How to buy wholesale for a small shop

Buying wholesale means purchasing products in bulk, directly from a manufacturer, maker or distributor, at a lower price than shoppers pay, so you can resell them at a profit. For a gift shop, boutique or market stall, it’s how most of the stock on your shelves gets there. Do it well and your margins hold up; do it badly and you end up with a back room full of things that won’t sell.

This guide covers what wholesale means for a small shop, the difference between wholesale and retail price, where to find suppliers, minimum orders, resale certificates, how to price what you buy, and how to plan reorders.

What buying wholesale means for a small shop

A supplier sells to you at a wholesale price because you’re buying in quantity to resell, not to use yourself. In return, you usually agree to some conditions: a minimum order, an approved business account, and sometimes rules about how you advertise or price their products.

Small shops typically buy wholesale from a mix of:

• Manufacturers and brands that sell straight to retailers.
• Distributors that carry many brands and handle the warehousing and shipping.
• Independent makers who offer wholesale pricing to shops alongside their own retail sales.

If you make your own products, you may be on the other side of this too: a shop might ask for your wholesale prices. The same math applies in reverse.

Wholesale vs retail price

The wholesale price is what you pay the supplier. The retail price is what your customer pays you. The gap between them pays for your rent, staff, card fees, shrinkage and, eventually, your profit.

Many suppliers publish an MSRP (manufacturer’s suggested retail price) next to the wholesale price. It’s a guide, not a rule, though some brands do set minimum advertised prices you’re expected to follow. Read the terms.

The prices above are examples only; your products and costs will differ.

How to buy wholesale: finding suppliers

Trade shows

Gift and home trade shows bring hundreds of brands into one hall, and many run several times a year in different cities. You can see and handle products, meet the people behind them, and often get show-only terms. Most require proof that you’re a business to get in, so bring a business card and your resale certificate or business license.

Online wholesale marketplaces

Online wholesale marketplaces let retailers browse many brands, place small first orders and pay on terms. They’re handy for testing new products without traveling. Compare the minimums, shipping costs and return policies before you commit, and remember that a brand on a marketplace may also sell to the shop down the street.

Directly from manufacturers and brands

If you love a product you’ve seen elsewhere, look at the brand’s website for a “wholesale” or “stockists” page, or simply email and ask. Many smaller brands prefer to work directly with shops.

Local makers

Craft fairs and farmers markets are full of makers who would love to be in a shop. Local products give you something the chain stores can’t, and customers often seek them out. Ask about wholesale pricing, or about consignment if they’d rather start that way; our guide to consignment explains how that works.

Checking a supplier

• Order samples before a big order, if you can.
• Ask about lead times, reorder minimums and what happens when something arrives damaged.
• Ask whether they sell to other shops near you.
• Be wary of prices that seem too good, especially for branded goods.

Minimum order quantities

Most suppliers set a minimum: either a dollar amount for the first order and a smaller one for reorders, or a minimum number of units per product, often sold in packs (a “case pack” of six or twelve).

Minimums affect small shops more than big ones. A few ways to work with them:

• Start with a test. Hit the opening minimum with a spread of a few products, then reorder what sells.
• Ask. Small brands sometimes waive or lower a minimum for a first order, especially if you’re a good fit.
• Watch shipping. A low minimum with high freight can cost more per unit than a bigger order.
• Don’t buy to reach a free-shipping threshold unless you’re confident the extra stock will sell.

Resale certificates

Most US states with a sales tax let businesses buy goods for resale without paying sales tax on them, because the tax is collected later, when the end customer buys. To do that, you usually register with your state for a sales tax permit, then give suppliers a resale certificate (sometimes called a reseller’s permit or resale exemption certificate).

Many wholesale suppliers also ask for one to confirm you’re a real retailer. Some states accept a multistate form; others want their own. Keep a copy on file and update it when it expires.

This is general information, not tax advice. Rules, forms and names vary by state, and items you use in the business rather than resell usually don’t qualify. Check your state’s revenue department or ask an accountant. Our guide to sales tax for small businesses covers the basics.

Keystone pricing and margin

Keystone pricing is the traditional retail rule of thumb: double the wholesale cost. Buy a candle for $12, sell it for $24. That’s a 100% markup and a 50% margin.

Keystone is a starting point, not a law. Some products can carry more, such as low-cost items with a high perceived value or exclusive local goods. Others, like products customers can easily compare online, may need to sit closer to MSRP. Remember that markup and margin are different numbers:

• Markup is profit as a share of cost: ($24 − $12) ÷ $12 = 100%.
• Margin is profit as a share of the selling price: ($24 − $12) ÷ $24 = 50%.

Include shipping in your cost. If a $12 candle costs $1.50 per unit to ship to you, your real cost is $13.50, and keystone is $27. Our profit margin calculator works out margin and markup for you. Plan for markdowns too: a few items in every order won’t sell at full price, and the discount calculator shows what a sale price does to your margin.

Reorder planning

The money you spend on wholesale is tied up in stock until it sells. Good reordering keeps best sellers on the shelf without overbuying the rest.

1. Track sales by product. You need to know what sold, how many and how fast. A SKU on every item makes this much easier.
2. Know your lead time. If a supplier takes three weeks to deliver, you need to reorder three weeks before you run out, plus a little buffer.
3. Set a reorder point for each key product: the stock level that tells you it’s time to order.
4. Watch turnover. Products that sell through quickly deserve deeper orders; slow ones should get smaller ones, or none. Our guide to the inventory turnover ratio explains how to measure it.
5. Plan for seasons. Holiday stock often needs ordering months ahead. Order early for big days and keep some budget for reorders of what actually sells.
6. Keep a written record of every order. A simple purchase order lists what you ordered, at what price, and when it should arrive. Our free purchase order generator makes one in a couple of minutes.

If you’re new to tracking stock, our guide to what inventory is covers the basics, including how to value what’s on your shelves.

Common wholesale mistakes

• Buying what you like rather than what your customers buy.
• Ordering too deep on a new product before testing it.
• Forgetting shipping and card fees when setting retail prices.
• Letting slow stock sit for a year instead of marking it down and freeing the cash.
• Not checking deliveries against the order before paying the invoice.

Where SleepingFire fits

SleepingFire doesn’t connect to any wholesale marketplace or supplier, and it doesn’t place orders for you. It keeps track of what you bought once it’s in the shop: each product has a price, cost, SKU and stock count that drops with every sale, with low-stock flags to tell you when to reorder. Reports show best sellers, profit margin per product and inventory valuation, so you know what to buy again and what to stop buying. See inventory management, or how it works for gift shops.

Frequently asked questions