The basics of running an e-commerce business are quite simple. You just want to buy products at a lower price and resell them for a higher price. The biggest hurdle for most beginners trying to start a business selling retail goods online is where to obtain the products at a low price.
Once you get pointed in the right direction, you’ll actually discover that there are a wide variety of businesses where you can purchase products in bulk and/or for wholesale prices. The real trick will actually be to figure out where you can get the best deal, the best service and/or find unique products.
Retail License: State Department of Revenue
The first thing you’ll need to worry about before you can really get started is a retail license. In the USA, these are issued by your state’s Department of Revenue. When you sell products retail, you’re required to collect sales tax. You have to file monthly or semi-annual reports to document your in-state sales and remit your collected sales tax payment.
To be able to purchase products wholesale from manufacturers and other suppliers, you’re going to need that retail license. Suppliers will ask you to send them a picture of the license and/or provide your license number to verify that you are legally allowed to purchase goods from them without paying them sales tax (the sales tax gets charged when you resell the goods retail to customers). It’s better to go ahead and apply for this retail licensing right away so you can be ready to order once you do find a supplier.
This license not only gives you access to buying from wholesalers, but it also lets you buy products for less since you don’t have to pay sales tax to purchase inventory. While it is possible to run a retail business (illegally) without this license, the benefits of having one far outweigh the downsides.
Wholesale Suppliers & Manufacturers
With the internet at your fingertips, you’ll be able to track down a wide variety of manufacturers and wholesale suppliers within your industry. In many cases, you’ll need to actually contact someone at the company to set up an account with them to be able to find out their prices.
If you already know the exact goods that you want to be able to sell, search brand names to try to figure out which companies can supply you with those items at wholesale or bulk prices. This can help to drastically narrow your search and avoid wasting time setting up accounts with businesses that you won’t end up using.
Another excellent way to find new suppliers is to visit trade shows or conventions for your industry. This tactic allows you see a lot of products in person, which can help you discover new items that won’t be sold by many other competitors yet. It also lets you meet companies in person, which can let you set up an account on the spot and be ready to place an order from the convention or as soon as you return home.
Liquidations & Auctions
Some industries offer the opportunity to buy goods for much lower prices, potentially even lower than wholesale prices, through auctions and other types of liquidation events. Some cities have liquidation businesses that you can visit on specific days of the week to have the chance to purchase these products.
In general, the exact type of product you want to sell will determine whether this is a viable option for you. However, this option is definitely worth exploring to find out if it can work for your e-commerce business because it can be very profitable.
Storage lockers, real estate, estate sales, police seizures and more can offer really easy access to a wide variety of goods. Sometimes these items will have a lot of competition and sell for normal prices, but if you know your industry and how much items should cost, you can cherry pick some amazing deals at these events.
Make Your Own Products
People go online to find something that they can’t find in a retail store or to get a better price. Maybe you look for an item in stores and can’t find it, but you also struggle to find it online. If others want the same type of product, this can be a golden opportunity to produce your own to fill the gap in the market.
Some types of products can be made yourself in your own home and then resold online. Other goods require expensive equipment, chemicals or technical expertise. While some items can’t be made at home, you can sometimes find companies that will make them for you. Search around online to see if this is possible for your type of product.
When you make your own product to sell online, you’ll be able to create a unique retail e-commerce store that offers items that nobody else will have to sell. Competition online for easily obtained and frequently purchased goods can be extremely stiff, which often leaves little room for profit. Selling your own goods allows you to avoid that competition, which can help a lot to drive sales and provide you higher profit margins.
Drop-Shipping Suppliers
There are businesses that offer another option for those that don’t have the money to buy inventory, space to store inventory or the desire to package and ship inventory. That other option is called drop-shipping. You get a catalog of products you can sell and a list of prices. You then attempt to sell those products at any price you want. When you get a sale, you punch in the order with you drop shipper and they fulfill the sale by shipping the item to your customer.
Drop shipping sounds pretty great when it’s explained at the basic level. However, what those companies won’t tell you upfront is that you’ll struggle to sell their goods, especially if it was really easy and free for you to gain access to sell them yourself. With hundreds or even thousands of other people trying to sell the exact same items, it becomes a competition of who is willing to sell for the lowest profit margins.
Many drop shippers also utilize a volume-based pricing structure. Beginners and people with low sales volume have the highest cost for the items. As you are able to generate a higher monthly volume, you’ll get to the buy the goods for a lower price. That structure works great if you can make a lot of sales, but it can be bad for the newcomer because of the competitiveness of e-commerce. Higher volume sellers can often price out beginners to make it very difficult to refer any sales. If you’re willing to try this route, be ready to sell for very little profit and try to bring your own audience, such as from your website blog.