Guide to buying wholesale products for business

Ailene Amaro
Nov 19, 2020
Guide to buying wholesale products for business

The crisis brought about by the pandemic is dragging on. Retail apocalypse, as experts call it, has impacted brands big and small in every part of the world where COVID-19 is. In the Philippines, the food industry, for instance, has suffered and pivoted down due to more than six months of lockdown and social distancing measures. Although the government and other financial institutions have readily offered the best loans, some are still suffering the crash and struggle to again attain normalcy in their finances.

According to a study by the Asian Development Bank (ADB), over 70% of medium and small businesses in the country have cash flow problems. Thus, old and new business owners have turned to the online platform for refuge. E-commerce has taken over and online sellers are now more actively looking for cheaper suppliers so that they could offer more affordable products online. Today, better business for retailers starts from finding the best priced wholesale products.

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Wholesaler vs supplier vs distributor

If you’re new to the business world, it could seem quite confusing to differentiate a wholesaler from a supplier and a retailer. The Philippine online selling platform even bred smaller traders known as resellers. A supplier is someone who bridges the manufacturer and the wholesaler. The supplier directly buys the products from its producers and sells them to the wholesalers. The wholesalers will then need to look for retailers who will also buy in bulk at a relatively higher price. Suppliers can also be manufacturers, packages, and processors.

Buying wholesale

Wholesalers are generally known as the middlemen between the retailer and the supplier. Wholesalers are traders who buy directly from those who supply the product. Wholesale purchase is usually done in bulk at a discounted price. A Php75 wallet posted on Lazada costs as low as Php25 pesos each when you buy 200 pieces from a wholesaler. Most of the time, the wholesaler will set a minimum order of quantity (MOQ) for the retailer so that the goods will be given the lowest price possible. Discounts are bigger when a retailer reaches the maximum MOQ required.

Deciding on whether you become a wholesaler or a retailer highly depends on your funds. If you want to buy in bulk at the lowest price possible, then you can choose an online loan with low interest to source the money you need for huge purchase. However, limited funding can let you settle into being a retailer at first. You may not want to risk your lump sum and would still opt to sell directly to customers which translates to a bigger profit from the retail sale.

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Finding and choosing the best wholesaler

Gone are the days when you still need to go directly to factories to buy in bulk. These days, wholesalers are already available online. There are Facebook groups especially created to accommodate direct suppliers and manufacturers. Once you’ve landed at the right place, it is time to pick your wholesalers. Here are a few things you should consider:

1. Items to sell

Choosing the right wholesaler depends on the merchandise you’re planning to sell. For instance, you’re eyeing to offer frozen products online. Start by making a list of wholesalers who can supply a wide range of goods that’s listed on your inventory. Getting from different wholesalers might cost you more since logistics and shipping charges have become higher than before due to the pandemic.

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2. Price point

Probably the most complex aspect of retailing is deciding on the price point. Choosing a wholesaler highly depends on the margin you will get. The price point covers the cost of the products and the other expenses entailed in transporting the products to your location. You can set the desired profit when comparing prices from wholesalers so that you’re assured of reasonable returns to pay off the personal loan you applied for to start your business.

3. Location

When buying online, one of the important things you should check is the location of the wholesaler. Those near your location would translate to cheaper pricing because you need not pay for higher expenses on logistics. Take for example that you’re buying items from a wholesaler within Metro Manila and one located in Bulacan. The Metro Manila source priced a pair of shoes for Php420 each while the Bulacan supplier has a price tag of Php320 each.

At first, it seems logical to buy from the Bulacan wholesaler because the price is Php100 lower. However, you should also consider how much would it cost you to transport the goods from Bulacan to your location. If you are in Metro Manila, the transport cost is at an average of Php150 compared to the transport from Bulacan which is at an average of Php300. Computing the item price and the transport cost altogether, you will end up purchasing from the Metro Manila wholesaler whose offer translates to Php570 against the Php620 when you buy from the Bulacan wholesaler.

4. Minimum order

The MOQ or minimum order of quantity varies from one wholesaler to another. Some would ask for 200 pieces on a single purchase while others do not require a minimum at all. Again, this becomes a factor because it would set the amount of money you’re willing to risk. If your money for business comes from an online loan, then you need to find a source that does not require a minimum order for you to purchase at a wholesale price point. A lower moq minimizes your risks and exposure. Before buying, check whether the wholesaler is requiring a specific MOQ or not.

5. Customer service

Online selling offers a bigger risk to customers because they do not need to check on your products personally before buying. As a retailer, look for a wholesaler that guarantees the quality of the merchandise and offers after-sales services to deal with warranties and return concerns. A wholesaler’s customer service will ensure that you’re offering your customers reliable goods and that you are not worried about returns and flaws because you can seek help from your source anytime.

Final thoughts:

Entering the wholesale and retail business is much more complex than it seems. Aside from the things mentioned above, there are other factors to consider which you may only experience when you’re already in the business. Choosing the right wholesaler may also run through a trial and error experience which requires your utmost tolerance and patience should you want your online retail enterprise to thrive.

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