Product Sourcing for Home Business--Do You Really Need an Online Wholesale Directory?

The idea of online home business has captured the imagination of almost anyone desiring greater financial freedom and more control over his or her life. Product sourcing for this specific home business model can be crucially important. One business model receiving what seems to be a fever pitch of attention is the reselling of wholesale and/or dropshipped goods from ecommerce websites, over eBay, online classifieds such as Craigslist, or through other offline environments such as flea markets. Much of the promotion encouraging you to start your own home business also implies vast financial success if only you join this or that online wholesale product sourcing membership. Such promotion, of course, is really only using home business as a hook to sell a membership and generally could care less about your own business aspirations. Nevertheless, if you have considered the art of buying cheap and selling dear and have Googled terms related to "wholesale" and "dropshipping," you have been pitched wholesale directories and online memberhsips promising access to thousands of suppliers and products across many different product categories. So, is there anything to the hype surrounding such directories, and if so, do you really need to buy this sort of membership? The answer, to be explored more thoroughly in the coming capsules is, in my opinion, both "yes and no" and "it depends."

I was motivtated to write this hub after reading over other hubs concerned with the problem of working from home and personal freedom. A few years ago, I decided that I wanted to sell DVDs on eBay, and I was curious, as are many, how prices for DVDs could appear to be so low. I purchased an ebook from someone promising to give the company names and contact information for two of the major wholesale distributors for DVDs and video games and also precise instructions for running the inventory datafeeds from these companies on eBay. The book was all that it promised except for the fact that the contact information, eBay information, inventory datafeed information, and pricing information was out of date and useless. The names of the companies were valid, however, and working out the logistics of establishing accounts with real wholesale distributors was an education in itself. None of the information found in ebooks informs you that you may be asked to put up a $25,000 letter of credit to establish the terms you need. That in itself is not particularly hard to do, but it was a surprise. You see, I was running into requirements of real business. Those of you who have been through the learning curve may chuckle. I am still chuckling. Me trying to do business is a little like a dog trying to sing opera. Well, even a dog can have dreams.

Later, not able to leave well enough alone, I bought another list of DVD product distributors. This turned out to be a good investment and the person who developed the list also a good source of other advice and information. I eventually decided that it was better to try and sell DVDs from my own site (or sites) rather than sell on eBay. This lead to me plunging into the world of what I think of as micro home business product sourcing. I established a few other accounts with wholesale businesses, developed a couple of ecommerce sites, and even joined an online wholesale directory membership. At this point, I wish I could say something along the lines of, "Well, in the end I went from $0 a month to just under $gazillion." However, the truth is that I made some very bad and costly decisions about outsourcing aspects of the site development, and then later, the sites were overwhelmed with spam. So, while the site and plans are not forgotten, they are in a holding pattern of sorts. In the meantime, I have moved some of my business onto eBay. And though I have not come through this particular learning curve with my pockets lined with cash, I have learned a fair amount about product sourcing.

Just in case there is any misunderstanding, a true wholesale business requires proof of your sales tax permit. A real wholesale business is licensed to sell as a wholesaler and authorized by particular manufacturers to distribute their goods to retailers. A sales tax permit, sometimes referred to as a resale certificate, is essentially a license from the state in which you reside to buy products from wholesale distributors without paying sales tax. As a retailer, you would be obligated to charge sales tax to your customers and then remit the tax to the state treasury at the established tax paying times. In many--perhaps all--states, this permit is free, and all you have to do is merely register with the state. In Iowa, where I reside, this is very uncomplicated, and the entire process can be done online in about ten minutes.

Dropshipping is a service that is sometimes offered by true wholesalers in which the wholesaler stocks all inventory and ships it out to your customers under your business name. The customer buys from you, you purchase from the wholesaler/dropshipper, the dropshipper sends the the product to the address you specify under your business name. This is sometimes called blind dropshipping. Dropshipping is often a service that you may be able to negotiate with a particular manufacturer or wholesaler, and there may or may not be an extra cost. You often here that "real dropshippers" never charge an extra fee. The truth is that every true wholesale business establishes its own policies regarding this. For example, WYNIT, one the major consumer electronics wholesale distributors in the United States, has never charged me a separate fee for dropshipping. DBL, on the other hand, also one of the largest wholesale consumer electronics distributors in the U.S., does charge a dropship fee, and this is clearly stated in their terms of service. .

These days a number of businesses have sprung up advertising themselves as dropship wholesalers and offering access to hundreds of thousands of mass market consumer goods. Doba.com, megagoods.com, shopster.com are a few examples of such companies. It is important to understand that even though these businesses refer to themselves as wholesalers and strongly imply that their prices are true wholesale prices, they are not true wholesale businesses because they don't require proof of a sales tax permit. They are, in fact, retail businesses offering products to you at a steep discount and providing the dropshipping service as a selling point. They may also offer other services such as a fully developed website preloaded with the advertised inventory. Many of these businesses are legitimate businesses, and though the examples mentioned above are generally well regarded, they are not true wholesale businesses. Because such companies promote themselves as a means of making a "killing" on eBay, a question that you, as a prospective eBay seller, need to ask is whether or not you can, in fact, make a profit. If you are thinking of using such a dropship service to sell on eBay, proceed with caution. In fact, you need to ask this question if you are thinking of purchasing from any wholesale distributor. Here's why.

EBay itself is a wholesale selling environment. Almost everything sold on eBay is already at or below wholesale price. If you intend to to buy wholesale goods to sell on eBay and dropship them to buyers using companies such as the above examples, keep this next point in mind. Make sure that your purchase prices are not already at or above the average purchase prices on eBay. Also, and this is often overlooked--be sure to factor in eBay fees when calulating your costs.. One of the problems with the wholesale-dropship eBay myth is that very often eBay prices start at the wholesale price you pay to the wholesaler or dropshipper. I don't know that you can never win on eBay with these companies. It is, however, important to identify the specific products that you think would do well on eBay. That is true for any business and any selling environment, but particularly true on eBay. Dropship companies such as Doba really only work on eBay when you have identified a few particular products or a particular product line that can sell well.

In my opinion, a good online wholesale directory is generally most helpful if you plan on selling mass market consumer goods to the general public. Though I could be mistaken, they may be less helpful if you are in the business to business line. However, if you already know what you want to sell, then go to the manufacturer and find out if you can become a reseller. If so, negotiate a price. If not, find out who the authorized distributors are and negotiate with them. If you are lucky, perhaps the manufacturer or the wholesaler will offer dropshipping as a service. In the end, the price you get will depend on the quantity you purchase and then will adjust depending on how good your personal relationship with your sales rep is. This may be oversimplifying a bit, but you can use resources such as the Thomas Register to find manufacturers and wholesalers in various industries. Your public library may have the reference freely available, but you can also use thomasnet.com for research, as well. I can't resist one little sidebar comment about eBay, and then I'll continue with online directories. You can skip to the next capsule, if you like.

I'm going to pause for a moment as say a few words about eBay. You invariably run across the same sorts of tips for eBay product sourcing. That is:

• yard and garage sales
• estate sales
• thrift and second hand shops
• auctions
• liquidation auctions

To that list I'll add the following:

• local crafts
• local artisans
• local artists

And one more:

• selling local craft and art items in foreign eBay markets,such as New Zealand, Australia, France, and so forth.

An example of this last item would be the selling of, say, handmade Amish quilts on ebay.au. I don't know that handmade Amish quilts would be a big hit with Australian collectors, but you get the idea. A unique, high quality item absolutely unavailable, unless previously imported, in the Australian market.

You have probably heard all of this before, but there is a reason for this. These sorts of products sell well on eBay. You can sell just about anything and everything on eBay, but the more "unique," the more "one off" an item is, the better chance you have of selling. Mass market goods, such as electronics and DVDs sell well, but the competition is so great that it is now relatively difficult to make a profit. Not that you can't do it with persistence and solid research into a particular niche, but it is more of a challange. The secret to selling mass market goods on eBay is purchasing in bulk lots. One of the "secrets" of eBay sellers is buying large quantities of liquidation and closeout stock. If you want to know how it is that a pair of non counterfiet Nikes can sell for $40 on eBay, the answer is that the shoes were part of a large bulk purchase of liquidated retail inventory.

What I now believe to be true about online wholesale directories is that in addition to listing as many suppliers as possible across as many products categories as possible, the membership should also include a forum so that you can network with other members. It also helps if management can reliably verify that the businesses listed are legitimate, and they should be willing boot any business that strays from ethical conduct. It's also my opinion that the forum is probably the valuable aspect of an online wholesale directory. It also helps if you can trust that the membership really does establish that the businesses it lists are current and accurately represented. However, being able to network with other buyers is really key and in my opinion the best reason for joining a membership.

Though quick access to thousands of suppliers and thousands of products might be great for research, you probably won't need access to hundreds of thousands of products. The truth is, if you've done your market research and know the product or product line you want to work with, you can probably find a manufacturer or distributor without the use of directory. In the Links casule below, I will provide links to resources that should allow you to find hundreds, if not thousands of product suppliers on your own, but I would also advise you to in some way plug yourself into network of individuals involved in ecommerce, ebay selling, and/or retail trade.

Two online product sourcing memberships that I know of and are highly regarded are One Source (World Wide Brands) and Salehoo. Both claim to offer potential access to thousands of "verified" reliable wholesalers, dropshippers, factory distributors, and liquidators; both include an active forum, both offer training materials and help to get new members started. And both require a one time membership fee. It is also important to mention as a sort of disclaimer that neither membership is a product supplier and is in no way responsible or bears any liability for purchases a member may make from businesses listed in its directory. One Source, I believe costs between $250 and $300 depending on what discounts may apply, and Salehoo costs $67. I am a member of Salehoo, and I don't think I need to say too much more other than that I really like the membership and find the forum constantly interesting and informative. I am not a member of One Source, but I have never heard any negative comments. Comments from Salehoo members also having a One Source membership have generally been positive.

Do you absolutely need an online dropship wholesale directory for business success? Probably not, no. But ultimately that is a decision you need to make for yourself. I'll echo something I mentioned above and say that if you plan on selling mass market consumer goods, and if you don't know where to start, such a membership might help you focus a bit. In the Links capsule, I'll also provide Internet locations to help research product suppliers, although my link resources are not in any way intended to be definitive. Rust never sleeps and research never ends.