Buying wholesale: Who can buy from wholesalers and how?
If you're wondering where to buy wholesale, or how to go about it, read on for all you need to know about the world of wholesale
Wholesale, or wholesale distribution, means the sale of goods to people other than the day-to-day standard consumer. The products are sold on the premise that they are to be used for business purposes, therefore, those who buy wholesale are usually retailers, industry workers or those engaged in professional business.
However, thinking that wholesalers will only trade with established, fairly large businesses is a common misconception.
In fact, all you need to purchase wholesale is the provable intention to use the stock for commercial, rather than personal, purposes (i.e: you have to prove that you're buying the stock to trade or use for business).
However, you don't need to have a shop or even be in charge of an office full of staff to buy from a wholesaler. They are just as happy to sell to sole traders as much as they are to large corporations.
Read on to unpick the finer details of buying wholesale, and we'll point you in the right direction for when it comes to selling-on your stock.
On this page, we will cover:
- Why buy wholesale?
- What does ‘for trade only’ mean when you’re buying wholesale?
- What proof of trading do you need?
- What are the minimum requirements when buying wholesale?
- Trade cards – are they a necessity?
- Why is the stock so cheap?
- What if I want to buy products from abroad?
Why buy wholesale?
There are lots of benefits to buying stock from a wholesaler, an amicable price point being just one of them. Here are some of the other top reasons that make buying wholesale completely worthwhile:
- Merchandise priced at great price points
Wholesale prices are way lower than normal retail prices, so by going to a wholesaler, you could be getting in stock at a lower stock than your competitors, but then selling it on at a similar (or competitive) price point.
- A wide variety of goods will be available
Wholesalers tend to have lots of stock and lots of choice at an undeniably good price. This is great if you're looking to buy a lot of stock in, but be mindful not to get carried away. It's easy to be lured into the trap of “this is cheap, I'll buy it because it's at a good price”. Make sure you'll have the scope to sell it before you buy it.
- Brand familiarity
Customers are more likely to purchase brands they know and trust. Wholesalers sell branded goods at a fraction of the cost, so you can stock up on the branded goods your customers want, at a fraction of the cost.
- Lower shipping, delivery or collection costs
Instead of having to make multiple purchases, costing you multiple rounds of shipping costs, as you buy in bulk from a wholesaler, your shipping, collection or delivery costs will be significantly reduced. Also, if you're travelling to the depot yourself, doing one bulk shop will mean that you're saving on both petrol and time.
- Freedom and agility
Whilst some of the larger companies might be tied to buying wholesale, as a smaller startup you have the ability to shop around. Buy wholesale when it suits your wallet, but then, you still have the freedom to shop around for something a touch more unique, should the mood strike you. It's a win win situation really.
What does ‘for trade only' mean when you're buying wholesale?
By their very nature, almost all wholesalers will state they are for ‘trade only', but if you plan to buy stock and sell it on, you are technically a trader – you don't need to have a limited company behind you to be eligible. Wholesalers are mostly ‘trade only' for the benefits accrued from their manufacturers, for tax purposes and, of course, to set them apart from high street stores.
If a wholesaler only wants to sell to the ‘big boys', then they will have large minimum purchase requirements. However, this is a rarity and minimum orders are often just £50 to £100 and in some cases there's no minimum order at all, whilst some will only have a minimum order for your first purchase.
What proof of trading do you need?
Most wholesalers are happy to sell goods to you without proof of being ‘in the trade', but some will demand evidence that you don't plan to use their products for your own personal use.
Again, if you are a budding sole trader new to wholesaling, this is nothing to fear. Proof of trading can be easily provided in the form of a business card or a letterhead bearing your trading name. An invoice from another wholesaler or a bank statement from your business account will also be sufficient to kick off your trading relationship.
If you're looking to set up a business bank account, then your first port of call should be to find out what a merchant account is. Follow the link to find out all you'll need to know about setting up a merchant account and what steps you can take to get one.
What are the minimum requirements when buying wholesale?
As with many aspects of buying wholesale, there is great variation as to what individual wholesalers will require of buyers. If your local wholesaler demands a large minimum order or other unhelpful conditions from you, it makes obvious sense to visit other wholesalers until you find one that best suits your needs.
Some wholesalers don't even insist that you take the whole ‘batch' (the groupings of goods that wholesalers put together to sell on) so you are able to pick and choose exactly how much of a particular product you need.
So, if you are afraid of approaching your wholesaler, the message is don't be. The difference between wholesalers and retailers is less than you may think. You may have to jump through a few more hoops for your supplier but, essentially, both want your business – the vital difference being that wholesalers will cost you vastly less money.
So have a look around – the wholesaler that could save you a large chunk of your budget could be just around the corner. For example, have you heard of Amazon Business? Registering an Amazon Business Account will save you £50 off your first £100 order. It's free for any verified business to create an account and you can benefit from loads of extras like special product delivery and assisted purchasing solutions for any business, any size.
Trade cards – are they a necessity?
Trade cards are issued on behalf of wholesalers to reward loyalty from businesses who buy their goods. Working much like standard retail store cards, trade cards also allow you access to a wide range of wholesalers and are a valuable sign that you are an established trader.
Some wholesalers issue a trade card as a sort of membership card – showing that they have verified you as a trader, allowing you repeat access to the premises explains. If a wholesaler runs such a scheme, then the only way you'll be able to buy from them is by obtaining such a card.
Trade cards a usually free and can be easily obtained by filling in a few forms and providing proof of trading – again, letterheads and business cards should suffice.
Although not all wholesalers run a trade card scheme, if you flourish the card when approaching a new supplier they will be happy to sell you goods as a recognised trader.
Why is the stock so cheap?
The reason that small firms can save money by buying wholesale goods isn't because they ‘fell off the back of a lorry' and ended up in a warehouse via the yellow Robin Reliant of a cigar-smoking market trader from Peckham. There are many, wholly legitimate, reasons why wholesale products are so cheap.
The stock may be end-of-the-line products that have been replaced by an updated model or design but are still perfectly usable. You will need to do a bit of research to find out what kind of condition these goods are in, but most wholesalers clearly label their stock and what you see is generally what you get.
Many wholesalers also stock catalogue or chain store returns. When a customer returns goods to a catalogue company, for whatever reason, the product is automatically sent with other similar items to be sold off by wholesalers. The wholesaler then breaks these batches up and sells the goods off in smaller quantities at a massively reduced price. Small firms normally make the biggest savings when buying products from wholesalers in this way.
Also, the standard wholesale trade price is often simply much lower than the retail price. Most shops work on a comfortable profit margin, so the discounts from buying regularly and in bulk from wholesalers can be massive.
What if I want to buy products from abroad?
Importing products from abroad is a great way to expand your inventory. However, in light of Brexit, it's probably best to avoid importing from, or manufacturing in, mainland Europe as it's about to get very expensive to do so.
But for sole traders, it’s understandable that the complexity of international invoice payments, shipping, and taxes can be a deterrent.
When it comes to international invoice payments, there are ways to make them easier – and less expensive.
One idea is to look outside of your bank. While banks are common for sending foreign payments, they can be unnecessarily costly.
How? Banks and services like PayPal make money when businesses pay or get paid in foreign currencies. They inflate the exchange rate without telling you, and take that markup as profit. They also could charge a fee to your recipient if they’re receiving your payment in a foreign currency.
Here we'e covered the basics when it comes to wholesale purchases. Turns out, pretty much anyone looking to purchase for business purposes can shop wholesale, whether that business is big or small.
You should now be familiar with the virtues of purchasing stock from wholesalers and what the potential limitations might be to your company.