Why it is not easy to establish a trust bond between a new wholesaler and distributor from a potential small-based-business? The main reason of this trust-bond issue rise when you start to get hundreds and thousands of targeted visitors to your sites every single day. You not only get visitors, but one of the greatest benefits of being open to huge amounts of targeted readers is that you get the benefit of joint venture partners.

As you get potential joint venture partners, your e-commerce hosting server can crash and burn from floods of visitors in an initial time frame or you can even downgrade your business for the most economical hosting option, that is depending how good your joint venture partner found is. Pretty much, the more customers you have on a monthly, weekly or daily basis- the more cautious you need to be with whom you conduct business with today and tomorrow.

One of the greatest tools to identify who you are really dealing with is called “Read Notify”. You can make a search in any popular search engine like Yahoo, Google or MSN and find the dot com name immediately. Such tool works as a tracking device when sending email.

The beauty of it is that when you get partners and middleman trying to post as a real legit distributor- you can know a lot more about the facts about the company trying to unite with you or conduct business and finally met initial trust bonds between you and your new trading partner. As for say, have you ever wanted to run an FBI check on your partner or potential new business acquaintance?

While there is nothing better than someone from the FBI telling you everything about a guy history, you definitely can do an in-deep investigation on your wholesale list contacts or your new wholesale distributor without even asking the new party!

Here is how this excellent tool works wonders for many of us. When you send an email to a small-based-business operator or the guy and entity in which you want to conduct business- chances are he will open the email to see whatever is that you have to say to him for both his company and pocket wise benefits, he then opens such electronic mail- what do you get? You immediately get crucial information from him, the receiver such as:

The exact location of where the email is being opened, tracked by I.P Address. Like if you live in Guaynabo, Puerto Rico and you are sending him an email from Sydney, Australia- the system most of the time will give you from 70-100% possibilities of the nearby street number of where he is located. Such tracking device tells you then of course the city and country and the exact time when the person opened the email, all in real time. Do you need to chase or potentially bribe an FBI agent to get this kind of information?

Of course not, not ethical and not legal- but you can investigate that yourself! So could you imagine what could a tool like this really do for you and your e-commerce negotiations if you received many joint venture offers or are skeptical of the person who wants to conduct business with you?

Getting a liar who tells you he is a wholesale distributor from the USA when the correct location of his whereabouts are in Berlin, Pakistan or other hot places where you should not commercially trade or ship any kind of package, could mean a lot for your business safety- especially if you happen to buy the everyday scandalous wholesale riches scheme story from someone who just does not know what his talking about.

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If you found your wholesale distributors’ website in a major search engine chances are that they are not a real factory direct source. The reason why is that most of all wholesale distributors do not have a budget to market their products over the web. They have contracts with large companies they ship products to regularly. They don’t need to spend money on marketing their products because the company that made the products will handle all the advertising. A wholesale distributors’ only job is to warehouse the products they receive from the factory and ship them out to the companies who are buying them for resell. It does not make any sense for them to spend money on marketing the products they have. This is why if you find a huge website full of products for resell, chances are it is a middleman buying the products in bulk, marking up the price a little bit, offering a drop shipping service to you, and getting you to do all the hard work for less money.

Another sign of a fake wholesale distributor is if they require a membership. Some will try to charge you a monthly fee to do business with you. This does not make any sense either. If you are buying products from a wholesale distributor they are making money from the products you are purchasing. Would you make your customers pay a monthly fee just to be able to buy your products in your store?

A real wholesale distributor needs your federal tax id number and resellers permit to do business with you. They need this so they do not have to charge you sales tax. When a potential wholesale distributor asks for this information you can count on them being a legit factory direct dealer.

A fake wholesale distributor could tell you that all you need to do is fill out a W-2 form and give them your social security number. They tell you that for the products you sell they will send you a check each and every month for your commissions. While this isn’t a bad thing, this sounds pretty easy. The easy way is the hard way though and you have to consider how many other people are selling the same products on the web at the same low prices. You will have a very hard time selling products from these types of dealers.

To run a successful ecommerce home business you need to eliminate any middleman and source products in bulk. A drop shipping supplier, even if they are a real factory direct source, will charge you more for their products and shipping services since you are not buying in quantity. To be successful you need the best price for quality products and the only way to obtain low prices are to source products from a real bulk wholesale distributor, one business to another. The easy road is the one most often traveled and you will learn that it leads no where.

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Wholesalers have only recently found the power of the internet, with more and more are shifting from having just an online prescence to having a full e-commerce site. And that’s good news for the retailer.

Due to the nature of the wholesaler, they won’t deal with end consumers, and only deal with ‘traders’, but that doesn’t mean they won’t deal with you. Provided you are going to be buying in bulk, in general the wholesaler will sell to you. Being a trader simply means you’re not going to keep the products you buy. If you’re selling on ebay as a hobby that still means you’re a trader. You don’t need to set up a company, the same way you don’t need to when you sell at car boot sales.

So now you know what a wholesaler is, how do you go about finding one. Buy a wholesaler list from ebay, right? Wrong! Those lists may contain thousands of companies, but accurate are they? In my experience, not very. Out of interest I bought a list, and 90% of the wholesalers listed aren’t in the country you’re interested in. Very few had websites, and some just had mobile phone numbers as the contact, which were not in service. Don’t waste your money. They are out of date as soon as they are put on the cd, or in the PDF.

You have a couple of options. The simplest is to pick up the Yellow Pages (or visit Yell.com). You’ll be suprised how many there are on your doorstep. Just pay them a visit explaining that you’re starting to sell online. Some do require letterheads etc, but many don’t. All it takes is a visit to find out.

The other way is to visit a trader directory website. There are a few on the net, but most of them require you to pay to see the wholesalers listed. I think this is backwards. It’s like asking you to pay every month for the use of the Yellow Pages. The right way to do it is to have free access, but if any payment is required, it should be from the advertiser. There is another benefit to the advertiser/wholesaler too, and that’s their page ranking. Search engines look at how many other sites are linking to their site, and more specifically, sites that are related (by theme/topic etc) to each other. Having similar sites linking will improve the page ranking of those sites, which will make them appear higher in search engines. But I digress.

When you find a wholesaler, visit his site. If he’s in the UK, he needs to have a contact name, address and number on their site (as required by section 4 of the Business Names Act, 1985). If they are a registered company, their company number needs to be visible also. You can use this to check how long the company has been in business and their registered address. Give them a call and have a chat. If they’re legit then they’ll welcome the call and quite happily answer any questions.

Check the terms and conditions. Because they sell in bulk, there may be a minimum order quantity for individual items, or a minumum order value. This can be as little as £50 or as much as £1000.

You may need to register to see the wholesale prices. This shouldn’t pose a problem. Once you’ve got the prices, compare them to similar items on ebay to see what kinds of profit you can make. I’ve found prices for the same item can vary quite dramatically between wholesalers. This is because wholesalers get discounts from the manufacturer depending on the amount they can sell. The more they sell, the bigger the discount.

Build up a good relationship with them if possible. Some online wholesalers are very friendly and offer what feels like a personal service. If you are regular, they may provide an even higher level of service.

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Are all of these new wholesale companies really selling wholesale products? The short answer is absolutely not! Not even close… but let’s go over the longer answer so you can get an idea of what types of operations the majority of these so-called wholesale companies operate.

If I was forced to make my best guess of the percentage of true wholesale companies behind all the Internet and Opportunity magazine advertisements, I’d say that maybe, just maybe, 0.5% of those companies is an actual lagitimate wholesale company. Obviously that means I think that 99.5% are not true wholesale compaines.

If a majority of the wholesale companies being advertised are not true wholesale companies, then what are they and where are they getting their products? They are likely just middleman operating within a chain of middleman.

A Middleman-chain occurs when a business purchases its resale products from one wholesale company, who in turn purchases the products from another wholesale company, which may also purchase the products from yet another wholesale company, and so on. Note: I am using the term ‘wholesale’ very loosely here.

For example, let us say you have a resale business and you are buying products from a wholesaler, who we will call Wholesaler-A, at 20% discount. It is likely that Wholesaler-A is actually purchasing the same products from another wholesaler; let us call them Wholesaler-B. Wholesaler-B may get the products for a 40% discount and then sell them to Wholesaler-A at the 30% discount level, thus making 10% profit. There may even be another level, Wholesaler-C, which gets the products for a 50% discount and then sells them to Wholesale-B at 40% discount, making another 10% profit. See a graphical representation of this process at http://www.victorykey.com/images/middleman_chain.gif.

As you can see from the diagram in the above link, there can be multiple layers of wholesalers creating a chain of middlemen that you simply cannot afford.

As a result of middleman-chaining, each layer adds on its profit and you are left unable to compete because you are not buying the products at a low enough price to stay in business. If you do, by chance, get orders, each company in the chain is a point of failure in your transaction.

For example, let us assume you have a source for a product which is in high demand and you are paying what you believe to be a true wholesale price, say 20% discount. You then launch an advertising campaign that pulls in a large number of orders only to find that one of your back-end suppliers somewhere up the chain cannot handle the volume. Your customers obviously want their money back (including shipping & handling) and you find that you have lost a lot of money in advertising and created a bunch of angry customers that will likely never buy from you again!

One question you may be asking is why doesn’t every wholesaler just buy from the manufacture and get the deepest discount? The answer is simple – not all wholesalers (or companies claiming to be wholesalers) can afford to purchase the minimum bulk-order requirements that a manufacture requires. Secondly, many manufactures only do business with companies that are established. So now you are left to do business with a level-1 wholesaler (Wholesaler-C in above diagram), which can be very profitable if the products have demand. However, a level-1 wholesaler may also require a bulk purchase that is outside the budget of many small home business operators, and/or they simply may not want to do business with a small home business. Eventually you may find that a higher-level wholesaler (level-2, level-3, or higher) is all that is available to the home business operator, and you simply can not make any significant money at this level. Unfortunately, just about every wholesaler you see advertising in the opportunity magazines or Internet is a level-2 or higher wholesaler.

Now, armed with the above knowledge of middleman-chaining, make sure you take a closer look at all those wholesale product advertisements before taking out your wallet!

Sincerely,

Michael Ellis

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Well let’s take a look at how it works…

An eager entrepreneur sees an advertisement that says something to the likes of:

Make Money on the Internet… Distributors Needed for Our Unique Products!
We Provide You with the Hottest-Selling Products at Rock Bottom Wholesale Prices!

The entrepreneur then clicks on the ad for more information. Usually the information consists of a lengthy advertisement describing the huge sums of money that can be made by reselling the company’s wholesale products. The wholesale company will further entice the entrepreneur by providing a showcase of their products (books, computer programs, knick-knacks, etc.) that claim to all be hot sellers. Alongside each product the entrepreneur will usually find a suggested retail price and a "wholesale" price.

Sounds good, huh? Well, before we answer that, let’s follow the process through. Let’s say the entrepreneur takes the company up on their offer (and many do). The entrepreneur will likely be required to purchase a bulk order of the product(s) and/or a membership fee to be paid before products can be purchased at the discount level.

Now, let me say this, everything that we covered up to this point can be legitimate. However, the problem is, many of the companies advertising wholesale products are NOT legitimate wholesale companies. In fact, they’re far from it. I’ve found that most of all the wholesale promotions you see kicked around the Internet fall into one of the following three scenarios:

A) The discounts (wholesale prices) offered on the products are not low enough for you to make a profit, and the products are either outdated or have very little demand

B) The discounts (wholesale prices) offered on the products are low, but the products are either outdated or have very little demand

C) The products are actually in demand, but the discounts (wholesale prices) are by no means low enough for you to make a profit

Again, this is my opinion, but I found that the above three scenarios just about sums up 99% of every wholesale product purchasing program you can find throughout the opportunity magazines and Internet marketplaces. Let us examine each one of the above scenarios individually…

In Scenario A:

You are given an insignificant discount on products with little to no demand. Unfortunately, this is the most common scenario. In just about every instance, the company which is offering the products markets itself as a wholesale provider for the product, but in fact they are just a middleman in the middleman-chain handling the transaction between you and the product source (or another middleman). As a result the discount will not be significant, probably in the 20% range, which is simply not enough of a discount even if the products had a high demand.

In this case, the discount rate in which you receive means nothing, because the products have no market demand. Your wholesalers (middlemen in your chain), however, will make a profit. Each level of wholesaler, including the manufacture, will make a percentage of the profit off of your initial bulk purchase. Or if the vender doesn’t require a bulk purchase, but instead requires a membership fee, then that membership fee is usually divided up the chain as well. They are fully aware that once they sell you a given quantity or membership, you will not be back because of the low product demand.

In Scenario B:

Your discount rate is significant, but the products have little to no demand. This is another common scenario that is usually the result of dealing with fewer middlemen (wholesalers).

The company providing the products may actually be a legitimate level-1 wholesaler, meaning, it purchases products directly from the product manufacture, however, the wholesaler knows the products have been around for years and already marketed to the point where there is very little demand for the products. The best thing for the wholesaler to do is take what it can get for them by selling them for extreme discounts to inexperienced resellers.

Again, the goal of the wholesaler is to sell you a bulk purchase. As in the first scenario, the wholesaler is fully aware that the likelihood of you coming back as a repeat customer is very low, so the goal is to make a profit once and to get rid of slow moving products.

In Scenario C:

The products offered are in high demand, but the discount rate is insignificant. This scenario is almost always the case with products that are in high demand. Here you will likely find the company offering the product to be a high-level (level-3 or higher) wholesaler, or the actual product producer, which is not a true manufacture. The term high-level wholesaler is the term used to describe the number of middlemen between the wholesaler and the product manufacture. A level-3 wholesaler indicates that there are two middlemen between the level-3 wholesaler and the product manufacture.

There are many high-level wholesalers that are offering products that are in high demand for resale. However, as discussed in the middleman-chaining article, a high-level wholesaler simply cannot provide a significant discount to you; therefore you cannot make any profit on the resale.

Product producers are not true product manufactures. A true product manufacture is dedicated exclusively to manufacturing products and distributing those products to wholesale companies, which in turn distribute the product to distributors. A product producer likely sells the same products to the general public (retail). In essence, they compete against you, and since they control the product and price, they will always win.

The lure in Scenario-C is the demand of the product. You already know the products sell well, you have probably seen them marketed for a little while and there may be some industry buzz going around about how good they are.

In this scenario, the wholesaler (or product producer) will typically offer a low 10% – 15% discount on the product for bulk purchases claiming this is an excellent opportunity to jump on board and make a killing off the high demand. Entrepreneur’s usually buy into this and end up purchasing several units to find that once they add in their operational cost of advertising the products they, at the very best, break even with a bunch of lost time.

You see, there are costs associated with doing business including: advertising, support, handling orders, etc. As a result of these costs, in most cases, you simply cannot make money with a 10% – 15% discount, even if the product is in high demand. Even an experienced entrepreneur would not make a sufficient profit at the 10% – 15% discount rate; they likely wouldn’t waste their time with that rate.

In conclusion, the underlying problem with any of these scenarios is that the products are not being purchased from a true product manufacture or level-1 wholesaler. Instead the products are being purchased from middlemen, or the products are being purchased at a low discount rate from a company that is competing against you for sales. In either case, you will be unsuccessful.

To avoid these situations, you absolutely must avoid the middleman-chaining effect, and be sure that you are getting quality products that are in demand, up-to-date and have good profit margins. You can protect yourself to a great degree by thoroughly examining the company you intend to do business with. For example, whenever you run into a product dealer requesting a bulk order or membership fee, make sure you have solid answers to as many of the following 10 questions as possible:

1. How long has the company been in business?
2. Does the company buy directly from the product manufacture (no middlemen)?
3. Is the company a member of the BBB or BBBOnline?
4. What is the volume of products they move each month?
5. What is the demand of the products (sales statistics)?
6. Is there a product guarantee?
7. Is there a delivery guarantee?
8. What are the delivery options?
9. Is there a guarantee the products will always be available when ordered?
10. What is the return policy?

The responses you get from the above 10 questions will almost always filter out the product dealers that simply do not have quality products or simply cannot perform to your standards. This filtering process is quick and will save you major headaches in the future.

Sincerely,

Michael Ellis

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The first thing you need to do is ask yourself why you want to get into the wholesale business. Is it because you want to work with other businesses and help people make money or is it because you think it’s an easy way to make a quick buck? Believe it or not, the wholesale business is very demanding. You need to have a lot of up front capital to buy product and unless you’re going to have someone else store the inventory for you you’re going to need a warehouse as well. You’re going to be dealing with hundreds of thousands of pieces of inventory and shipping things all over the world. Most retailers expect to get 30 days to pay. What happens if they go out of business before they do? Wholesaling is a very risky business.

The next thing you have to do is study your competition. If you plan on entering a market where there are already dependable distributors you’re going to have a tough time of it. You want to get in a market that needs a wholesaler if you want to have a good chance to succeed.

After that, you need to take a look at your financial situation. You have to have a lot of up front capital to get into wholesaling. You have to make sure that you have the resources to establish a relationship with a manufacturer. Also, can you afford to wait 30 days to get your money from the retailers? Startup costs, taxes, property rental and insurance can eat you alive before you ever get your feet off the ground.

Then, you’re going to need a business plan. You’ll have to get together with lawyers and get advice from consulting services. If you are unfamiliar with the wholesale business you have a lot of education ahead of you.

The next step is applying for all the licenses that you’re going to need. There are certain tax laws that you are going to need to be aware of that apply only to wholesalers, such as tax exempt status for goods moved between manufacturers and other retailers.

You’re also going to need a location for your business. You need to get a warehouse, an office and make sure that people know where to find you. If you’re going to build a warehouse you better make sure you are aware of all the zoning laws. The last thing you want is to have your warehouse torn down because it is in a residential district.

Then comes the marketing. That’s right. Just because you’re in business doesn’t mean people are going to know it. You’re going to have to place ads at a number of places including newspapers, Internet, magazines, etc. Advertising is expensive so be prepared.

Finally, when you are in business you better make sure you take care of your customers. That means getting the product to them, answering their questions and taking care of any problems that arise, and problems WILL arise.

Don’t forget one thing. You’re not going to be running this business alone. You’re going to have employees. You’ll need to pay them and possibly fire some if they do a poor job, which means hiring new ones. This is an ongoing, never ending process that is incredibly time consuming in itself.

So, you want to be a wholesaler? Just make sure you know what you’re getting yourself into.

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In this article we will provide you with ten tips to help guide you along the way as you begin planning for your business. They are presented in chronological order so that you can use them as a way to plan out the proper steps along the way. Remember, success depends on many factors – and the most important factor is your determination and energy you put into making your business a success!

Step 1: Ask Yourself Why?

Why do you want to get into the wholesaling business? It is because you would enjoy working with other businesses and manufacturers being the main point of contact between the two? Or is it because you think it is an easy way to make money quick?

Wholesaling is a demanding business, and can require lots of up-front capital, warehousing, logistics planning and customer service skills. As the main channel between the manufacturer and retailers you may find yourself dealing with hundreds of thousands of units of merchandise needing to be shipped across the country on a moments notice. Large retailers often pay on a Net-10 or Net-30 schedule, meaning payment is made after the goods are delivered. What would you do if a retailer did not pay or went bankrupt before you received payment?

Step 2: Study Your Competition

It does no good to enter a market where there already exist established, credible wholesalers for a given product. Retailers want to know they have a dependable supply source that meets their terms and often will not change wholesalers for an established product. Just because you build the warehouse does not mean they will come.

Use your local Chamber of Commerce, the Internet and even visit with retailers to find out what wholesalers exist in your area. If you want to specialize in a specific product, contact the manufacturer directly to find out who handles wholesaling for them already in your region. There may be none in your state, or there could be three down the street.

Step 3: Assess your Financial Situation

Wholesaling can require a lot of up-front capital and expenditures before you even see one cent of income. Do you have the resources to spend on setting up a relationship with a manufacturer who will most likely require you to buy in huge quantities from them? Can you afford to wait up to 30 days for payment? Do you have the money to invest in shipping freight or setting up your own delivery service?

Be sure to look past the startup costs as well. Employees, taxes, property rental and insurance are just a few of the things you will need to factor in as ongoing costs.

Step 4: The Business Plan

A solid business plan is the foundation of any business. You need to make sure that you have spelled out what you intend to do and how you intend to get it done. Not only will banks require this for financing, but often other businesses you deal with will want to see it as well. It should be the guidelines that you follow every day in your business to achieve the goals you have set forth.

For this part, it is often wise to work with a business lawyer or seek professional advice from business consulting services. A good resource to help you find people in your area with the necessary skills and background is the Small Business Administration government site.

Step 5: Apply for Licenses, Taxing Certificates and Other Necessary Paperwork

Nothing is as certain as death and taxes. It is no different in business, with one exception. As a wholesaler you will be required to pay taxes and other fees to your state and to the federal government.

The one exception is that you will be granted tax-exempt status for the actual goods you are moving between the manufacturer and other retailers. This can be a tricky process and is handled at the state level.

Again, for this part you will want to make extensive use of your state taxing authority as well as local Chambers of Commerce. One wrong mistake here can end up costing you not only money, but possible your entire business.

Step 6: Establish Your Facilities

Location, location, location. Businesses must exist somewhere and like most things in life there are rules and regulations on where they can be. Will you be having semi-trailers coming to your location at all hours of the day and night? Will you have a storefront for vendors and clients to come calling at? What about electrical, water and sewage needs?

Zoning laws exist to make sure that the right structures end up in the right places. Nobody wants a warehouse next door to them in a residential neighborhood. Work with commercial real-estate agencies to find a suitable place for your business.

Step 7: Establish Your Relationships
You have the facilities, you have the finance – now do you have anyone supplying you product or customers for that product? Work with manufacturers and retailers to build a relationship. This can be one of the most difficult parts of the experience, and is where the rubber hits the road.

In addition, relationships extend beyond your customers and suppliers. It is good practice to establish relations with your local Chamber of Commerce, retail associations and labor organizations in your area.

Step 8: Marketing

Wholesalers traditionally do not advertise. That does not mean you should not market your business to others, after all how can you build relationships or expand on existing ones? Wholesaling guides are published and distributed to many retailers and this is where the bulk of your marketing efforts will be directed. The other half should be in going to retailers directly, meeting with buyers and outlining your services. Just because you have a customer today does not mean you can rest on your laurels.

Marketing works hand in hand with building a relationship and maintaining it.

Step 9: The Machine in Motion: Servicing Your Customers

Product is coming in, retailers are placing orders – we are all done right? Not exactly. Getting the product to your customers, answering questions about delivery timeline, working with vendors to obtain new product lines, it is a complex and demanding part of the business.

In today’s “just in time” marketing model a delay in shipment could mean the end to a business relationship. You must keep your customers informed of any status changes, pricing concerns and product movements from your facility to their loading dock. This is where back end systems come into play by maintaining records and logs of all activity with that customer. Do not underestimate the value of a good Customer Relationship Management system.

Step 10: Employees, Accounts Receivable and Other Financial Matters

Once everything is up and running your next focus is your business financial present. Employees need to be hired and fired. Payroll needs to be met. Money must come in, and money must go out. Here you should invest in financial talent and services if you do not possess them already.

One oversight can mean the loss of hundreds of thousands of dollars; a missed payroll deadline could mean your entire business comes to a halt. It is critical that you constantly keep an eye on the books and on your expenditures. Know when to tighten the belt, and know when to expand.

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Getting Started

Like in any other types of business, starting your own wholesale beauty products business can be very challenging. To keep you in the right direction, you should come up with a good business plan. A good business plan is your road map. No, you do not have to be a business expert to come up with a good business plan for your wholesale beauty products business. With some research and a lot of creativity on your part, you will be able to come up with a good business plan.

As part of your business plan, you should be able to identify good sources of wholesale beauty products. You must have at least two sources of wholesale beauty products. Why two or more sources? You must always have a back-up if you are engaged in business. A back-up source will ensure that you will have a steady supply of wholesale beauty products. Besides, having more than one supplier can be good leverage in bargaining for better prices and terms of payments.

Another thing that you should pay close attention to when making your business plan is your pricing. Always remember that if you are to survive in the wholesale beauty products business, you should come up with a good price for your products. Note that most customers are interested in low cost but high quality products so study your pricing careful. Get the prevailing market prices of the products that you are selling and then try to find a way to come up with a better price without compromising profit.

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