Smart drop shippers are always looking for new opportunities to expand their offerings and cash in where the profit potential looks promising. The world of wholesale clothing distribution can be a real cash cow for the clever entrepreneur.
Today, we'll look at the state of the wholesale clothing industry as a whole, then cover some of the pros and cons of getting involved in selling wholesale clothing online.
Global imports and exports are at an all-time high due to increased connectivity facilitated by technological advancement and the emerging global economy. The outlook of wholesale clothing distribution, as one might imagine, is pretty bright. This is especially true for those marketing their products in the U.S.
Whereas prices for most goods and services have gone up over the last 20 years, clothing and apparel has remained largely static.
Chart courtesy of the New York Times.
As you can see clothing is still as affordable as it was in 1991. To be even more precise, in 1987 clothing was responsible for 5.4 percent of all individual spending on consumable goods in the U.S. 22 years later, in 2009, that number had decreased to a measly 3.1 percent. The last available figure from the U.S. census bureau says that that figure jumped back up in 2012 to a 3.2 percent. It seems that Americans are paying less for clothes today than they did in the 1980s.
This being the case, Americans with disposable income are likely to have extra set aside to fill their seasonal wardrobes, despite relatively recent economic woes. According to a study performed by North Dakota State University in 2010, the average American family is likely to put nearly 4 percent of its annual budget (usually around $50,000) toward clothing. That adds up to around USD $2,000 per year in clothes.
And here I am wearing the same shirts I had in college. Good thing bloggers almost never have to go out into the daylight, eh?
It hardly needs to be mentioned because its so obvious, but online sales are grabbing a bigger and bigger slice of that revenue from clothing sales every year. Nielsen recently found that consumer confidence and discretionary spending increased as well. In the case of clothing in particular, the intention to increase spending reached 26 percent.
This is actually a pretty big deal, since these are the highest consumer confidence levels since 2007, pre-economic crisis. Take a look at the consumer confidence index comparing U.S. and Canadian consumer confidence:
USA! USA! USA!
It took us awhile, but we are now officially more confident in our discretionary spending than Canada. Good on us.
And America isn't the only place that spends a great deal on clothing through e-commerce. The UK, Denmark, Germany, and the rest of Europe have high spend rates as well. Just take a look at Germany's e-commerce habits. Care to take a guess which retail category came in with the highest sales figures? If you guessed clothing, you get a shiny penny.
So what does all this mean for you? That there's plenty of market demand for clothing sold online, of course. The only question is: How difficult will it be to get your supply? The answer will vary according to your niche, volume needs, and people skills. In general though, you can look to affordable, high-quality exports to meet your sourcing needs.
China is a hot area for imports of all kinds, and it carries plenty of cultural pitfalls for you to avoid when working with suppliers. However, none of this should scare you away from looking for a Chinese wholesale clothing distributor. And judging by the numbers, it hasn't so far.
In 2013, the U.S. imported more than USD $29 billion worth of clothing from China. That's no small investment on our part. So why China? what makes it such an attractive market for imports?
China is abundant in the raw materials required to manufacture clothing, and labor costs are only a fraction of what they would be if you were to have your clothes constructed by an American supplier.
What really makes China such a viable option though, is all the competition for the U.S. spend. The retail market is extremely stratified. The top hundred retailers only account for 9.3 percent of the total market share as of 2012. That means mass competition keeping prices low, which is great for anyone looking to buy clothing in bulk.
Furthermore, there's currently a trend toward eliminating the intermediaries, that is to say, the middlemen, in wholesaling. Whereas a manufacturer might normally hire an agent to contact and sell to distributors, who in turn deliver the product to retailers (you), now it's not uncommon to sell to distributors or even retailers directly. Here's a chart to simplify the product flow for you:
With fewer middlemen in the way to jack up your buying price, your profit margins are likely to see a boost. So always work as close to the source of the product as possible to avoid unnecessary markups.
But China is hardly the only import option for thrifty drop shippers. U.S. importers combined to bring in USD $8 billion worth of goods from Vietnam, and USD $5 billion from Bangladesh. There are always good deals to be had if you know where to look.
If you've been drop shipping for any length of time, you're probably already well aware of your obstacles. Wholesale clothing distributors can be very difficult to find in the first place. Once you've found them, you've got to work hard at maintaining a fruitful partnership. And there's always the ever-present threat of getting scammed. So what can you do to avoid these obstacles and get down to the business of making money?
First you have to know what to look for in a distributor. You want a wholesale clothing suppliers who meets all the following criteria:
To check out a wholesaler's reputation, it's best to ask around. The SaleHoo community forum is an excellent place to find out if other users have any experience with a certain wholesale clothing distributor. If they've had any trouble, they'll be sure to let you know. You might also want to check out the Ripoff Report website. The site is constantly updated with the latest discoveries of scam sites.
To verify how consistent a company's online presence has been, you need to find out its age. The longer they've been around the better. Most scam sites are fairly new, because scams that have been around any significant length of time end up getting exposed.
Finally, to determine reasonable pricing, you just have to look at the profitability of a product. Can you sell those shoes for more than the site is selling them to you? Can you make a profit after handling shipping and duty costs? A great tool to help you find out the answers to these questions before you even contact a supplier is the SaleHoo Market Research Lab. Use it to find out your potential profit margins, as well as competition rating on eBay.
Have you had any success selling products sourced from wholesale clothing distributors? Let me hear about your experiences in the comment section.