The Wholesale MisconceptionWritten by Chris Malta
"The Wholesale Misconception" One thing that’s constantly misunderstood by people trying to run a home business on Internet is word “Wholesale”. Some people think that working with a real wholesale supplier means that they will magically be able to sell products for less than anybody else on planet, for ever and ever. They’ll be only one who ever gets such good prices, and they’ll earn millions because no competition can touch them. They’re retire happily in a couple of months, and buy a big house in Beverly Hills, complete with a butler, a private chef, and a little satin doggie bed in every room for casual use of family Basset Hound, Duke. Then they find that they may actually have to compete with companies who have more buying power and get better price breaks, and suddenly honeymoon is over. They run around screaming that supplier is not a real wholesaler, and is cheating them. The sky is falling, and it’s time to get Duke to storm cellar because all their dreams are being blown away by bad, BAD people who claimed to be wholesalers, and really are NOT! The truth is that they’ve simply been confronted with a perfectly normal aspect of retail sales that they had not anticipated, and need to be educated about. Even when using genuine wholesale distributors, you're going to find some stores selling products at a "retail" price that is lower than your distributors’ "wholesale" price. There are VERY good reasons why you'll see this happen, and it's extremely important to understand why it happens and what to do about it in order to sell successfully on Internet or anywhere else. As I said, it happens for a variety of reasons; most common of which is that retailer with "lower than wholesale" price is a large retail operation that bought THOUSANDS of product at a dirt-cheap quantity price break, and also qualified for huge manufacturer's wholesaler rebates. You can't compete against that with a home business; no one can. The term "wholesale" is relative, no matter who your distributor is or how you find them. What you're getting as a small business is a supplier's genuine "first level" wholesale price. For example, one factory-direct supplier we work with has an initial wholesale price for 1 to 36 dart boards. Then second price level is reached, and there's a lower price for 36 to 72 boards, for example, then a lower price for next higher quantity level, etc. When dealing with single item orders in your home business, you are obviously going to be getting "first level" wholesale price.
Again, wholesale is a relative term. Yes, genuine wholesalers DO sell at significant discounts below Manufacturer's Suggested Retail Price. However, you have to watch what you sell. Electronics, for example, are a very tough market, because EVERYBODY is trying to sell electronics on 'Net right now. All these people are so busy trying to undercut each other that they have driven "market price" of these items down so low as to make it very difficult to make a profit, even at wholesale. For example, if Manufacturer's Suggested Retail Price (MSRP) for a VCR is $149, and it is available at "wholesale" for $69.00, that's a 54% discount off MSRP. That's a pretty good profit, right? However, with everybody getting roughly same price break, there are a lot of people out there who are ruining market for everyone else by selling that product for, say, $79, thinking they will undercut everyone else and make money by selling volume. Pretty soon, everyone else sees this, and tries same thing. Eventually, Internet "market price" for this VCR BECOMES $79, and everyone is flooding market with it at that price. That's only a 13% percent profit margin, and that product is no longer worth effort for anybody. So, even though product IS available initially at a great wholesale price, its market value is ruined by those who (wrongly) assume that only way to sell is to have absolute lowest price anywhere. Sales is much more of an art than that. If selling something were simply a matter of absolute lowest prices, Wal-Mart would be only store on face of Earth. Without going into too much detail, sales is a mixture of choosing right product, or combination of products, for your web site. It's presenting a clean, attractive, focused site. It's giving customer some little value-added bonus at your site. It's providing absolute best customer service that you can. All these things help a customer to trust you, and when they trust you they are willing to spend a little more to buy from you. One of our retail sites is www.ElectronicDartShop.com. We sell Arachnid Electronic Dart Boards there. We sell ONLY those products on that site; just 14 of them. Our site is clean and attractive. We have a page listing all rules for all dart games that can be played on those boards. We pay very careful attention to customer service. And guess what? We are NOT lowest priced store for those dart boards, by any means. Yet we are one of highest-volume Internet dealers of products around, according to factory. Why? Our customers trust us, and are willing to pay a little more because they feel they will get more value from us than they will from some guy who just throws up a cheap-looking site full of all kinds of unrelated products and only pays attention to price-cutting.
What Should I Sell on my Site?Written by Chris Malta
"What Should I Sell on my Site?" Far too many people make mistake of trying to sell only products that they like on their web sites. Others make mistake of trying to sell only coolest and flashiest things they can find. The whole point of starting an Ecommerce web site is to make money. That’s something you must not lose sight of (no pun intended!). Our business is to show people where they can find products to sell without investing a single penny in inventory. The approach is called drop shipping. This is where a wholesale distributor will ship a single item directly to your customer from their warehouse, AFTER your customer pays you for it. It’s perfect way to start in Internet business on a shoestring budget. The Directory we publish covers three quarters of a million products, from over two thousand well-known brand names, available from more than a hundred REAL wholesalers who will drop ship. So why does everyone who uses our Directory try to sell electronics? Ok, I guess I did same thing. When I opened my first Internet store, I plastered walls of that place with things that I though were cool. Stereo equipment, DVD players, Computer components. The shinier better. I had latest technology up there. Some of items cost thousands of dollars. I think that in back of my mind, I knew that I wasn’t going to sell much of it, but it LOOKED really cool. I could show it to my friends and say, “Check it out…that’s MY store!” They were all suitably impressed, and I could walk around feeling like I was pretty slick. Whenever any of them asked me how much money I was making, I cleverly changed subject. The truth was that no one was buying much. Come to think of it, none of my friends bought anything, either. That should have told me something right there. Look, electronics are a fine product to sell on Internet. I only use them as an example because it’s a situation I can relate to. The problem is not product; it’s COMPETITION. Most of people I’ve seen start an Internet store want to know what hottest sellers are on ‘Net, so they can sell those products too. They’re missing point, as I did. If you only sell hottest sellers, you dilute your available customer base, because everyone else is trying to sell hottest sellers, too! You also run into those bricks-and-mortar popular-item superstores that have millions of dollars to purchase tons of inventory at rock-bottom prices. People buy all kinds of products. They don’t have to be cool or shiny. They just have to be things that people will buy. Here’s an important ingredient for success on ‘Net: sell those products that people use, but don’t stumble over every time they open a web browser. When we build an Internet store, we do a little research first. Since we build stores in Yahoo Shopping (http://store.yahoo.com), we do our research in Yahoo Shopping. We know that at least 90% of our traffic is going to come from millions of people who surf through there with their purses and wallets flapping in breeze. So when we consider a new product line, we start a search. If we were considering selling DVD players, for example, we would do a search on term “DVD Player” in Yahoo Shopping. As of date of this article, such a search turns up 7,813 DVD Players available from 496 stores. Do we want to become store number 497, add 20 or 30 products to nearly 8,000 that are already available, and hope we sell something? I think not. Since we use our own Directory exclusively as a source of product suppliers who drop ship, we go back to Directory and look around at some of available product types. We notice that one of wholesalers we list carries a complete line of Fiskars brand Yard and Garden tools. Will people buy these products? Hmmm…people HAVE been known to work on their yards and gardens, when they’re not playing with their electronics. Fiskars is a well-known brand name, so our customers would feel comfortable with it. It happens to be late spring, so it’s reasonable to assume that people will be buying garden tools for some time still this year.