How To Avoid Buying Wholesale Products for Resale Disasters

disasterous wholesale products for resale

 

Are you mesmerized by the concept of buying wholesale products and reselling them – buying low and selling high?  Have you already tried it with disastrous results because of poor planning? If you don’t follow a sound business plan, you can lose money, time, valuable floor space, and therefore your customers’ confidence.

The story below illustrates what can happen if you count your chickens before they’re hatched.

Rebecca was on the board of directors of a non-profit organization that had a supporting thrift store.  At monthly meetings, she saw the stats for the store but knew little of the day-to-day operations.

Rebecca got a flyer about a wholesale warehouse and thought it would be a brilliant way to boost store revenue – buy wholesale products for resale.  The board agreed, and she went on a shopping spree.  The number of bulk items, all from China, was overwhelming.

After selecting a few things, she came to crates filled with rubber chickens in dresses and knew she’d hit pay dirt.  The chickens were unique, she found them very adorable, and the low price was insane.  The wholesaler had a minimum purchase amount, so she walked out with 584 rubber chickens, loaded them in her car, and couldn’t wait to see the manager’s smiling face when she dropped them at the store.

The store manager, (who wasn’t exactly smiling), was instructed to mark the chickens $2 over the unit purchase price and to display them at the front door.  Six months later, the display remained with 583 chickens, and a sign reading, “Free with any purchase”.

Rebecca hadn’t taken into consideration the store was in an older ethnic neighborhood whose residents had fixed incomes, and therefore shopped for necessities.  Nor had she’d considered the chickens had lead-based paint, and the dresses were sewn so poorly they fell apart easily. It also became clear not everyone found the birds as adorable as she did.

If you’ve thought of trying the wholesale waters, start with your big toe instead of diving in, and consider the points below lest you get hit with a tsunami.

State Your Objective

What do you hope to accomplish by buying and reselling wholesale supplies?

Who Are Your Customers?

Review your target customers’ profile.

What Do Your Customers Need/Want?

Which categories/sub-categories of merchandise have the highest sales?

What role does quality/quantity play in those sales?

Which merchandise provides the highest ROI?

Pre-determine which wholesale items will meet the needs/wants of your customers.

Identify Your Competition

What competition do you have regarding the specific merchandise?

What advantage do you have over your competition?

Shop Around

Identify the wholesalers selling the items you are looking for.

Compare prices, quality, and minimum purchase amounts before choosing a wholesaler.

Will Purchasing Wholesale Products For Resale Meet Your Objective?

If there is a minimum order amount, you must calculate how many items you would need to sell for your break-even point, then you compare that number with your average sales totals in the same group.

Compare the needed number of sales with the saturation point of sales.

What is the anticipated time for the needed number or sales?

How long do you anticipate it will take to get the needed number of sales?

When you compare your ROI with buying and reselling wholesale merchandise with other revenue generating possibilities, such as advertising, improving fixtures, sales incentives, etc., will you get the best bang for your buck?

 

Simply put, if you don’t do your homework as you would for any other part of your business, you may get stuck buying 583 rubber chickens you won’t be able to unload at any price, even free, (unless it’s to another thrift store without a strategy).

Be sure to share this with your board of directors!