A lot of people make a good earning by buying the product directly from the manufacturer and selling it to the retailer or direct market. Especially, in the internet, a lot of people run the same business without even setting up a warehouse to store the products from the manufacturer. They almost work like a broker.
This method is commonly called drop shipping. In this situation, the seller attracts prospective customers via different ‘community online stores’ or via their website and once the deal is closed, they ask the distributor to ship the product directly to the consumer. Thus you save a lot of money as you do not need to spend on storage, carrying or transportation, showroom and storefront employees. All you need is to promote the product online via advertisement or your website and channel the sale via you.
If you want to start an online business, this business model is fine as long as the target market is accustomed to buying these products online (all products do not have a good market online that you can rely on).
But what if you want to start the business in real world? A lot of manufacturers have the option so that you can contact prospective retailers and sell the product directly to them without having your warehouse in between. However, the profit margin is often less than what you could have earned by selling the product directly to the target market. However, the business volume always works for you.
Do you want to start a real business as a supplier or distributor with your own warehouse? Here is a step by step guide to start the business.
Ok, there are some legal issues that you must consider before you really invest into the business. You mainly need two documents – Tax ID and Vendor’s License if you want to sell the products directly to the target market like a fair.
You can apply for the Tax ID at IRS (US Department of Treasury). This is important as most of the manufacturers also require Tax ID. Apart from that if you have a tax ID it would also help you in banking and you can keep your business income and personal income separate while filing for tax return. You can get the vendor’s license from your state’s official website.
Now, when you have got both the papers, you are ready to dive into the market. You can now directly contact the manufacturers to sell their product. A lot of manufacturers will be happy to offer you distributorship but some of them would definitely look for your previous experience. As you do not have any prior experience, you should start developing a network or retailers who would be interested in selling your product. Do not forget that your success depends on the network.
There are other places apart from the direct market where you can look for retailers. For example, there are different distributor’s forums or directory of wholesale distributors and wholesale suppliers. You should participate there to get more buyers interested in your product. A lot of people also use telephone directories to find related distributors. You can enlist your business information there to get prospective clients.