In wholesale buying nomenclature, retail stores, auctioneers, flea market vendors and jobbers across the world share one common bond: buy low, sell high and keep overhead manageable. Buying low, however, isn’t always the prudent path toward profitability.
If you’re currently wholesale buying, playing the numbers game should be second nature. Spend the day creating plausible scenarios to purchase cheap goods, contact several wholesale companies offering products matching your purpose, haggle a bit, and make your purchase. You make off with gently returned or brand new merchandise for pennies on the dollar, your customers are elated, so everyone wins.
Or do they?
I’ve been blessed with an incredible job in the wholesale world, working for a company that is driven by an invaluable passion for making customers happy. In this position, I’m afforded the opportunity to talk with virtually everyone about anything wholesale, and quite frankly, I’ve been educated beyond the Associates Degree I hold in an unrelated field. With that education, unfortunately, comes frustration. I see numerous people daily making the same mistakes I often wish I could immediately undo on their behalf – buying merchandise from competitors based off the perception of price.
Forget the quality of merchandise. It’s all about marginal victories.
The problem with price-motivated wholesale buying
I’m totally onboard with getting an awesome deal when shopping. I’ve acquired $40 shirts at Old Navy for $3.00 because they had a slight (1”, nearly invisible) tear down the seam. Two washes later, however, that 1” tear increased to 4”. Another three washes, and my shirts went to Goodwill.
The concept in wholesale buying and selling is simple: would you want your family to have half-working electronics sitting around the house? Would you want to shop at stores where the owners are known for hoarding the newer merchandise they receive, and giving you dibs on whatever they didn’t want?
Cherry picked merchandise – a more creative way to say “I want the shiny toys, and the neighbor kids can play with the broke ones” – is an eyesore to my industry. It’s what some of my new customers fall victim to daily when they’ve purchased from a competitor, and they unwittingly find out about their booboo later on when half of what they’ve purchased ends up in a Waste Management dumpster.
Price. It can be a dirty word, or your best friend.
Wait. I can’t profit off slimmer margins…
Well, you certainly won’t profit at all if what you’re offering to local customers equates to yard sale junk.
Another creative component to my job is finding the right merchandise for customers with several components in mind:
- Shipping costs relative to the product’s perceived retail value;
- The function of the product (i.e. store, auction, flea market, export);
- The likelihood said product could have an extended stay on one’s shelf.
I then very quickly come up with an estimate based off the aforementioned, along with the condition of the merchandise. The end result is a number that should, theoretically, provide profitability for the entity making the purchase from me, and offering long-term happiness for their customers.
Not always will my price smash the competition, and I get that. Buying good product at a fair price and having someone you can call personally while they’re sitting on a beach vacationing, however, is priceless. As is buying overstock that customers will come back to your store for, which isn’t always at the heart of every buyer’s final wholesale destination since profiting seems to be more important than wholesale buying wisely.
Which leads back to perception of price.
I’ll continue this next week by discussing how one should be on the lookout for price deflation and how buying cheaply can hurt your bottom line down the road.