Buying wholesale: Who can buy from wholesalers and how?
It’s a misconception that only established businesses can benefit from buying wholesale, as long as you’re trading you're eligible. But what does that mean?
Entrepreneurs new to wholesaling often fear approaching their suppliers because they mistakenly believe that wholesalers will only trade with established, fairly large retailers.
Happily, this is not the case. 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 as happy to sell to sole traders as they are to large corporations.
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 ensure that they do so by having large minimum purchase requirements,” says Grady. “Very few do this though and minimum orders are often just £50 to £100. Some wholesalers don’t have a minimum order at all and some 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.
How to pay for products from abroad
Importing products from abroad is a great way to expand your inventory. 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.
An alternative to consider is TransferWise.
Unlike banks, TransferWise provides the mid-market rate and only charges a small upfront fee, which you can see before you make your payment.
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. Take a look at our guides on finding the right wholesaler and how to approach wholesalers and our brief tips on dealing with wholesalers for more advice.
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 – it shows that they have verified you as a trader and allows you access you their premises,” explains Grady. “If a wholesaler runs such a scheme, then the only way you are likely to 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.
Firstly, by simple economics, buying in bulk shaves a significant amount off the retail price. Also, as you are dealing with wholesalers keen to offload their goods, not the perfume counter at Harrods, these savings can be increased even further by a spot of persuasion (i.e. haggling – more of that later).
The stock may be end-of-the-line products that have been replaced by an updated model or design but still perfectly useable. 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 break these batches up and sell 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.
The economic picture
Despite the current gloomy economic outlook, these are generally very good times to buy from wholesalers. There are plenty of new suppliers sprouting up across the UK, forcing existing wholesalers to remain competitive and keep their prices down.
Entrepreneurs working from home, in particular, are finding that significant profits can be made when dealing with wholesalers. With few overheads and a supply of good value goods, home workers are enjoying a fruitful time, even those who are part-time.
Of course, it is worth remembering that wholesaling is divided up into many different sectors, each with its own different economic position.
“It really depends on the products being sold by the wholesalers,” says Grady. “For the ‘easy to get hold of’, more common products, such as giftware and household products, I think this is a competitive time.”