A retail price is just about right for a customer. After all, a person only buys one or two of something. But for a business owner, even a small difference between the retail price and the wholesale price can make a big difference in how much money they make.
But what does that mean? Where can you find things that are sold at wholesale prices?
Here, we’ll look at why wholesale prices exist, where you can find them, and how buying in bulk can help you make a lot of money.
Why do wholesale prices exist?
Manufacturers and distributors are usually where wholesale goods come from. People who buy a lot of them at once are called retailers. These stores will take the risk of selling these products to end customers one piece at a time.
The way an economy is set up is important. A company that makes goods doesn’t have the means to get them to the end consumer.
For instance, you might be in the business of making processed and canned milk. As a manufacturer, you have spent all of your money on building a plant, raising cows, milking them, and pasteurizing the milk products.
You have to can them as part of your process, and you also have to pay your employees and truck drivers. You make thousands of gallons of milk that has been processed.
Your main goal is to get this product out there. But if you also do retail, you’ll have to build your own grocery stores, which isn’t a good business move.
This is why you need to sell your products to grocery store owners at wholesale prices. Your goal is to keep your manufactured goods moving, so you have trucks that will take milk to different states.
Now, marketing is the job of stores like Whole Foods and Walmart. Since they bought a lot of your product, they have a lot of room to raise the price and make more money.
Where can you buy in bulk?
In big and bulk stores, you can buy a lot of things in bulk. One is Walmart. In the US and around the world, many grocery stores sell things in bulk, like 24 rolls of toilet paper or 6 gallons of detergent in one pack.
Consumers will see that buying these products at wholesale prices can save them up to 30% off the normal retail price.
The only reason why they’re called “wholesale” is because people buy them in small quantities. But the truth is that these stores still make money. To really buy in bulk, you have to buy more than 24 rolls of toilet paper.
You have to buy by the box, and you have to buy directly from the manufacturer or the regional distributor.
Think about sodas. Most of the time, a can of soda costs about $1. But if you buy it in boxes, the distributor can give you a free box of soda for every 10 boxes you buy.
Alibaba is an example of an online store where you can buy in bulk. One more is AliExpress.
Because you are buying directly from the manufacturer, the products in these online wholesale markets are sold in bulk.
Many businesses around the world buy from these companies. They are often called OEM, which stands for “Original Equipment Manufacturer.”
One who makes a product for a client is called an OEM. Then, all they have to do is stamp the product with its brand name, and it’s ready to be sold in stores.
On Alibaba and AliExpress, you can find a lot of products that are sold in stores but don’t have a brand name. You can buy them in bulk and save a lot of money.
An Example of Making Money on Wholesale
Here, we’ll look at how buying in bulk can save you a lot of money. We’ll use a product from Alibaba as an example.
In the picture below, you can see a black crop top hoodie that you can buy in bulk. When you look at the prices, you can see that the more you buy, the more you save.
If you only buy three pieces, each one will cost you $7.30. But if you buy at least 600 of them, each one will only cost $4.96.
Now, you might not be able to sell 600 of it, so you only buy three. Your capital is $7.30, which is equal to $21.90.
If you look for something similar on Amazon, you will see that it is being sold for $18.99, as shown in the screenshot below.
If you keep the price the same and sell the product, you still make a good profit of $11.69 per piece.
Now, look at the table below to find out how much you can make.
As you can see, the price of each piece goes down as you buy more. And if you sell everything at the suggested retail price, you can make up to a 280% profit if you buy at least 600 pieces.
Wholesale: Pros and Cons
Look at the pros and cons of buying in bulk to help you decide.
Here are some positives:
- Cheaper Prices: are lower when you buy in bulk, which makes sense. This is true for all ways to get the product, even if you don’t buy from the maker.
- Price Haggling: If you buy directly from the manufacturer or distributor, you can haggle over prices because you will be buying a lot of products. Many businesses would rather make less money than have their goods go bad.
- Low-Cost Or Free Shipping: Since you are buying in large quantities, the manufacturer is likely to ship the items to you for free or at a low cost.
Here are the negatives:
- Huge Stock: When you buy in bulk, you own the products and can store them. Even if the products don’t sell, you still have the stock.
- Big Risk Capital: Even though the price per piece is lower, you still have to spend a lot of money because you have to buy in bulk. For the hoodie we used as an example, you have to pay at least $2,000 for 600 of them.
- Storage: To keep your stock, you need a place to store it. You need to rent a warehouse if you don’t have one.
Wholesale is a great way to do business, but only if you can sell a lot of your products and if people want them.
This is also the best choice if you want your products to be branded by a manufacturer. But there are some risks, like having to keep an inventory and rent a warehouse for things that might not sell.