Buying Wholesale Versus Buying From A MiddleMan

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A few weekends ago, my wife and I had the pleasure of attending the annual San Francisco Gift Fair held at the Moscone center. My mom was in town so we left the kids with her and took off to check out the latest gift wholesalers from across the US.

The SF wholesale gift show had the usual requirements to keep out casual shoppers. You needed to show at least 2 forms of id which could consist of any of the following: your business license, LLC or corporation paperwork, EIN number, business credit cards etc…

Young kids were not allowed in and you had to pay a hefty fee to bring in guests that did not have their own business. These rules were in place to make sure that only true buyers and business owners were allowed on the show floor.

Tradeshows Are A Great Place To Find Products To Sell

Tradeshows like the SF Gift Fair are a great place to meet vendors because hundreds of companies congregate under the same roof for several days. And in that span, you can talk to many vendors and discover new products to sell without having to travel more than 500 ft.

Most vendors that attend these trade shows bring along a large collection of products. As a result, instead of having to go back and forth requesting product samples by mail, you can touch and feel all of the products first hand at their booth.

This saves a ton of time with product sourcing and you can get a good idea of product quality as well.

Are You Getting The Best Price?

However, the big problem with vendors at these trade shows is distinguishing the real wholesalers from the middle men. Now there are many vendors out there who call themselves wholesalers but the term wholesale can be very misleading. My definition of a “real wholesaler” is a distributor that is one step removed from the manufacturer.

If you’ve never been to a wholesale tradeshow before, almost every company that you meet will give you a price list which consists of both a wholesale and a retail price.

The retail price is the “suggested retail price” and is usually around the ball park of 2X the wholesale price. The problem is that unless you have some context for the pricing of the goods you are buying, you will have no idea whether the wholesale prices you are getting are the absolute lowest.

After all, the “retail price” is usually just a bogus number that you can’t really expect to charge.

For example, there were several vendors at this show that sold the same or similar products that we offer in our online store.

However, the wholesale pricing that they were offering was a good 2-3X higher than what we could get directly from our vendors in Asia.

In some extreme cases, the markup was upwards of 8-10X. But if you looked at their retail pricing, it didn’t appear to be a bad deal. That is why you have to be extra careful and do your homework before making a bulk purchase.

Finding Real Distributors

Distinguishing the middle men from the real distributors takes a lot of time which is why I always recommend using a service like WorldWide Brands in addition to attending tradeshows. Companies like Worldwide Brands help you screen out the little guys and provide useful search facilities for real distributors. You can think of them like a “Google” for true wholesalers of goods.

A good strategy for sourcing product is to attend wholesale tradeshows to obtain ideas for what you want to sell and then use Worldwide Brands to track down a true distributor for that product.

While my wife and I didn’t find any new vendors for our online store at the SF Gift Fair, we did come away with a ton of new product ideas.

Some Other Observations

This may only be true with my particular niche, but I found it extremely odd that many of the vendors on the show floor did not have their own websites. And those that did had really crappy ones.

We even met one company that not only didn’t have a website but didn’t accept credit cards and didn’t have an email address either! All business was conducted via phone or fax and you had to manually request samples of new product before ordering.

But despite still living in the stone ages, this company had been around since 1927!

The key takeaway here is that even though there are a ton of ecommerce companies out there, I strongly believe that technology has still not caught on with the majority of shop owners.

While this trade show only represents a small sampling of the US, the fact that we saw many vendors completely neglect their online presence indicates to me that those with web skills or web initiatives have a clear opportunity here.

Start an online business online now! As my wife and I walked the show floor, we saw many companies doing business the old way that could easily be done better online.

Do your research when sourcing your products, avoid the middlemen, throw up a web store and I guarantee that you’ll rock these dinosaurs over time.

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9 thoughts on “Buying Wholesale Versus Buying From A MiddleMan”

  1. Hi Steve,

    Thanks for the information. Do you have other suggestions on the vendor finding sites? I am not sure if I want to pay $299 with World Brands right now.

    Thanks,

    Jeff L.

    1. @Jeff
      It all depends on how much you value your time. Using the search engines is not a good way to find real wholesalers since there are so many scams and middlemen online. If the product you want to sell is well branded, then you can contact the manufacturer directly and get a list of authorized distributors. But for small unbranded items, you have to go to tradeshows or do your own price matching online which can be a lot of work.

  2. JP says:

    Any hints as to what merchandise is lacking a strong web presence? 😉

    I like your blog btw. I came over here from The Financial Blogger and I have been enjoying your posts.

  3. Diana says:

    Somos proveedores de mercancía en general de tiendas al por mayor tales como : liquidación, saldos, remates, excesos de inventario y devoluciones de clientes. Hacemos parte de este negocio desde el 2004.

    Central Closeut se interesa en ayudar a los clientes y empresas de cualquier tamaño, incluso a aquellos que quieren iniciar por primera vez pues sabemos lo difícil y confuso que puede llegar a ser la realización de negocios en esta industria de liquidaciones en particular. http://centralcloseout.com

  4. This is actually my very first time i visit here. I found so many interesting things within your blog especially it’s discussion. From the tons of remarks on your posts, I suppose I am not the only one having all the enjoyment here! keep up the good work.

  5. Shoney says:

    I am opening a clothing boutique, but i won’t have an online site. Is World Wide Brands for me?

  6. iradath alam says:

    how to do email to wholesale vendors for to do business with them selling there products on our site

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