Important Wholesale Sourcing Tips You Need to Know

2021-05-19

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If you are planning on starting a retail business, you need to research two things: your prospective customers and your wholesale suppliers. Most retailers buy products from wholesalers such as an Alibaba Sourcing agent and do not manufacture them. This benefits you because wholesalers will not only become the source of your merchandise but will be a good support to you with your evolving needs. To make profits, you will have to buy bulk quantities at competitive prices.

Suppliers like Alibaba Sourcing agents will give you large quantities at greater discounts because you are helping to move his inventory and putting liquidity in his hands. The more successful you are in selling large quantities, the more advantage you can take of price breaks on large purchases from the wholesaler. Initially, you may find the task of locating a trustworthy wholesaler daunting. You may also wonder how price negotiations are done. Following are some tips that will help you to start your retail business.

What does buying wholesale mean? 

Purchasing wholesale will ensure that you have sufficient inventory at any given point in time to fulfill your orders. In addition, your profits will increase as you buy more and more in bulk. Increased sales will lead to an increase in quantities purchased from the wholesaler and a better price bargaining position for the retailer. Wholesalers such as Alibaba sourcing agent is a middleman between the retailer and the manufacturer. A retailer gets a discount from the wholesaler because they buy in bulk. A retailer's profit is the difference between the wholesale price he pays and the retail price that he sells at.

Finding the right wholesaler

The best way to find a wholesaler for the product you are looking for is by using the internet. You will be able to find both local and international wholesalers. Make a list of all the wholesalers that suit your requirement and inquire who will give you the services of drop shipping.

The second method to locate wholesale suppliers is to go through directories that list wholesale suppliers. This will help you locate the best suppliers in a minimum time. It may prove beneficial to check classified ads in trade magazines advertising wholesalers in your industry. 

Thirdly visiting trade shows will bring you in contact with wholesalers looking for retailers for their products. If you are satisfied, then you can do business with them there and then. Otherwise, make notes of all options and get back to your office and do additional research before committing yourself to any terms.

In case you are going to deal in a branded product, then get in touch with its manufacturer and request wholesale prices. This way, you can maximize your profits. In case they refuse, then take reference of wholesale dealers of their products and crack a deal with them.

Other ways to find wholesale dealers include contacting the chamber of commerce of your area or getting in touch with other entrepreneurs. Networking is a good way to find reliable wholesalers.

Choosing a wholesaler

Once you have listed down the wholesalers you think are suitable, go online and read reviews written by other retailers with experience of working with them. Some options could include sourcing agents on Alibaba. This will enable you to make a decision to contact them or not. After making a list of wholesalers that seem right to you, be cautious of fake wholesalers. Sometimes, an internet search may lead you to scammers who can cheat you by mediating between you and the genuine wholesaler. They will book your order at a marked-up price and forward the order to an actual dealer. Your profit margin will come down, as you will be paying more than you would have if you had dealt with the genuine dealer.

How to detect an illegitimate wholesaler?

  • If the wholesaler asks for a sign–up or monthly fee.

  • They don't ask for a sales tax ID.

  • Their website does not have full contact information.

  • You get claims from him about the earnings to expect. 

  • Unrealistic deals and additional services offered by him

Steps to be taken after finalizing a wholesale distributor

Finalizing a wholesaler is not the end of the task. To make sure that you have made the right decision, ask for references from him. In addition, go online and study any complaints and reviews from other retailers dealing with him. You can put up questions to other retailers on an online forum of businessmen and get their advice.  

After this background check, clarify all the terms and conditions with the wholesale distributor before finalizing the deal. You may want to find out how much time they take to process an order, what is their return policy, how do their discounts change with volume. You may also ask for samples to ensure that quality is satisfactory and your customers will receive standard quality. 

Also, before signing the contract with an agent such as an Alibaba sourcing agent, do not hesitate to negotiate all the terms that are crucial for the smooth running of the business. These include the time of delivery, pricing, and minimum order to see that they suit you. You can also get the contract reviewed by your lawyer in case you have overlooked something.   

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Choice of wholesale partners depends on goods to be sold 

If you plan to retail in a wide variety of goods, then look for wholesalers who have all the goods you need. Options could include an Alibaba sourcing agent in China. Or else deal with different wholesalers for different goods to build up your inventory. Always ensure the kind of goods the wholesaler sells supports your retail store for consistency.

1. Price Point is crucial to profits

The purpose of starting a retail business is to make a profit. When you decide on a supplier, it goes without saying that his pricing should be such that you should be able to make profits.

2. Choose a reliable wholesaler

Avoid working with people who are unreliable. Wholesalers who do not deliver on time, do not deliver at all, or send damaged goods will cause a lot of harm to your business and should be discontinued immediately.

3. Good Customer Service is important

The company you choose to work with should have a dependable customer service set up that you can contact in need. This is important for the smooth running of your business. A company where no one is around to answer your queries or keeps passing your queries from person to person is not worth the while working with.

4. Knowledge About the Product is important

The wholesale company you decide to work with (such as sourcing agents on Alibaba) should be well informed about the products they sell. This allows you to keep your customers well informed about the products you sell. It also makes you feel confident that your wholesale partner is sure of the quality of products they sell. If the distributor cannot answer your queries about the products confidently, it could mean their goods are not of the best quality. Also, being ignorant about them shows a careless attitude.

In either case, the distributor is not good for you.

5. Do they provide Drop Ship service? 

If you plan to sell online, it is to your advantage to find a wholesaler that also provides a drop-ship facility. Under this facility, the wholesaler will not only provide storage for your inventory but also ship your orders to customers. When a customer orders from your e-commerce retail store, the order information is passed to the wholesaler, who will ship it straight to the customer. This allows you to save spending on shipping and storage. But to maintain your reputation, you must ask for samples of all the products you plan to retail from your wholesaler to check quality. Fake drop shippers have caused many startups to close prematurely, so choose them very carefully. To identify fake drop shippers, look for the following seven signs:

1) Insufficient contact details

Dropshipping wholesalers may not be able to create an appealing website due to a lack of proficiency and funds. But it is expected from them to give important details like several contact numbers, address, and other basic information. Wholesalers who do not provide this essential information cannot be trusted, and time should not be wasted negotiating with them.

2) Direct sale to public not acceptable 

Dropshipping wholesalers are different from routine businesses as they keep inventory for e-commerce retailers. They also execute the orders on behalf of the e-commerce retailer. Many e-commerce retailers do not want to keep stocks and execute orders. Any drop shipping wholesaler that is indulging in direct sales to customers is definitely fake. No explanation on their part as to why they are doing so is justified because they are breaking the basic rule of a drop-shipping wholesaler.

3) Promise of high margins

A drop-shipping supplier cannot give you high margins on products. The reason being that they have to bear the entire cost of storage and execution of orders. Thus, if a supplier claims that they will give you high margins to enable you to earn quick profits, they are not to be trusted. Avoid getting into business with them. There is a great possibility that either their packaging is inferior or the quality of goods is poor. You will end up with large returns from dissatisfied customers. This will lead to loss of reputation and increased costs. Avoid all such suppliers.

4) Not ready to provide samples

When negotiating with dropshipping suppliers, ask for samples from them. This enables you to check the quality of the merchandise. Also, the legitimacy of the supplier is confirmed. Anyone who is not genuine will hesitate to give samples. If they ask for some more time, be sure they are buying time to create imitations of the original products. Beware of such fraudulent suppliers and do not enter into any contract with them.

5) Demand membership fees every month

This is a very common trap set up to cheat startups. Genuine drop shipping suppliers never demand a fee for keeping inventory. They get paid on every order. Thus, avoid suppliers demanding membership fees or service charges, as they are fake and not trustworthy.

6) Does not want to enter into a contract

It is prudent to get into a written contract with the drop-shipping supplier. This way, you eliminate any kind of ambiguity in terms and conditions between the two parties. In case the supplier does not agree to get into a written contract, then he is not a genuine dealer, so must be avoided. Only people who are fake do not want to get into a legally binding contract.

7) Beware of middlemen pretending to be drop shippers

Be careful not to be taken for a ride by a group of people who are not drop shippers but middlemen pretending to be genuine suppliers. They are a disaster, especially for start-ups. They forward your orders to the actual suppliers and eat away into your margins. To identify them, place a few test orders without the knowledge of the supplier. This will reveal the real situation and help you distinguish between a genuine supplier and a fake middleman.

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What is the best approach to source for wholesale?

1. Precaution is a must if you choose to buy from manufacturers directly 

Normally, online sellers purchase products from wholesale suppliers. These wholesale suppliers function as middlemen between the retailer and the manufacturer. So, one would think purchasing directly from the manufacturing firm would translate into higher profits for the retailer, but in reality, it is not so simple. 

In reality, the manufacturers have no time for marketing and selling their products. The distribution and promotion of products are too time-consuming for them. They rather want to concentrate on the manufacturing aspect of their business. Thus, they outsource the selling and distribution aspect of their business to middlemen. This way, they make great products, and the wholesale supplier brings them customers. 

So it would be difficult to find a manufacturer who is not averse to selling bulk quantities to a retailer. In fact, even if you find such a manufacturer, his motives will seem rather suspicious. You would wonder why they are not selling through a genuine wholesaler like other producers in their field. The doubts that would trouble you would be that they are fraud manufacturers, or even if they are genuine manufacturers, their products are inferior in quality. Also, middlemen may not be prepared to sell them to save their reputation. 

Sometimes the manufacturer is very small and so does not appear on a wholesale supplier’s list. A seller can take advantage of this situation by becoming their sole distributor. This way you can negotiate for a better price. If you pass on this saving to your customer, then you can establish a market reputation of offering the best price and enhance your business. 

The flip side to this situation is that a small manufacturer may not be able to perform in times of peak demand season. They may not be able to fulfill spikes in orders during festivals and holiday seasons. This will negatively impact your reputation as a retailer. 

So, if there is a manufacturer who is happy to sell to you directly at discounted rates, be extremely happy. However, do ensure beforehand that he will not let you down in times of high demand.

2. If you choose to buy from wholesalers, negotiate well 

A personal relationship with a good sourcing agent can be used to your advantage. Try and work out a better deal for yourself and your supplier. 

One way is to ask for an early bird rebate. Make full payment before time and ask for a discount of 2-5%. Your supplier will be happy to oblige because you put money in his hands. Their purchasing power improves with enhanced liquidity. 

You have to make sure that the discount you get on early payment is to your advantage in terms of financial gain. Work with your accountant to calculate whether your earnings will be better from interest income on money kept in your own accounts. Calculate whether you can make more money by investing somewhere else. 

Negotiate with your supplier about who is to bear the cost of shipping. Some suppliers are happy to bear the cost of shipping if the order is of a certain amount. It will be advantageous to increase the size of your order to save expenses on freight. Suppliers will not be open about this option, so before entering into a contract with them, negotiate all the terms.

To conclude, improving your profits and inventory is directly related to how you purchase from wholesalers. Thus, spend enough time researching what terms and conditions you have to settle with your wholesaler supplier. The prices at which you buy from the supplier like an Alibaba sourcing agent in China should work for both for the association to last in the long run. The bottom line is to work with suppliers who deal in good quality products, are dependable, and can back you in your growth. So good research work and calculation of numbers ahead will help you make smart decisions for the growth of your business.

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