The Scoop about Purchasing
"Wholesale" Products for Resale

The discounts (wholesale prices) offered on the products are not low enough for you to make a profit, and the products are either outdated or have very little demand

The discounts (wholesale prices) offered on the products are low, but the products are either outdated or have very little demand

The products are actually in demand, but the discounts (wholesale prices) are by no means low enough for you to make a profit

In Scenario A:You are given an insignificant discount on products with little to no demand. Unfortunately, this is the most common scenario. In just about every instance, the company which is offering the products markets itself as a wholesale provider for the product, but in fact they are just a middleman in the middleman-chain handling the transaction between you and the product source (or another middleman). As a result the discount will not be significant, probably in the 20% range, which is simply not enough of a discount even if the products had a high demand.

In this case, the discount rate in which you receive means nothing, because the products have no market demand. Your wholesalers (middlemen in your chain), however, will make a profit. Each level of wholesaler, including the manufacture, will make a percentage of the profit off of your initial bulk purchase. Or if the vender doesn’t require a bulk purchase, but instead requires a membership fee, then that membership fee is usually divided up the chain as well. They are fully aware that once they sell you a given quantity or membership, you will not be back because of the low product demand.

In Scenario B: Your discount rate is significant, but the products have little to no demand. This is another common scenario that is usually the result of dealing with fewer middlemen (wholesalers).

The company providing the products may actually be a legitimate level-1 wholesaler, meaning, it purchases products directly from the product manufacture, however, the wholesaler knows the products have been around for years and already marketed to the point where there is very little demand for the products. The best thing for the wholesaler to do is take what it can get for them by selling them for extreme discounts to inexperienced resellers.

Again, the goal of the wholesaler is to sell you a bulk purchase. As in the first scenario, the wholesaler is fully aware that the likelihood of you coming back as a repeat customer is very low, so the goal is to make a profit once and to get rid of slow moving products.

In Scenario C: The products offered are in high demand, but the discount rate is insignificant. This scenario is almost always the case with products that are in high demand. Here you will likely find the company offering the product to be a high-level (level-3 or higher) wholesaler, or the actual product producer, which is not a true manufacture. The term high-level wholesaler is the term used to describe the number of middlemen between the wholesaler and the product manufacture. A level-3 wholesaler indicates that there are two middlemen between the level-3 wholesaler and the product manufacture. (see the middleman-chaining article for description of the wholesale levels)

There are many high-level wholesalers that are offering products that are in high demand for resale. However, as discussed in the middleman-chaining article, a high-level wholesaler simply cannot provide a significant discount to you; therefore you cannot make any profit on the resale.

Product producers are not true product manufactures. A true product manufacture is dedicated exclusively to manufacturing products and distributing those products to wholesale companies, which in turn distribute the product to distributors. A product producer likely sells the same products to the general public (retail). In essence, they compete against you, and since they control the product and price, they will always win.

The lure in Scenario-C is the demand of the product. You already know the products sell well, you have probably seen them marketed for a little while and there may be some industry buzz going around about how good they are.

In this scenario, the wholesaler (or product producer) will typically offer a low 10% - 15% discount on the product for bulk purchases claiming this is an excellent opportunity to jump on board and make a killing off the high demand. Entrepreneur's usually buy into this and end up purchasing several units to find that once they add in their operational cost of advertising the products they, at the very best, break even with a bunch of lost time.

You see, there are costs associated with doing business including: advertising, support, handling orders, etc. As a result of these costs, in most cases, you simply cannot make money with a 10% - 15% discount, even if the product is in high demand. Even an experienced entrepreneur would not make a sufficient profit at the 10% - 15% discount rate; they likely wouldn't waste their time with that rate.