5 Quickfire Answers for Wholesale Newbies

New to wholesale? Confused about wholesale? We've answered 5 of the most common newbie questions about wholesale to help you kick-start your business! 

1. Should I set up my own ecommerce store?

You don't need to set up an ecommerce store to start selling online, but it's a great way for sellers to have more control over their business through:

• Developing your own branding and increasing your use of marketing

• Eliminating auction fees

• Increasing your number of repeat-customers, and,

• Eliminating auction time frames – your products are available to possible buyers 24/7

Setting up your own ecommerce site is easier than you think – many sites such as Yahoo Small Business and Vendio have easy-to-use templates which take care of all the technical stuff for you and leave you to take care of the stuff that really counts.

The cons? Some find that compared with auction sites like eBay, their site traffic is relatively low. This can be helped by search engine optimization (SEO) which often comes as part of ecommerce packages, or you can read this article and learn how to implement some basic SEO yourself.

2. Do I need a Sales Tax ID?

A Sales tax ID has many aliases and is also commonly referred to as a Retail or Reseller License, State Sales Tax ID, Tax ID, Resale Number, Resale Certificate or Vendor's license. Don't be freaked out by all the names; they all allude to the same thing: A certificate issued to you for a small fee by your state (if you live in the US or Canada) which says that you are registered to collect sales tax.

So who needs one?

1. Anyone based in the US or Canada who wants to purchase wholesale goods from a US or Canadian supplier will need a Sales tax ID so they can buy without paying sales tax. If you don't have a Sales tax ID you might still be able to purchase from a wholesaler, but you will be charged Sales tax as though you are the end user. 
2. Any retailers in the US and Canada who buy or sell tangible taxable items are required to get a Tax ID. Most states have a sales tax but there a couple that don't. If you are working from one of these states, let your wholesaler know as they’ll probably want to see another form of business identification instead.

Although it’s not necessary for SaleHoo members to have a Tax ID and a registered business for them to use many of the suppliers in our directory, we strongly recommend they get one as it will give them access to more wholesalers.

It’s easy to get a Tax ID online from your State's website or by visiting your local County Clerk’s Office.

3. What is an MOQ?

MOQ stands for 'minimum order quantity'. Wholesalers have MOQs because their business is based on volume. This means that their margins generally aren’t high enough for it to be worth their while dealing with small or single orders. The MOQ is important to know when you are negotiating with a wholesaler or liquidator as it indicates either the minimum amount you need to spend or the minimum number of units you need to purchase per order.

4. What are backorders?

Backorders occur when a supplier runs out of stock for an item which has been advertised and sold to a buyer. Backorders are a pretty common occurrence because it’s easy for suppliers to suddenly run out of a popular product during a busy period - and unfortunately, not many provide real-time stock updates. As the seller, you have two options when backorders occur: (1) You can ask the buyer to wait until the item is restocked, or (2), you can simply refund them the money and cancel the sale.

To avoid backorder problems it’s a great idea to buy a couple of the items yourself and keep them on hand. Alternatively, put a note in the item listing about the possibility of backorder delays – especially during the holiday season. A buyer who is pre-warned about the possibility of backorders will react much better to the situation than one who is not!

5. How much money do I need to order from a wholesaler?

How much you money you need to order from a wholesale depends on a few different variables including:

• The per unit value of what you are wanting to buy from the wholesaler

• The wholesaler's MOQ

It’s possible to buy wholesale with just $100 (even $50 will get you a small wholesale lot of an inexpensive item) and for your first wholesale order, it’s generally best to stay under $500 anyway while you test the supplier and their product. The golden rule is never risk more than you can afford to lose! As you gain more experience, you’ll want to scale your order up as quickly as you can to get maximum volume discounts.

Each supplier is different so it pays to look around as much as possible to find one that can work in with your budget. If you do happen to find a product that you are really interested in, but the MOQ is beyond your budget, contact the supplier anyway. Many SaleHoo suppliers are sympathetic to new sellers and may make allowances during your early days so that they can have a great customer later on.