As a retailer of general merchandise or handmade goods, you are in the market to make a profit. As a craft artist selling handmade goods, buying your supplies from local retail craft stores might work out okay for a while, but to break it all down, buying wholesale means higher profit margins for you. The lower the price the higher the profit! That’s why you as a retailer need a wholesaler.
Who Are Retailers?
You are a retailer if you plan to sell products to the general public. Retailers are businesses that sell merchandise, (in small quantities) to the general public for personal or household consumption. In some cases, retailers sell merchandise to businesses and institutions. Retailers may operate stores, designed to attract a large number of walk-in customers or sell their goods online
The Wholesale Industry
Unlike retailers, wholesalers sell products in bulk. The whole idea is wholesalers sell merchandise to other businesses below the retail price for the purposes of reselling the product or for other business purposes.
Wholesaling consists of manufacturers, the producer of a product. In general, a wholesaler is a middleman or distributor who sells to retailers, jobbers, other merchants, and industrial, commercial, and institutional, and general consumers. Wholesalers may be sales branches maintained by manufacturing businesses, for the purpose of selling their products. They also may be agents or brokers who arrange for the purchase or sale of goods owned by others, often on a commission basis.
Importers are businesses that purchase products from manufacturers outside of their home country due to the lower cost of the products (who often sell to wholesalers). For example, an importer would be someone who purchases products in bulk from say China at low-cost prices and sells them to a wholesaler or direct to retailers.
Retailers have higher profit margins when they purchase their products wholesale with the intention of reselling the product as-is or in a finished product such as raw materials. Craft supplies used to make a finished handmade product would be considered raw material.
Wholesalers are in the business to sell merchandise to other businesses at lower than the actual retail price the product sells to the general public for. The retailer’s profit is the difference between the wholesale price and the retail price.
Wholesale Purchase Requirements
A legitimate wholesaler will require your sales tax permit or business permit. Your sales tax permit will serve two purposes.
- It tells the wholesale you are legitimate business
- You don’t have to pay taxes or the products you buy for resale
You still may be required to show proof of your business license. Wholesalers normally require you to purchase products in bulk with the intention of selling directly to the consumer. By buying in bulk, you receive a significant discount (typically 50%) which allows you to make a decent profit when selling goods at the retail price.
Exclusive distributors: (manufacturers grant certain dealers exclusive territorial rights to sell their product). It is unlikely that a small retail business will be able to buy directly from a high-volume wholesaler or manufacturer.
There are, however, many smaller manufacturers and wholesale distributors who will sell and ship to small businesses. You will be required to provide a sales tax Id. There are many businesses that claim to be wholesalers but their prices tell another story. I call them discount retailers, a legitimate US wholesaler will require your business license or sales tax id information.
How Do You Find Wholesalers?
It is not always easy to find wholesalers since many of the wholesalers of the products you may need are often not found locally. You may want to start by checking your local directory for wholesalers, purchase a professional wholesale Industry specific directory or a Trade magazine. Some wholesalers will advertise in trade magazines and/or participate in trade shows.
For maximum income potential, buying your resale products wholesale or below wholesale by importing them yourself, is the key to higher profit margins.