Wholesale Secrets Revealed: The Holy Grail Of Wholesale!

By Robert Potter
Posted Monday, January 31, 2005

Like the legendary search for the Holy Grail, the cup that Jesus drank from at the Last Supper, the same "holy crusade" goes on today by veteran and newly anointed business owners for the perfect wholesale, surplus, and drop-shipping resource. They believe that divine intervention will lead them to suppliers that can defeat the economic laws of "supply and demand."

There are more than a few people who try to build an enterprise based on the weak premise that they will able to "score" in demand retail items for their new business, or auction, at either below wholesale prices, or "pennies on the wholesale dollar."

Trying to ride the wave of popular retail products brings out the greed monster in all of us. Pursuing the "deal of the century" has lead some aspiring business owners to risk their startup capital on fraudulent deals and offers.

In this article I want to discuss three of the more sought after sources of product supply, and the "Pros & Cons" of each. I also want to shed a little light on some of the misconceptions people might have about buying “products for resale.” The reality is that not every product will be available through wholesale, surplus, and drop-shipping venues.

Wholesalers: Typically, one of the better places to purchase products for your new found venture. Most true wholesalers will require that you have a "Certificate Of Resale" before you can purchase from them. A Certificate Of Resale, or "Tax & Use Certificate," is not hard to obtain, and costs anywhere from five to twenty dollars depending on the state you live in.

Some states do not require that you even have one. You can obtain the certificate from your State Department of Revenue. To see if your state requires you to obtain such a certificate, and for a complete listing of the Departments Of Revenue in all fifty states go to this website:

Roisyn.com/certificates.html
(http://www.roisyn.com/certificates.html)

Depending on your states procedure, once you fill out the paperwork you can get your "Certificate Of Resale" number the same day. You do not have to incorporate in order to obtain a certificate. You need to be a Sole Proprietor (at the very least) and have an address where you plan to conduct business. Once you have your number you will be able to open a business checking account at most local banks. Most do not require more than a few hundred dollars to get started. Wholesalers will require a minimum purchase price that can range anywhere from 100 to 1000 dollars.

A true wholesaler is usually one step away from the original source of the product. For instance, a manufacturer produces blue widgets and wants to get their product into the marketplace. They will then employ a sales representative to get the product into the market, or they will assign a wholesale distributor the exclusive rights to carry and sell their product line. Some companies are import wholesalers. While they do not necessarily manufacture a product, they will import products from manufacturers in the United States, and from countries like China. A great example of such an importer/wholesaler is the Bnfusa.com:

Bnfusa.com (http://www.bnfusa.com/)

There are a few ways to find wholesale products. Just about every product that is in the distribution chain will usually have a dedicated trade association, organization, or trade publication attached to it. You can find such trade information with the help of the following directory information:

National Association Of Wholesale Distributors

(http://www.naw.org/Content/NavigationMenu/About_NAW/Associa tions/About_Associations.htm)

The above website address will lead your toward associations, ranging from Advertising to Woodworking. You should be able to solicit them for wholesalers within a particular industry. If you want to purchase their membership list (separate from the association listings), you will have to get in touch with them to check their current prices. Other good sources are:

Encyclopedia Of Associations By: The Gale Group

The Encyclopedia Of Associations lists over 100,000 different nonprofit American organizations. If you cannot find what you are looking for from the National Association Of Wholesale Distributors in terms of trade associations, then this is the directory for you. However, you will have to go to your library to find this research gem. You can usually find it in the reference section of any large University, or Public Library.

Publist.com (http://www.publist.com/)

In addition to trade associations, trade magazines are another good source. Publist.com allows you to: "Search our database of over 150,000 magazines, journals, newsletters, & other periodicals. Find FREE in-depth information on familiar and hard-to-find publications from around the world, representing thousands of topics."

Tradepub.com (http://www.tradepub.com/)

Tradepub.com allows you to subscribe to trade periodicals from their web site for FREE! No hidden trial offers to qualify.

ThomasRegional.com
(http://www.thomasregional.com/)

If you are looking for industrial product manufacturers, then this is the directory for you. The Thomas Regional directory will give you access to services from over "550,000 industrial distributors, manufacturers, and service companies."

The Thomas Regional will help you find suppliers in your own state or region. Registration is required, but you can use the directory for FREE! Other free online sources of wholesale information and offers are: Wholesale411.com, Wholesalecentral.com, Wholesalegopher.com, Bizbb.com, Wholesalegopher.com.

PROS AND CONS OF WHOLESALE SUPPLIERS:

Wholesale is the backbone of product supply for any type of new business venture. Large and small wholesalers are usually one step away from the manufacturer. They have the advantage of buying large quantities, and, depending on the type of merchandise, are able to pass along savings to those who are looking for "products for resale." With wholesalers (in most cases) you can be assured of purchasing new product. I can't think of too many "cons" when dealing with wholesalers--other than pricing. There might be items that could be too expensive to sell in the Ebay auction marketplace. Remember, true wholesalers will require that you have a Certificate Of Resale in order to purchase from them.

Surplus & Salvage Merchandise: Another sought after source of supply is retail surplus, closeout, overstock, liquidated, and salvage merchandise. Surplus dealers, and brokers, purchase shelf-pulled, returned, overstock, closeout, liquidated, and salvage merchandise from manufacturers, retail stores, reclamation centers, bankruptcy sales, and just about any business who has slow moving or salvage merchandise.

Surplus dealers buy these obsolete items in large quantities, and then resell them to just about anyone who wants them for their Ebay Auction, Flea Market, Dollar Store, or Retail Store outlet. One of the largest trade associations for the surplus industry is the International Marketing Association Of Surplus Dealers: (http://www.surplus.net). You can find dealers throughout the United States.

Other sources of finding Surplus, Salvage, Closeout, and Liquidated merchandise include the following: Closeoutcentral.com, Liquidation.com, CWSMarketing.com, Commoditysurplus.com, and National Retail Equipment Liquidators (Nrel.com).

PROS AND CONS OF THE SURPLUS & SALVAGE SUPPLIERS:

The "Pros" of the Surplus & Salvage merchandise is that they can offer you a variety of products at below wholesale prices. However you "market your merchandise," you should be able to find a product, or price, that will fit into any business advertising model. In most cases, you do not need a "Certificate Of Resale" to buy products from Surplus & Salvage Dealers and brokers.

The downside is that you have to do some investigative work. Some dealers will want you to buy merchandise in quantity (a pallet minimum, truckload preferred) and you have to visit the company you are buying from to make sure that the product is, as advertised. Also, more than a few S&S dealers want payment in the form of wire transfer which can be very risky. Also, dealers and brokers will sometimes misrepresent the quality of the merchandise they are are selling. Before you consider doing any business with a surplus dealer, or broker, you must read "The Ten Tenets Of The Retail Surplus And Salvage Business." It can be found here:

The Ten Tenets Of The Retail Surplus And Salvage Business
(http://productsforresale.com/articles/index.html)

Drop-Shipping: Supposedly the perfect business model. No inventory, no trips to the post office or UPS. You just set up shop, take the order, pass it along to the wholesale drop-shipping company and they send it out for you. Some drop-ship distributors will even send you ad copy and pictures to help you advertise their products. They can even put your return address on the package! A lot of Retail Catalog companies use drop-shippers as their means of supply.

PROS AND CONS OF DROP-SHIPPING:

There is one obvious advantage to drop-shipping. It is basically a "product less" venture. No need to tie up your money in inventory. Drop-Shipping can fit into any business model, or advertising method you happen to use. However, if you are an Ebay Auction seller you might want to rethink that position.

Finding a drop-shipping company that can deliver on a consistent basis can be tough. Drop-Shipping companies have been known to run out of merchandise. If they happen to run out of the product you are auctioning, asking buyers to wait on their product because it is "backordered," does not inspire confidence.

Your negative feedback rating can pile up real quick. The other problem is expense. Some drop-shippers require a sign-up, or "entry fee" before you even start marketing their products. You might also have to pay for support materials, such as pictures and advertisement brochures for the product you choose to sell.

In addition, when you sell a product from a drop-shipping distributor there are processing fees that have to be paid, in order to get the product out the door and in the hands of your customer. That price can range anywhere from 5.00 to 10.00 dollars and up depending on the item. After Ebay and drop-shipping fees, you can wind up loosing money, or at best, breaking even. Bottom-line, drop-shipping and auction selling don't mix. The best bet for any auction venture is to "own what you sell."

EVERYTHING CAN BE HAD FOR A PRICE-BUT THERE IS A PRICE TO PAY FOR EVERYTHING!

Now that we have reviewed the "big three" let me put them into perspective. There are products that can be obtained through a few of featured supply chains, and then there are products that will never make it to the surplus, wholesale, or drop-shipping market. Example: To get Louis Vuitton handbags through a surplus dealer is almost impossible. Surplus dealers that are promoting LV Handbags are misleading you.

Same is true for people who are selling designer handbags on Ebay in mass quantities. The likely scenario is that they are Chinese knockoffs. Over 80 percent of popular retail products here in the United States are copied in the People's Republic Of China. Those products include Nike, Reebok, Puma, Adidas, Louis Vuitton, Calloway (Big Bertha) golf clubs, and just about any product that enjoys popular merchandising status.

There is no plan by the Chinese government to stop "knockoff" activity because it is a thriving industry that provides employment for the masses. Despite the pleas from American companies to "cease & desist," there is a tepid response from Chinese officials to do address the issue. When raids are conducted, they are "ceremonial" public relations stunts to appear as if they are actually taking action against the counterfeiters.

Another indicator of authenticity is price. You will not find any authentic Louis Vuitton handbags for 30, or even 100 dollars. Most are 500.00 and up. To illustrate this point even further, just think about the popular celebrities of today who are clothes and handbag aficionados. Jennifer Lopez, Britney Spears, Jennifer Aniston, Angelina Jolie, all sport around town with "Louies" that can fetch up to 10,000 dollars for an exclusive style of handbag. Do you think you will ever have access to these items in the wholesale, surplus, or drop-shipping market?

Forget it! You might not even get these in some upscale boutiques! There are people so well connected that they buy up "hot items" like LV Handbags before they even hit the stores. They know who wants these items, and they will purchase whatever is available just so they can have an exclusive for their celebrity clients. Don't get me wrong. It's not that you can't get "designer duds" or handbags at wholesale prices. You will not get high end clothes and accessories that are featured in the latest issue of Vogue, Cosmo, as a "product for resale," in any wholesale environment, unless you spend thousands for the right to distribute such a product.

Even if some of these items made their way beyond the connected channels of purchasing, exclusive clothing and handbag items like Louis Vuitton will have limited distribution in "hand picked' boutiques, and well connected purchasing agents. In addition, there are people in the fashion industry, as well as other branded industries that would rather have their merchandise burned, or buried before it would reach the wholesale, surplus, or drop-shipping market! For more information on designer clothing, and to learn about designer "fakes," please refer to the following websites:

(http://fashion.about.com/cs/tipsadvice/a/fakingit.htm)

(http://www.handbag.com/fashion/howtolookgood/spottingfakes/)

(http://www.fakediesel.com/)

For a healthy does of honesty, and an eye opening perspective concerning the realities of purchasing designer clothes for resale, the Clothing Broker will definitely explode some popular myths about obtaining such items:

The Clothing Broker (http://theclothingbroker.com/)

THERE IS GOLD UP IN THEM THERE HILLS!

Now lets address the Surplus & Salvage Industry. When people first encounter some of the offers from Surplus dealers, or brokers, they tend to suffer from what I call the "I just found Gold" syndrome. A feverish excitement permeates their brain cells, and reduces them to a quivering pile of jelly, leaving their reasoning skills inoperable! A few thousand dollars later, and after coming to the conclusion that their "Golden Opportunity" turned out to be bars of lead, elation, then turns to anger.

It is a cliche, and I hate using it, but it is more than appropriate when it comes to surplus and salvage products. "If it sounds to good to be true, it probably is!" Some Surplus dealers will hone in one at least one of seven deadly sins--greed! As with wholesale, you will never get certain products for "pennies" on the dollar. One type of surplus product category that has some people loosing their minds is surplus and salvage electronics.

The problem with electronics is that they have a low profit margin even when they are brand new. Finding surplus dealers with working, undamaged, electronic products can be a daunting task. Most salvage electronics can be in pretty rough shape. See Techliquidators.com: (http://techliquidators.com)

What you are getting from most Surplus Dealers, or companies who specialize in electronic salvage is someone's customer returns, i.e., "junk!" Unless you are a electronics technician, or recycler, then I would stay away from "salvage" electronics.

Even product that is not damaged, and still in the box or retail blister pack, can have a pretty high surplus price. If you find that someone is offering you a electronics item, be it a DVD Player, or Xbox, for eight dollars a unit, then "buyer beware."

For a further explanation of the surplus industry, and how you can avoid "purchasing pitfalls," I would suggest that you read the: "The Ten Tenets Of The Surplus and Salvage Business" found here:

The Ten Tenets Of The Surplus & Salvage Business
(http://www.productsforresale.com/articles/index.html)

GETTING DROPPED BY DROP-SHIPPING!

My last critique, and word of caution is about drop-shipping. You might have access to information about drop-shipping companies that would prove me wrong. I will not argue with anyone who is dealing with a dropshipping company who is serving them well. However, I will tell you that dropshipping is a risk. I really can't recommend any type of guide, or information that would lead you to a reliable source of drop-shipping companies.

Unlike surplus and wholesale, where you physically own and control the product, that option has been taken out of your hands. You are entrusting a company to ship products directly to your customers. If you get involved with a company who cannot deliver, or who is back ordered, you can find yourself with some very irate customers. Sign up fees, shipping fees, and expenses for support materials can really affect the bottom line.

Also, most drop-shipping companies like to send out product in volume. If you are selling just a few items per week, or per month, it might not be worth if for a drop-shipping company to deal with you. Large retail catalog companies use drop-shipping or "fulfillment" houses, but these companies cater to large scale operations.

The bottom line is this. When it comes to finding product supply for your business it pays to do your homework. Visit the company facility when you can. Never wire any money into a company account. Use a credit card, or Escrow service to protect yourself should your supplier not deliver, or send you defective merchandise.

Understand that you will not be able to get the latest and greatest technology or fashions at surplus and below wholesale prices. If you follow all of these rules, and you use common sense as your "crusade" you just might be able to find your own "Holy Grail," of wholesale product supply!

About the Author
Robert C. Potter is a wholesale and retail surplus products specialist. He is the author of “The Ultimate Guide To Products For Resale!” Over 300 Wholesale & Surplus Supply Sources For Ebay Auction Sellers, E-Commerce Websites, Flea Market Vendors, and Retail Store Owners! You can find his 160 page ebook at: (http://www.productsforresale.com).