When you are buying products at wholesale one of the easiest ways to drive your profit margin up is by negotiating with wholesalers. The more negotiating you can do and the better price you can buy products at, the more chance you have on selling them on for a profit.
But negotiating can be tough so what can you do to secure the best wholesale rates?
Know Your Limits
Before you can negotiate a price you need to know your budget. Your negotiation will depend entirely on what capital you have available to spend on stock. So before contacting wholesalers assess your available capital and set yourself a limit as to what you can spend. If you overspend on buying products then you’ll be chasing your investment and it will take you a lot longer to start making profit.
Preparation before trying to negotiate is crucial. The more you know about your product and how much you can buy it for from a range of wholesalers, the better position you will be in to negotiate on price. Firstly research the product you are looking to purchase. Go online and find out how much other resellers are selling it for and how much you can buy it (or similar products) for on the high street or from online retailers. This will give you an idea of the products resale value – which can help you when you are given a price from a wholesaler. For example, if you are interested in a certain clothing item which is selling for £50 on most retail sites, it’s unlikely you’ll accept a wholesale buying figure of £49 per unit. You’d have to sell a lot to make a profit! Once you have done your initial product research you should also do some wholesale supplier research. Use a wholesale directory and search for wholesalers specialising in the product area you want to resell in. If you are then able to gain a few quotes from different wholesalers you will be able to figure out the best price for the product. (Note: most wholesalers will quote a price for a job lot of goods although some do offer products on a one-off purchase).
Once you have the product in mind, an idea of its resale value and an idea of how much you can buy it at trade price then you are in a great position to negotiate and to hopefully drive those prices down. To negotiate you should firstly find out the cost of buying the product as a singular item (if the wholesaler allows that) or as a job lot. If the wholesaler quotes a price for a job lot of goods then you can divide the amount of products in the job lot by the overall price to get a price per unit figure. If this is stretching your budget or you think it doesn’t offer much room for profit making then start negotiating. When negotiating you should always ask the wholesaler to give a figure instead of suggesting one yourself. If you give a figure it may be higher than the wholesaler would have suggested and you will never know their bottom line. To further negotiate you could ask about buying wholesale pallets. Pallets are usually made up of clearance items and end of season goods. Buying pallets can be a risk as many are sold boxed up and you can’t see what’s inside – the wholesaler will just let you know the types of products in the pallet but you’ll usually be unable to look at the goods. Although it is a risk, these pallets are usually sold at way below their RRP so if you’re willing to take a risk on buying products it could pay off. Offering repeat purchases or offering to buy in bulk will usually see prices driven down too. These are all ways to potentially lower your initial outlay on stock however some wholesalers won’t be open to negotiation so don’t feel too disheartened if you don’t get a deal.
Once you have made a purchase you should try and maintain regular contact with your wholesaler. Not only will this keep you up to date with new products and stock availability but building rapport may also help you to negotiate further fees in the future.