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Buying Wholesale Basics

7th Apr 2013

There can definitely be a great deal of profit made when it comes to buying products wholesale and then reselling them retail. The key is not only finding the right product, but also the best distribution source. Before we can begin picking a product or wholesaler, you will need to have your Tax ID and a Vendor's license.

Obtaining Tax IDs

Wholesalers do not charge sales tax when you make a purchase because as a reseller you will be charging the sales tax to your customers. The majority of wholesalers will require your sales tax ID number in order for you to make a purchase. You may probably need a State Sales Tax ID and may need a Federal Tax ID (depending on whether you have employees and what you plan to resell.

State Tax ID

"A state tax ID is established for the purpose of collecting sales and use taxes from customers and subsequently submitting those taxes to your state's revenue department. Some states refer to it a seller's permit or a resale license. You can obtain a state tax ID through your Department of Revenue, Tax Board or Board of Equalization. Anyone who collects sales tax from customers will need a state tax ID."
See Is a Tax ID Needed to Sell Wholesale? for more comprehensive details on federal and state requirements.

Obtain a Vendor's License

If you plan on reselling your products at physical locations such as festivals, flea markets, fairs, etc., you are likely to be required to have one or more vendor's licenses. Check with the SBA or your state, city and county sales tax offices for local requirements.

Choosing a Product to Resell

Once you have your paperwork in place, it is now time to choose and locate products to resell. It is best to go with a product that you use personally and believe in. First narrow down your list of potential products to ones that you actually use. Then spend some time doing research and price comparisons. Look to see which products will give you the most return for your investment. For example, our sunglasses can be purchased wholesale for as little as $8 per dozen. On average they are sold retail for $6.95-$14.95 per pair. Our polarized sunglasses usually retail for $19.95-$24.95 per pair.

Because of the excellent profit margins, sunglasses can be an excellent product to buy wholesale and sell retail.

You will have to decide yourself which products best suit the audience you will be targeting.

Types Of Suppliers

When it comes to the types of suppliers there are three popular options: Manufacturers Distributors Drop shippers

Manufacturers

A manufacturer is the company that actually makes and produces a product, and therefore will often require you to purchase in large wholesale quantities. Not all manufacturers will deal directly with retailers. If you find a product that is made by a specific company that you would like to resell you will first need to contact that manufacturer. First ask if they will deal directly with you. If not, ask them for a list of their distributors.

Distributors

Think of a distributor as a middleman between you and the manufacturer. As mentioned above, if the manufacturer will not deal directly with you, you will need to go through one of their distributors. The upside to this arrangement is that you may may be able to purchase smaller quantities through a distributor than you would with a manufacturer.

Drop Shippers

Another popular option when looking for a supplier is to use a drop shipper. The upside to using a drop shipper is that you do not have to buy inventory in advance. The drop shipper will ship the product to your buyer AFTER you make each retail sale. Make sure any drop shipper you use will use mailing labels from you and not include their own promotional information in packages they send to your buyers. You don't want to be taking on the cost of building a customer base only to be handing it over to them! The downside to using a drop shipper is that there is much less profit in each sale.

Locating Wholesale Suppliers

Two of the most common ways that retailers find suppliers is by searching online and by attending trade shows.

Finding Wholesalers Online

By simply doing a search for wholesaler online you will quickly notice there are hundreds of businesses declaring themselves as a wholesalers. Please note that many of these are not true wholesalers. Be wary of any companies that require you to purchase a membership or pay unknown fees for their services.

Wholesale Directories

  1. WholesaleCentral.com Wholesale Directory
  2. Top Ten Wholesale Buyers and Suppliers
  3. The Thomas Register of Manufacturers and Distributors
  4. Salehoo is a DropShipper Directory

Trade Shows

Another great way to find products is by attending trade shows. You will be able to meet face-to-face with companies that interest you. You will get to see the products close up and in person. Trade shows are also a great way to see what new products will be available.

Whichever products you decide to resell, buying wholesale and selling retail can be a great way to make some extra profit.

Even if you are just looking to add one additional product to your shelf space, consider buying wholesale to resell. Because CTS Wholesale is a manufacturer, we can offer the best quality at the lowest prices. We are one of the rare wholesalers with no minimum order. This allows our retailers to add one additional product at a time and grow their business as the products pay for themselves.

We would love to be your wholesale supplier. Give us a call at 1-800-796-3486 or click on the live chat link at the top right corner of our blog.