Truckloads and pallets of merchandise are what wholesale operations move frequently, and while the transition from lower volumes to weekly truckloads may happen quicker for some, making the leap for others is a well-refined process. Where do you stand? Perhaps this guide will answer your most pressing questions.
Auctioneers and small businesses that I deal with every day have that one sweet spot, which many would call their comfort zone, that they would really rather not shy away from. Buying one or two pallets on a weekly or even monthly basis works perfectly fine for them, whereas some of my larger customers seem to scale up every month. All told, there’s really no one-size-fits-all solution where wholesale merchandise buying is concerned.
There are, however, innumerable telltale signs that you could be ready to graduate pallet buying, then head into the world of truckload volume.
Customer demand indicators
Busy season started rather late this year for many in the wholesale industry. Clearly this is an indication that consumer sentiment was sluggish to begin 2016, or in layman’s terms, mom and dad spent more this Christmas than the last several.
With this little snippet of information, we are able to ascertain the following as it applies to the auction, small retail and even smaller scale wholesale operations:
- Customers spent big in November and December, meaning they’ll inevitably be looking for deals that hopefully you’ll be able to deliver. See my Wholesale Buying 101 piece regarding perception of price as it pertains to buying wholesale merchandise, too.
- Major retailers have fewer products returned or overstocked as a result of stronger product efficacy. Generally speaking, when products experience a “good run” in manufacturing, the retailer experiences fewer returns, meaning there are fewer truckloads of leftover product moving around the aftermarket. Which also means customers are generally buying less of those products.
- State tax returns may be larger, but processing seems to be taking longer. Moreover, recipients of said returns are concentrating on larger purchases, catching up on bills and perhaps saving for vacations.
In certain areas of the United States, none of this applies as flea marketing (for one) is a year-round activity. Of course, for those selling on Amazon and eBay, you already have a worldwide market and therefore experience little slow time provided your product meets or exceeds consumer demand.
Gauging customer demand is tricky for the rest of the United States, which makes it difficult to know when buying truckloads is a more appropriate action than buying single pallets.
When to Buy Truckloads
I certainly can’t speak accurately about every buyer on an individual basis, so I’ll try to generalize my statements.
As I touched on above, some store owners have that sweet spot that’s worked for them for decades. Buying 2 to 5 pallets a week does just fine for their needs. There are others who are just starting out, perhaps looking for that perfect vendor they can use for years to come, wanting to test the waters by buying a pallet or two. Truckloads can be a highly beneficial beginning to your business, too, so let’s clarify what purposes exist for buying truckloads:
- You’re interested in buying truckloads and flipping them for a profit. Nothing more.
- You have a specific market for a product, an almost ready-made customer base, advertising in place and a grand opening scheduled.
- You just purchased an existing store with a whole bunch of empty shelf space.
- The price is simply too good on a truckload to pass up. You’ll figure out how to move it later.
- You’ve slowly grown your business up to a ten pallet a week operation, and have a large enough demand where buying a truckload would make good financial sense.
- You have a penchant for taking risks in your small retail business, so buying truckloads and absorbing any shrinkage wouldn’t bother you.
- Opening multiple flea market locations is in your future, so buying truckloads is perhaps the only recourse available for keeping these markets stocked.
- You have a very large facility capable of handling the storage of one or multiple truckloads, and intend on selling by the pallet.
If your current situation falls anywhere near the items in the bullet points, buying truckloads of merchandise is already on your mind. So yes, while it’s fresh on your mind, you may as well make the jump into bulk purchasing. Should your current situation fall too far outside the above, perhaps consider a half truckload to both minimize risk and have no issues with storage.
When to Buy Pallets
Pallet buying is essentially for everyone with a worthwhile purpose. Seen as the best way to start out when selling online or even in a small scale auction, pallets offer a much more manageable means to individually sell items on eBay, Amazon or even in a local flea market. The initial investment is much smaller, shipping rates drop considerably lower since pallets are shipped via LTL, and the opportunity to slowly scale up in volume is much simpler and doesn’t take as long.
The best case scenarios when pallets would work best for you include:
- You’re wanting to test online selling but have very little startup capital.
- You only intend on selling occasionally.
- A personal garage will be the sole means of storage.
- You would like to take products on the road but lack a trailer to haul numerous pallets worth of product.
- You’re testing a new product line in a market you’re unfamiliar with.
- You cannot handle truckloads but can handle several pallets weekly.
- Products you’d like to sell may include jewelry, name brand clothing, electronics such as iPhones or high-end tools, which would increase the pallet’s retail value and your cost. In this scenario, a pallet may run as much as $50,000.
- You are testing a new supplier and wish to minimize risk.
At the end of the day, nearly everyone in the retail industry (regardless at what capacity) starts out buying pallets unless they’ve got a sizable amount of money they wish to invest, not caring about the efficacy of the products they receive (which is rare).
Quick Cheat Sheet
From the above sections, you can easily ascertain which scenario works best for you. While many wholesalers and liquidators wish to jam as much product down your throat as possible, only you will know what works best for your market.
To get yourself started off in the right direction, here’s a quick cheat sheet you can use during your phone call with a company you wish to transact with, albeit a wholesaler or liquidator. Note this is only a guide, not a set in stone Q & A sheet:
Questions to ask:
- What’s the general grade of products you guys carry? (shelf pulls, salvage, new stock, customer returns will be the most popular answers you get).
- Is it possible to ship from a location near me? Shipping quickly becomes the elephant in the room regardless how much you’re buying. Go outside tomorrow and look whether the price of diesel went up or down as this is a strong indicator of shipping costs. When diesel is low, obviously shipping falls down with it. Getting product shipped from a location nearest to you shouldn’t be the only mitigating factor when choosing between pallets and truckloads, but it should at least be in the conversation.
- How much retail value will I get per pallet? Obviously everybody wants to profit, so concentrate more on how much retail value exists on a pallet, and less about buying that ‘cheap’ pallet. The goal here is getting customers to return to your store; consistently selling low grade products isn’t a great way to leave a “warm fuzzy feeling” in the minds of the customer as they leave your store. Don’t worry – the right wholesale outfit will make sure you meet your margins.
- How will I know when I’m ready to graduate to truckloads? If a wholesaler or liquidator has their heart in the right place, they’ll help you make that determination based off factors listed above along with some expert advice stemming from personal experience.
Things to remember:
- Never get bullied into buying more than you’re ready for.
- Whether you’re buying truckloads or pallets, always go in with the expectation there will be some shrinkage (i.e. product that may need to be worked on or tossed).
- Never underestimate the power of a question.
- If you’re receiving product at a residential address, there may be an upcharge regardless if you’re receiving a pallet or a truckload of merchandise. This is because the semi drivers have more maneuvering to do (meaning greater risk of damaging property or cars) in residential areas as opposed to businesses with docks. Ask the representative of the company you wish to deal with for further information regarding shipping rates to residentially zoned addresses.
You may already have chosen whether or not you’re a pallet buyer, or master of truckloads. Perhaps you’re on the fence. Regardless where you sit, the amount of merchandise you should acquire is conducive to the size, demographic, and income level of the area which you are selling in, and available storage space – the latter being the main factor when selling online.
In the next segment, I will discuss the hottest wholesale products by season.