People who re-sell online are always looking for a bargain. They go to yard sales, peruse trade portal listings, look for manufacturer closeouts, to identify products that can be purchased in volume at a low price and sold for a profit. Unfortunately, one of the problems with bulk purchasing is that the allure of the low price can cause even the most sensible entrepreneur to set aside common sense principles of good business buying.
Know your trading partner
Unfortunately, there are a lot of scams in the surplus and liquidation business. It's not that hard to put up a respectable looking website and make lots of offers that won't be honoured after money changes hands. How do you figure out who you can safely work with? You can read our article on evaluating suppliers which provides tips on ferreting out the scam artists (such as checking to see if a vendor bank account is a business account or a personal account). Even better, you can stick with vendors you find through the eSources verified suppliers directory.
Understand the merchandise
You need to understand exactly what you are buying. Why is there bulk availability of this product? Is the manufacturer going out of business or is this a reject batch from an ongoing concern? Does the product meet any applicable standards, e.g., electrical safety, child safety and so on? How many of these items are you purchasing? If there are 40 cases, how many items to the case? Is the pallet of product all the same, e.g., are there name brand items on the top and knockoffs on the bottom?
Understand the cost of purchasing the product
How much will it cost for you to move the product to your storage facility? Will you need to spend additional time working with the product to assemble, package or otherwise manipulate the item or items? Will the product require any unusual handling or shipping materials? Each of these factors will add cost that needs to be factored into the price.
Confirm the market
This is a huge question. It's very exciting to come across several pallets of x merchandise at a fraction of the price and yes, it happens all the time as an importer abandons inventory at the warehouse or a shipment is the wrong color for the original purchaser but will work for you, etc. If the price is low enough, you may well be able to accommodate any special handling the merchandise requires. But, is there a market that will purchase this product? Will they purchase at the price you are offering?
Develop a marketing plan
Okay, you know the costs, you know the markup, there is a market that will buy the product at that price. Do you know how you are going to find and sell to that market? In other words, do you have a marketing plan that will move the inventory in a timeframe that makes tying up the money in the inventory worthwhile? If you are going to need to develop a whole new customer base for this product, you may want to re-think buying the product in bulk. That's the time to so some trial selling, not burden your business with a lot of product.
So is the bottom line that you should never take advantage of a bulk buying deal? Absolutely not! The key is to follow the sensible rules of trading:
- Check out the supplier to be sure it's reputable;
- Be sure you know what the 'bulk' contains. Get assurances in writing.
- Calculate all costs of handling and be sure you can sell at a profit.
- Look for deals within your area of business so that you already have a built in customer base who will purchase these items.
It's always satisfying to score a coup by buying low and selling at a bigger profit than usual. Keep your eyes open and your business hat on while you search for those deals.