IS IT REALLY WHOLESALE?
Most people believe that buying “wholesale” means that they can Purchase products extremely cheap and sell them lower than anyone else on the market. I have to admit I to thought like that when I started, I was sure that purchasing items at wholesale prices would allow me undercut the majority of my competitors in the market allowing me to make huge profits and stay home to work part-time with a full-time income. However I have found that Wholesale pricing does not guarantee the lowest prices so I have written this article about WHOLESALE WHAT YOU SHOULD KNOW.
How does Wholesale pricing really work?
Wholesale Pricing is usually based on volume. The big guys purchase items in bulk so they get them at a reduced price (wholesale). Let’s say they purchase 500 pieces of a particular camera that normally costs $50.00 each and has an MSRP of $75.00 each, but because of the big quantity they receive a wholesale discount. Let’s just say their discount is 35% which now puts their cost at $32.50 each. Now that may not sound like a lot but it just put there mark up to around 125%. This is why they can offer us such huge discounts. Let’s say they sell all 500 cameras at 30% off the MSRP they still make $20.00 per camera sold, their profit is still $10,000.00. Now the bigger the quantity they purchase the bigger discount they would receive allowing for higher profit margins. Once they are big enough they generally go straight to the source, once again paying less for such items due to there is no warehouse involved, order straight from the factory.
Are Wholesale Prices Always the Lowest?
When I was looking for vendors for WSMS, everywhere I turned claimed to be a wholesaler. However I noticed the prices were all over the place some prices were more expensive than my local stores.
You must keep in mind there are lots of sites that claim to be wholesalers but are in fact just one of many middle men. This means that they have their mark up and their supplier had his mark up and so on, what does that mean for you? Well it means you will not always get the best price. There are very few (true) wholesalers on the market that don’t expect you to purchase huge quantities to get the savings, but they are out there.
I found that when I was setting up Wholesale Mega Store I spent more time contacting said suppliers to find out the type and structure of their wholesale discount offers.
Heck some only offered 2% less than their list price for an exuberant quantity (chances were they are the middle man or 5). The truth is that there are lots of people out there that call themselves a wholesaler but in reality they are not, if you are in the market for a wholesaler don’t be afraid to ask questions.
Is it Always about the Lowest Price?
No matter which market you choose, there will always be competitors. If there isn’t, then chances are you should pursue another market. Most people who want to open a store (myself included) often get frustrated and start second guessing their decisions during the research phase, why? Usually it’s because they do a Google search and find several thousand competitors already in that particular market.
Knowing that your site will start at the back of the pack (page rank) really makes you wonder if you can even make a decent profit from this venture. But Just like any business there is more to the success of your store than just lowest price. Take Future shop and best buy for instance; even though they are one in the same their prices are not the same. I find Future shop to have higher prices than Best buy on similar items, but what keeps me going back to Future Shop? Unique items that Best buy doesn’t carry, the same goes for best buy and Wal-Mart even though they all carry some of the same items, they also carry items the other does not.
Remember to set yourself apart with one or more items they (your competitors) do not offer, Maybe set yourself apart by offering higher quality items and great customer service? Whatever you do, don’t be discouraged because you see a competitor offering rock bottom pricing. If you work hard and offer something they don’t your business stands a chance.
Should you face the Big Guys?
Should you try to sell the same items as the big guys? I would recommend that you don’t, that’s not to say don’t offer some of the same items but if you try to match their prices, you are sure to lose. If you remember my example from earlier (How does wholesale pricing really work?) these big companies buy in extreme quantities, I used 500 as my example but they are more likely to buy items in the thousands.
I guess the best advice I could give if you are serious about starting your own online business is don’t give up, offer something others don’t and Don’t be afraid to ask questions, the more you know about a potential supplier the better off you will be.
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