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The 7 Deadly Sins of Buying Wholesale

Discussion in 'General Wholesale' started by Anthony, Feb 15, 2012.

  1. Anthony

    Anthony

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    It’s a jungle out there for wholesale buyers and unless you’re a seasoned explorer, your first few expeditions could reveal some perilous scenarios for you and your small business. I’ve put together my list of the 7 most deadly sins you could potentially commit when buying wholesale:

    #1 – Being Ruled by Price

    Being led solely by price can blur your vision to other important sourcing considerations. Obtaining the best price for goods you are buying is vital but not at the expense of service, authenticity, and most importantly, legitimacy.

    Price can have a holding over you that can obscure your judgement. We’ve all been offered something where based on the price alone we’ve immediately determined ‘we want in’. With that said, it’s necessary to step back and look at the wider issues that have led to the price being offered by the supplier.

    Is the price offered actually realistic?

    Know anything about your products and your market and you should very quickly be able to determine if the price being offered is realistic. By realistic, I mean, a legitimate deal, what a real wholesale deal would actually look like for the products at the specified quantity you’re after.

    If you’re not sure what realistic pricing looks like, you’ve forgotten an important step before you got to this stage and rather than jumping into something you’ve not done the groundwork on, you’re best bet is spending some time researching and collecting data to better understand your market.

    Use our products & trends forum to ask for advice or get opinions on pricing a supplier has offered.

    #2 – Forgetting Due-Diligence

    Business is all about offsetting risk for the end reward. No business, whether you’re buying wholesale or selling ice cream operates without an element of risk. The risks when buying wholesale shouldn’t be wrapped up in cotton wool, there are an ever increasing number of risks in our industry and anyone who tells you otherwise is frankly trying to deceive you.

    The question is; how can you reduce your exposure to these risks?

    Allow me to introduce you to due-diligence.

    Due-diligence is not something new to you, chances are you practice it every day, when buying a second hand car, a property, choosing a restaurant, or even accepting a date or proposal offer from a respectable lady or gentleman – all of these decisions came about as a result of going through the due-diligence process, it’s just we don’t consider them as such because they are everyday life decisions that come second nature to us all.

    Destiny would have it that; you bought the car because it drove well on a test drive, your mechanic said it was solid and the price was about right. You decided against eating at your local Chinese due to bad online reviews and went out of town instead. You married the girl/guy of your dreams because due-process led you down that route.

    All of these examples, however simple they may seem, contain elements of risk.

    The second hand car could have needed a new set of brakes but even your expert may have missed it. The restaurant you went to could have actually been a stinker. Your marriage could have been like Kim Kardashian’s and lasted only 72 days.

    That’s life – but you did your due-diligence, right?

    Be foolish in the wholesale playground and you will get badly burnt. You must treat buying wholesale like any other serious life decision, unless of course you have the money to burn in the first place, in which case, I would love to know how you made it this far down this article.

    Use our suppliers forum to search for a wholesaler you're considering buying from. If nothing exists, start a new topic and we'll lend you our eyes.

    #3 – Tangling with Counterfeits

    There’s no hard or fast way to avoid being offered counterfeits. If you’re chasing branded products, guaranteed you’re going to run into them and depending where you’re looking, perhaps in mass quantity.

    Counterfeits should be avoided like that dodgy part of town that everyone knows you steer clear of unless you’re looking for trouble. You have no business if you’re buying counterfeits and the justice system will certainly not offer you any sympathy.

    Ignorance is no excuse, folks!

    Avoid due-diligence when buying branded products and you easily run the risk of being embroiled in a criminal trade that as an example, cost the US economy an estimated $200 billion in 2010. Consider what the worldwide figure may amount to and it's a scary thought.

    #4 – Imports Ignorance

    Trust me when I say that there is no worse feeling than coming to the realisation that the amazing deal you thought you had has actually ended up losing you money. Having said that, it’s easily done, as a lot of importers fall foul of underestimating what it’s going to cost them to get their products from A to B.

    UK Buyers: It’s important to realise that when you import anything from outside of the EU you are liable to pay VAT on it. Import duties are another additional charge that usually becomes payable once the goods have entered the UK. Duties will vary according to the nature of the goods, their value, and their country of origin.

    There are lots of excellent guides written by fellow members on the process of importing, I’m going to recommend reading those rather than go over old ground myself:
    #5 – Overspending

    If you’re like me and bored of everyone saying how tough the economic times are, I can relate. That said, it’s not a time to be flash when it comes to what you’re spending, whether it’s on business purchases or personally. Few of us are fortunately placed to not have to consider what we are spending and if you’re reading this, chances are money, and how you can generate more of it, is at the forefront of your mind.

    You’ll never see me advocating taking high risks when it comes to spending on stock purchases. I believe to be frugal but steadily profitable is a better longer-term strategy than rash and risky, even if there is a short term pay-off.

    Leaving room for unexpected charges (remember those import duties and VAT?) and making allowances for the possibility that your stock might not sell for the price you hoped for (or not at all) is advice I would always pass on with real importance. Allowing 1/3rd of your total spending budget or as cash reserves is a good fraction to work off even if you’ve been really thorough planning your financials.

    Never ever spend what you cannot afford to lose and never risk the essentials or your family’s wellbeing. Don’t be that guy or gal!

    #6 – Miscalculating Profit

    Something that should always be in the front of your mind is the profit you are projecting to make from each purchased stock-lot. Meaning, the price you hope to sell the goods for, minus the cost of the goods delivered to your door (inclusive of all charges) and minus the costs you will incur in generating sales.

    Don’t forget the reason why you’re really in business and that is to make a profit in a rinse and repeat motion. Pay just as close attention to the small numbers as their bigger brothers as these inherently make all the difference, especially when you get into volume territory.

    Be sure to work out what you need to break even on the deal and calculate your profit margins diligently, this will help you visualise an end-goal and keep you motivated toward achieving it.

    If you need financial advice seek the services of a qualified advisor or pursue some of the helpful guides members have contributed to our money, accounts & finance forum.

    #7 – Ignoring your ‘Too good to be true’ Intuition

    Seriously, haven’t we all been there a few more times than we care to remember?

    One thing you will learn real fast when buying wholesale is knowing when to walk away from a deal when it looks too good to be true.

    You’ll either learn it the hard way, as many thousands do through buying goods that were never destined to be delivered, or you’ll be wise and heed the advice we preach here on TWF about practising due-diligence.
    It is so important that you understand your market before venturing into it otherwise you will end up chasing what doesn’t exist.

    There are unscrupulous characters out there that will tell you all day long what you want to hear; that they have this and that product at this price, and that means you’re able to make this profit. They are selling drugs! They are selling a trip down a deep black hole and trust me, there’s no high at the end of it, just a sickening feeling in the pit of your stomach when you realise you’ve been had.

    Conclusion

    Despite the title, this piece is not intended to scare you from buying wholesale, it’s a frank account of what I believe to be some of the most common mistakes people commit when doing so.

    You can learn from the points raised here by realising that there are many factors battling to stop you from succeeding in this business and that overcoming them all is a mere feat in itself.

    Stay safe. Use protection. Practice due-diligence.

    *This article was authored by Anthony Trollope, CEO of The Wholesale Forums. You may not copy, re-publish or alter this article without linking to its original publication URL (this page).
  2. sexbomb

    sexbomb

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    Absolutely brilliant thank you, will keep all these points in mind when I start buying
    saahaodotcom, markakrali and Anthony like this.
  3. eBay Power Guru

    eBay Power Guru

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    Fantastic and informative post!
    saahaodotcom, Cody and Anthony like this.
  4. Volantary

    Volantary

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    Nice article, those that are scared by the points raised in that need to take more care over what they're doing :)
  5. Jay Jones

    Jay Jones

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    Very informative thanks.
  6. UKbuyer1

    UKbuyer1

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    Very helpful thanks Anthony.
    saahaodotcom and Anthony like this.
  7. Anthony

    Anthony

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    Thanks folks! :)

    I've wanted to put pen to paper for quite some time. It's good to have finally hit publish!
    saahaodotcom, TraycDiana and ladyag like this.
  8. Cibertrade

    Cibertrade

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    Excellent!!
    saahaodotcom and Anthony like this.
  9. Seamoose17

    Seamoose17

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    Top stuff, thanks very much, Anthony.
    saahaodotcom and Anthony like this.
  10. omodemeta

    omodemeta

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    Thank you very much. NOt that some of us dont know this things, but we hardly remember them. Thanks for refreshing my memory for the week.
    saahaodotcom and Anthony like this.
  11. Jam Malone

    Jam Malone

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    Very nice over view! Thank you so much for sharing this :)
    saahaodotcom and Anthony like this.
  12. umesh

    umesh

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    Excellent job:):):)
    saahaodotcom and Anthony like this.
  13. Morris White

    Morris White

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    Very well written Anthony and so true!
    saahaodotcom and Anthony like this.
  14. Charlette71

    Charlette71

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    thanks for that, I will definitely keep this in mind
    saahaodotcom and Anthony like this.
  15. steveshaw

    steveshaw

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    How about The 7 Deadly Sins of Being a Wholesaler.
    saahaodotcom, Cody and Anthony like this.
  16. Anthony

    Anthony

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    Have you got a few you would like to share, Steve? :)
    saahaodotcom and Catonroof like this.
  17. TreatWise

    TreatWise

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  18. Yilmaz

    Yilmaz

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    thank you!
    saahaodotcom likes this.
  19. PatrickO2

    PatrickO2

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    One of my favourite thread here. Thank you.
    saahaodotcom likes this.
  20. Catonroof

    Catonroof

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    Its all pretty obvious tbh but knowing all this didnt stop me from jumping straight in with both feet and doing a deal with a non existent wholesaler.in march'12. Sometimes it good to know you're not alone and helpful to see it written down. Thank you ! x

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