When you hear the words “wholesale price” do you expect to see 50% off the retail price? It’s no surprise if you do, as there are so many sources out there telling us that this is what wholesale is. For example, electronics stores selling consumer products make as little as 10% from each sale. It’s the same for a lot of designer cosmetics. Just because you find a supplier to sell wholesale products, doesn’t mean you’re going to get a huge discount. Usually, retail profit is made by taking a small profit from many sales. If you would like to clear up a few things about what wholesale price really means, read on as I show you the real ins and outs of wholesale pricing, as well as how to ensure you are always paying the true wholesale price when you buy in bulk!
How is a wholesale price calculated?
It’s really not that complicated: wholesale pricing is based on four different factors:
- The commodity price. e.g. the price of the raw materials which are used to produce the product.
- The manufacturing costs (including labour)
- The packaging costs
- And finally, the amount of profit the wholesaler takes.
Why do wholesale costs vary so much?
Quite simply because the costs above can vary greatly from product to product. For example, an item that requires very little skilled human labour will cost more than an item that’s pumped out from a conveyor line. Likewise, a plastic bottle with the main raw material being petroleum will cost much less than a ring made from gold. Surprisingly though, a cheaper item made from plastic will often have a higher percentage mark-up than a luxury item such as a bottle of perfume.
How can you be sure that a supplier has true wholesale prices?
To get true wholesale prices, you need to buy from a true wholesaler. In order to be able to sell at or below wholesale prices, a supplier must be a well-established wholesaler with a proper business setup (with a business license and tax ID). The only way a supplier can sell to you at a price that is truly wholesale is if they buy from a manufacturer in massive bulk.
The difference between a true wholesaler and a middleman lies in who they buy from, and how much they spend. A true wholesaler will invest many thousands of pounds at a time when buying from a manufacturer. A fake wholesaler will buy from larger wholesalers in medium to light bulk and therefore, they won’t get items at the best possible prices and be able to pass them on to you, the retailer at the best price possible. Unfortunately, many retailers are fooled by individuals acting as wholesalers when really they are simply middlemen who don’t have the money or the contacts to invest in huge bulk.
To really ensure that you are only dealing with true wholesalers you need to make sure they are trustworthy businesses. The best way to do this is to access supplier databases from trusted sources. You can find these online by Googling “wholesale supplier directory”. Most directories will charge a subscription fee, but this is worth it as it can save you a lot of money by preventing you from being scammed in the future. You should also do your own due diligence and fully research any company before you get involved with them.