make sure that you have an account setup with one of the best bank for online transactions, and if required, have gotten an eCommerce business license.
- Decide on a niche. If you don’t yet know what wholesale items to sell, you should pick a category. There are thousands of quality products you can sell, including wholesale meat, wholesale seafood, wholesale dairy, and wholesale produce. Modern customers are heavily discerning in their purchases and won’t buy cheap goods simply for the money savings. Select a niche market and supplier that is as quality as your budget can afford.
- Browse a wholesale directory. This is any website that offers information on wholesale suppliers, their goods, average price, and how to contact them. It’s an easy way to get your foot in the door and start building relationships. Note that the harder a supplier is to get in contact with, the more likely they are to be someone you want to work with because this indicates their products, both existing and new, are in demand. On the other hand, it could mean their customer service is not up to par for your needs. Conduct your own research in these circumstances and only buy quality products with a reasonable wholesale price.
- Obtain your reseller’s permit and/or licensing agreement. A reseller’s permit is required to sell wholesale goods because it shows suppliers that you are a real business. A licensing agreement is similar to a permit. It’s used by suppliers to control the type, amount, and sometimes the market a product is sold in. Generally, licensing agreements apply to products where intellectual property or stiff competition is concerned.
- Attend trade shows and relevant events. There are few better ways to get your wholesale business started than by attending trade shows. This is where suppliers and handmade product creators display their goods and develop sales relationships. Look for owners who offer a low minimum order quantity, or MOQ, and want to work with new resellers.
Now that you’re familiar with how to buy wholesale products, it’s useful to expand your knowledge according to your niche. Let’s look at best practices for buying specific types of wholesale goods.
How to Buy Wholesale Grocery Items
There are numerous ways to buy wholesale grocery items, and your buying approach will depend on what you’re selling. If you’re selling dried, packaged, or dehydrated goods, you can get these great items from hundreds of suppliers online. Wholesale directories make it easy to browse food and beverage industry categories, and you may discover current food trends or related information while you're at it. Make sure that you have the warehousing capabilities to store products like this.
If you want to sell fresh produce or perishable goods wholesale, you’ll need to build a relationship with local farmers and growers. There are dozens of farmers’ markets nationwide that partner with wholesale suppliers. Research what farmers expect of their wholesale relationships beforehand. This helps you get started with professional questions and an appealing offer.
How to Buy Bulk Wholesale Items
Buying wholesale items in bulk is where most wholesalers begin. The MOQs of most suppliers mandate that new products are ordered in bulk; typically 100 units or more. Bulk shipping usually accompanies this approach, as well.
Start by looking for bulk suppliers. This isn’t difficult, as most suppliers understand resellers want bulk goods. This also allows you to pay minimal shipping prices and maximize resale profit. eCommerce shipping costs are calculated using a shipping cost estimator.
Once you’ve found an appealing supplier, ask them what their MOQs and AOQs (average order quantities) are. This will give you a feel for how much you may order from them, and how often. Also, familiarize yourself with what is lead time and inquire about your suppliers’ lead times for delivering products to you.
How to Buy Name Brand Items Wholesale
If you want to stand out from the masses of wholesale businesses more easily, you may be interested in name-brand products. Doing thorough research on the products you want to sell and the companies that supply them is crucial here.
Some wholesale directories offer established, quality products through a wholesale or online marketplace. Websites like eWorldTrade, DHgate, and Tradewheel are some well-known directories. Take your time in researching suppliers and understanding their expectations so you can get off to a good start.
Remember that the more specific and branded products get, the more likely a supplier is to have stringent licensing agreements. Name-brand wholesalers may require you to have a proven selling history or a certain monthly volume before they partner with you. Selling name-brand goods can be a lucrative subscription box business model if you’re interested in kitting.
Why Businesses Buy Wholesale Products
The majority of bulk purchases are done by businesses. They buy wholesale products for various reasons. Allow us to briefly share some of them.
- Buy wholesale items for resale. A lot of businesses purchase wholesale products and resell them to retail customers. These products can also be paired with other goods or products and sold as bundles. For example, companies that offer gift boxes or subscription boxes might purchase wholesale products and include them in their bundles.
- Purchase wholesale products for manufacturing or other business purposes. Restaurants and food manufacturers often buy products in bulk. For example, a producer of sweets might purchase cocoa powder, sugar, fruits, and other products in bulk in order to reduce the cost of goods sold. Some food service establishments purchase only the most essential products in bulk. The reason for this is that suppliers of wholesale products often have minimum order quantities. This can lead to storage problems for restaurants and other businesses.
- Buy bulk to avoid supply chain disruptions or product shortages. The demand for some wholesale products has a well-established seasonality. For example, some products are often included in gift sets and are purchased in the months of November and December. That’s why companies might purchase these items earlier. That way, they avoid the expected increase in prices due to the high demand and the potential for supply chain disruptions.
Do I Need a Wholesale License to Buy Wholesale Products?
If you’re wondering, “Do I need a wholesale license to buy wholesale?” The short answer is yes. Different states may call wholesale licenses a reseller’s license, reseller’s permit, a wholesale ID, or something similar.
There are a few reasons wholesale licenses are required for businesses:
- It allows suppliers to know who they’re working with. It’s much harder to control supply and demand when unregistered individuals are buying at random.
- The government requires businesses to adhere to tax laws. If a business isn’t registered on paper, this can be considered tax evasion (among other concerns) and will be punishable by law.
- It encourages positive relationships on both sides of the supply chain. This includes the food supply chain. Getting a license makes you a known business entity. This means both you and your supplier can adjust your workflow to mutually benefit your business outcomes.
The only legal way to buy wholesale without a license is if you’re a consumer. If you’re a customer of a business that resells wholesale goods to the public, this is not a problem. There are hundreds of wholesale businesses that simply import goods and turn them around at a profit.
How to Become a Wholesale Items Buyer
Becoming a wholesale buyer is a relatively inexpensive and fast process, but it does require doing your homework and having enough money. Here’s how to become a registered wholesale buyer:
- Get your employer identification number (EIN). This document shows the government you’re a real company doing business. You can’t begin selling products or hiring employees until you have your EIN, so make this a top priority.
- Acquire a sales license. This legally permits your business to make sales. The fee and application process differs based on where your business operates.
- Obtain your sales tax ID. A sales tax ID will vary state by state but is required for any business. The government approves a business to collect and submit state taxes based on this information.
- Apply for a wholesale license. Each state has slightly different requirements for wholesale resellers. To learn how to get a wholesale license, go to your state’s tax or revenue website and fill out the reseller application. Typically there is a fee associated, so be prepared for that.
Once all of these steps are complete and your application has been approved, you’ve become a registered wholesale buyer! You can now start contacting suppliers, developing relationships, and helping your online business thrive.
How to Buy Wholesale Items Without a Business
When researching how to buy wholesale without a business, there are at least three scenarios you may come across:
- Buying wholesale as a reseller without a sales ID or EIN
- Buying wholesale as a reseller with a sales ID or EIN but no registered business
- Buying wholesale products as a consumer
Each of these circumstances implies different actions and outcomes. In the first scenario, a businessperson is purchasing goods that they sell without the government’s knowledge. In the second scenario, a wholesaler is selling goods with some of the legal paperwork filed but not all. In the third scenario, a customer is buying wholesale goods for their own private use.
The most common (and only legal method) of these three scenarios is the third, buying wholesale products for personal use. You can find businesses that sell wholesale goods to the public through a variety of methods. These include searching through a B2B online marketplaces and online marketplaces, checking local event listings, browsing online forums, and asking friends or family for references.
Here are just a few popular sources of wholesale goods:
- eBay
- Rose Wholesale
- Loffer
- American Freight
- SS Activewear
- Trade shows
- Craft fairs
- Local events
- Farmers’ markets
- Mom and pop shops
Cons of Buying Products Wholesale
Although there are multiple benefits to purchasing wholesale items, there are also disadvantages to buying products wholesale. That is especially true for smaller businesses that don’t have very high inventory turnover. Let’s examine some of the cons of buying wholesale.
- Large upfront costs. The initial investment needed to purchase in bulk is much bigger compared to shopping from retailers that also offer B2B sales. Small businesses and companies with small profit margins and limited cash flow can find it difficult to purchase from wholesalers with high MOQ (minimum order quantity).
- Inventory management. Keeping optimal inventory levels can be difficult for small and medium sized companies. That’s why some of them will choose to purchase certain products from wholesalers and others from retailers. That’s especially when it comes to perishable goods that have higher storage costs.
- Limited flexibility. Buying wholesale means commitment to these products. This limits a company’s flexibility to switch to more innovative or better products. Companies that buy products wholesale might need to also increase their marketing spending in order to quickly liquidate their stock and purchase new products. Furthermore, wholesale items rarely have customization options which further limits a company’s flexibility.
- Dependency on suppliers. Businesses that partner with distributors are also reliant on them. Problems such as supply chain disruptions might cause significant issues with deliveries. As such, some companies prefer to invest in their own manufacturing and production capabilities rather than buying wholesale.
- Price management difficulties. Buying in bulk means that companies are stuck with a set price for their products. If, for some reason, the market price of the product drops, this can lead to losses for the retailer.
- Warehousing and storage costs. Purchasing wholesale products is only suitable for businesses with good storage capabilities. That is not always the case for small companies.
How to Buy Wholesale Products for Resale
Knowing how to buy wholesale for resale is nearly the same process as buying general wholesale. There’s paperwork to fill out, retail business relationships to develop, products to find and acquire, and inventory management to practice.
The main difference between buying wholesale goods for your use and buying wholesale for resale is the reselling permits involved. If you work with a great, popular supplier, these companies often have more stringent requirements than up-and-coming suppliers.
Your reselling permit likely includes information about the markets you can sell direct to consumer, what types of products you can sell, and sometimes the volume of products you’re allowed to sell. Make sure prospective suppliers answer all your questions before you sign on as a reseller. The supplier you partner with is a pivotal moment for your online business.
Use the following steps to guide you as you prepare to sell:
- Confirm that your business paperwork has been approved by your state’s governing bodies.
- Review the products you’re selling and confirm supplier contact information.
- Draft or finalize your budget and double-check that sales forecasts are realistic.
- Confirm that your online store, website, or both are prepared for sales.
- Get your B2B marketing or DTC marketing plan in place and start reaching customers.
- Strive for a high fill rate. This means you're able to ship products to customers on time, at all times, without resorting to backorder or having to pre order.
Buying Wholesale Is a Great Deal
Once you have the paperwork completed and a buying process figured out, making wholesale sales becomes rather exciting. You have a wide degree of control over the products you resell and your wholesale marketing plan. Use these steps to start or grow your online business and reach new customers. You can even test them out for a new dropshipping venture.
Frequently Asked Questions About Buying Wholesale Products
If you want to build a wholesale online business, it’s important to have a firm understanding of the products you want to sell. Learn more about buying and selling wholesale with the commonly asked questions here:
How Do You Buy Wholesale?
Buying wholesale is the process of purchasing items in bulk in order to resell them to consumers for profit. The wholesale price for goods is typically cheaper than the retail price.
Is It Legal to Buy Wholesale and Resell?
Yes, it is legal to buy wholesale and resell. In order to do so, you must have a wholesale license and a business license that corresponds with your type of company.
For example, if you only sell online, you’ll need an eCommerce business license. If you sell in a brick-and-mortar location, you’ll need a retail license of some kind.
Make sure you also have an employer identification number or federal tax ID. This is how the government tracks your business income and assigns taxes accordingly.
How Do You Qualify to Buy Wholesale?
In order to buy wholesale you must have a wholesale license. This is important for a couple of reasons.
One, it shows manufacturers, retailers, and the government that you’re a lawful dealer of wholesale items. You’re a known entity that’s doing business in an ethical manner.
Two, it reduces and often eliminates sales tax. Most governments treat the expense of a wholesale license as a replacement for sales tax, which eliminates per-unit taxes (which add up quickly).
Is Amazon a Wholesaler?
Amazon is not a wholesale company; they are a B2B and B2C online retail business. Companies that offer goods on Amazon either manufacture their own products, or buy items in bulk from wholesalers and sell them to consumers.
How Do You Buy Wholesale Without a Business License?
To buy wholesale without a business license will require you to purchase items as a consumer; in other words, in a retail environment. You can search for items through B2B online marketplaces, browse online forums, check local event listings, and more. This is also how you can buy wholesale without a tax ID number.
What Does MOQ Stand for in Wholesale?
MOQ stands for "Minimum Order Quantity" in wholesale. It represents the minimum quantity of products or goods that a supplier or manufacturer is willing to sell to a buyer or retailer in a single order. Meeting the MOQ is often a requirement to establish a wholesale business relationship with a supplier, and it helps ensure that the supplier's production or distribution process remains efficient and cost-effective. Buyers who wish to purchase products at wholesale prices typically need to meet or exceed the MOQ specified by the supplier.