It is a blindingly simple business model, and it makes a lot of obvious sense. When you purchase products wholesale, you get each unit for a much lower price, allowing you to then sell it on for a competitive price.
In other words, you sell a lot of them, and you have a steady inexpensive supply. Olympic Eyewear, a company offering men and women’s wholesale sunglasses to retail outlets, says though that this isn’t the only reason low-unit price wholesale orders are a good idea.
When we think of wholesale, we often think of uniformity. Depending on the business and the product though, this can often be seen as a negative. However, it is wrong to assume that wholesale necessarily means uniformity, and we can take a few examples to illustrate this.
The first is Olympic Eyewear again, and the example of inexpensive designer sunglasses for sale on racks in brick-and-mortar outlets or among the impulse buy products on an ecommerce site. Olympic Eyewear actually sell a lot of their sunglasses by the assorted batch. Not every product lends itself to this type of variety but many wholesale orders will contain a variety of products – in this case different sunglasses styles.
Another example of how wholesaling can avoid uniformity is when it is not products that are purchased, but components. A classic example here are the type of ecommerce businesses that provide parts for handmade items.
Often, increased order load presents a challenge for homemade product businesses, specifically because it is difficult to make so many of the products at home. Unless, that is, part of the work is handled by a wholesaler, and preassembled parts (still to be finished off) are supplied instead of finished products. This way, the business can retain the authentic “homemade” badge and handle increased order load.
There are many products that are well-known to be very profitable when sold in wholesale, and therefore these are the ones which businesses often choose. This is especially true when the products are small and inexpensive, and therefore can be sold very easily. But not all products are like this, and sometimes deciding what to source from a wholesaler requires a little more detailed analysis.
It is wise therefore not to give product examples (because, really, the list is endless) but rather to set out what you should consider before selecting wholesale products.
So, here is what to consider first:
Profit margin is defined as the difference between how much a product costs and how much you can sell it for. That sounds quite simple – and it is – but it must be preceded by a sound analysis of what the costs are.
We can give a rough figure here – 42.53% profit margin. Actually, that is a pretty exact figure! But products with roughly this profit margin are a safe bet.
Get the Price Point Right
And being able to sell wholesale products is all about the price point. It’s all about absolute numbers. If you can source a single product for $0.10 and sell each unit for $0.50, then that’s a massive 80% profit margin. However, you would have to sell a lot of those products to see any significant income.
Believe it or not, some very niche products do come wholesale, especially if those selling them have really made a successful business off the back of that niche. So long as they can be inexpensively produced and in large quantities, wholesaling makes sense with niche products too.
Inventory acquisition is one of the central disciplines of business, and it should be rigorously applied to wholesaling too.