4 Easy Steps to Establishing a Reselling Business

Updated on March 6, 2019
TaggMartensen profile image

Tagg Martensen is a self-employed entrepreneur. He specializes in non-web based business opportunities such as retail and services.

Have You Always Wanted to Start Your Own Store?

In a world filled with retail giants many shy away from establishing businesses in the retail space. People often assume that with companies such as Amazon and Wal-Mart generating billions that there just isn't any room for the small entrepreneur to get a foot in the door. The good news is that these people have already taken themselves out of the competition before you arrived!

Ask any successful shopkeeper how they are able to compete with big box retailers and they will all tell you the same thing; by not competing with them in the first place.

If you open a hardware store it's highly unlikely you'll be able to offer a competitive selection at competitive prices over Lowe's or Home Depot. You might also find yourself sitting on unsold products if you decide to sell something that Wal-Mart stocks.

With some creative thinking and a little research you can create a successful and sustainable business today.

Source

1. Find Your Niche

My first online business, and one I still operate today, was in selling lapel pins and tie clips. I found a niche market in men who like the old school cool of tie clips. I found another niche market in the form of men who wore lapel pins to show off their membership in certain clubs or associations or to otherwise show pride in a country, an idea or anything else that could be captured in a pin.

I studied the market by looking at recent sales on eBay, one of the only players in town at the time, to see what was selling and what was sitting. From there I began trying to identify price points that would enable me to be competitive. If tie clips are selling for a maximum of $7, then I need to keep my costs low. This initial research can help you identify whether the niche you've chosen is even a possibility that warrants further exploration.

2. Find Your Supplier

Finding a supplier can be a daunting task. For some people, they like to hunt at thrift stores looking for specific items. Clothing, for example, is something you can typically buy low at a thrift store and sell high online or at a swap meet.

You might also purchase your items in bulk from a website like Alibaba or AliExpress. This can be slightly riskier for a few reasons. The first is that, unless you are ordering custom items, there is nothing to prevent someone else from buying from the same supplier and undercutting your price. The second is that because suppliers on these websites are in China, you are running a higher risk of lost shipments.

I once lost a $500 shipment that caused me to miss my holiday rush. While I was able to recover my $500 thanks to AliExpress's protection program, I missed out on the income I would have generated from having those items arrive on time. It was all the fault of one individual seller with whom I had done business successfully many times before.

Once you find a supplier, however, you may be able to negotiate lower prices per unit which will ultimately improve your margins.

3. Price for Profit

The very first time I sold items, I knew nothing about pricing. I saw that tie clips were selling for around $7 - $12. I bought some tie clips and I sold them for that price. They flew off my digital shelves! The problem was that, at the end of the day, I didn't seem to have much money.

Before purchasing anything you need to understand your costs. Create a spreadsheet that allows you to fully identify the cost of selling one of your products. Aside from the price per unit, you need to factor in shipping costs, the cost of the box or envelope it will be shipped in, your time and anything else that comes out of your pocket in order to get the product from the supplier all the way to your final customer.

The objective is to constantly work to improve your profit margin. For me, I don't even consider a product if my margin will be below 60%. You may need to start off a bit lower as you build up your system. However, I would recommend not going below 50%.

The reason why I didn't have much money is because I purchased those tie clips for $4 each. I thought, then, that I could count on a sweet $2.50 profit per tie clip after shipping expenses. Unfortunately, I failed to consider the cost of the padded envelopes I was using. I failed to consider my listing fees on eBay as I hadn't listed anything before. I failed to consider my PayPal fees. Perhaps worst of all, I really failed to consider the time I was spending on this as something for which I should be compensated.

Instead of making $2.50 per clip, I was making closer to $0.75. For all of the work that went into this, it just wasn't worth it.

4. Monitor and Adjust

While it's tempting to get the lowest price per unit and buy whatever quantity gets you there, it's also important to remember not to put all of your eggs in one basket and to test your market.

I typically try to sell between 20 - 30 of an item first just to measure how the market responds to the price. This might mean taking a lower margin in the beginning. On reorder, I can take the price down by ordering in larger quantities. But I'd rather not get stuck with 1,000 of something if I can't even sell 20 of them.

It is possible, even advisable, to test your market by checking for common search terms, this can overlook a lot of potential in certain niche markets. In these cases, it is possible to get off the ground for an initial investment of maybe $20 - $50 just to test how response your target demographic is.

You Can Do This!

Unfortunately, some people will tell you to jump through administrative hurdles before you ever establish a business. You don't need to incorporate to sell your first few items. In fact, selling things is the best way to find out if you want to sell things for a living!

It's important to not give up and learn from your mistakes. If you find that your product views are down, adjust and try again with more robust listings. If you find that views are up but sales aren't materializing, you might need to adjust pricing. Keep on top of your product and soon you'll have a viable business on your hands.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

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    © 2019 Tagg Martensen

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