The Profitability of Wholesale Products

The fundamental aim of starting a business is to make a profit, but once the seed idea of the business is fleshed out, how exactly does an organization maximize profits and turn a great idea into a going concern?

To some who don’t plan in advance, this not only remains a mystery, but is also likely the reason for the failure of their new business.

But to those who create and follow a robust business plan, an idea with tremendous potential can be grown into a profitable venture for years to come.

One of the cornerstones of the consumer retail business model – bricks and mortar, online or both –  is choosing the right products from the outset.

This is where wholesale products fit into the consumer retail business model.

In this article we’ll be discussing the criteria for sourcing profitable wholesale products from OEM (original equipment manufacturers) and then move on to looking into some of the evergreen products that are all but guaranteed to help your new business create sustainable profit, year-on-year.

Ways to Analyze Whether a Wholesale Product is Profitable or Not:

For the purposes of this article, we’re going to focus on OEM wholesale products from China.

There are three fundamental things to take into account when analyzing the long-term viability and potential upside of a product.

Buying an existing product direct from a Chinese manufacturer in a non-exclusive bulk or wholesale agreement is one of the most profitable and scalable business models available to entrepreneurs looking to launch a new brand.

The Manufacturer has already completed the R&D (research & development) of the product, a stage of the process that is hugly time and resource intensive – bottom line, they’ve already done this, so you don’t have to.

They have a proven product available to ship and ready for you to buy in bulk at a discount to sell on to your customers – regardless which sales channel you are using, Amazon FBA for example.

The following simplified 3 step framework will help you to evaluate the profitability of a product direct from the factory in China

Identify Products That Are Evergreen

Unless you are planning on developing your own unique product via the ODM route (Original Design Manufacturer), it is nearly impossible to find products not yet stocked by your E-commerce competitors.

There are exceptions to the rule where you can get exclusivity of products through private label agreements with the manufacturer, but these types of deals are unlikely to present themselves to a brand new startup.

Equally important is not to invest heavily into trending items – unless you have experience in the niche or have the ability to pivot fast when the buzz around that fad starts to decline – otherwise you could find yourself with a huge amount of inventory that you simply can’t sell as the demand and appetite for the product no longer exists.

What you should focus on instead, is identifying evergreen products – products that solve a problem, but that problem can never be truly eradicated – pest control products like mouse traps  and ultrasonic pest repellers for example.

This means you will get repeat business from the same customers, obviously assuming the product is of good quality and solves the problem it says it can, which leads us perfectly into the second point for you to consider

Check the Durability and Quality of the Products

Profitability comes with durability. And the durability of the product comes down to the quality and standard of build.

The more durable a product is, the greater its profitability because these are the kind of products that customers can place their faith in and depend on to do the job, time and time again.

Lets face it, we’ve all at some point been in the situation, where we’ve bought a product either online or at the local store.  On the face of it, the product looks like a great fit, the packaging and marketing materials sell us the idea and the solution to what we are looking for.

Then we get home, unbox the item and it’s either already broken, missing a component or simply isn’t fit for the purpose we bought it for.

I’m sure you will agree, nothing is more frustrating as a consumer.

So make sure to do your due diligence into the product before entering into a wholesale agreement with the Chinese manufacturer.

Ask for testimonials from current clients and ask for a demonstration unit to be shipped to you to check out.

And when the product arrives, do everything you would do as a first time customer – is it a product you would be satisfied with when you first unboxed it at home.  And most importantly test it to see it performs and delivers the outcome you are expecting.

Your product needs to last the long haul for customers to return to them every time they feel a need for it.

If the answer to all these questions is a resounding yes, the final step in the framework is to negotiate the right price.

Shipping durability and low shipping rates

As an entrepreneur, you will be used to negotiations with suppliers, but there a couple of other factors to keep in mind once you have identified a product you believe is right for your brand.

Before launching into wholesale or bulk pricing negotiations with the manufacturer in china, first consider two things:

• Shipping durability
• Shipping costs

Generally, the less fragile a product is, the less likelihood of damages occurring in transit – for example, a smart TV is considerably more fragile than a humane mouse trap.

Taking into consideration the costs of shipping, both insurance and freight will be cheaper for an electric mouse trap over a smart watch – not only is the individual unit value less, but there are also fewer components in each device that could go wrong or be affected by rough seas or ambient temperature changes.

Once you have an idea about these two points, you can then start wholesale pricing negotiations with the OEM.

They will have an MOQ (minimum order quantity) and this will be your starting point. From there, the larger the bulk wholesale order you make, the cheaper the unit cost becomes.

Evergreen Product Ideas

Now that we have covered the analysis of profitable wholesale products, let’s briefly explore some examples of lucrative products that businesses could consider for their E-commerce websites.

Textiles

Clothing and soft furnishings are a solid bet.

Sure a particular trend might no longer remain popular after a point of time, but rather than focus on the latest fad, instead think more of the evergreen side of things – socks, T-Shirts and bed linen for example.

These products are always needed and will not fall out of favour.

They are also low-risk and low-cost when it comes to shipping costs and durability.

Pest Control Products

Not the most exciting, but possibly the most evergreen of all the product niches.

Pests like rats and mice are a Worldwide problem, growing year on year as the Global population expands.

Not only is the market growing, but these devices are simple, small and lightweight, making them one of the easiest and cheapest products to ship.

If you establish a partnership with one of the best China mouse trap manufacturers like X Pest, you gain access to a broad and proven product range, from humane mouse traps to ultrasonic devices – this means you can scale your business into complementary products areas.

Books and Stationery

Pens, pencils, paper etc. We all use it and there will always be a demand for it.

Coupled with the fact its low-risk and relatively low cost to ship, makes this niche one that can stand the test of time.

The most important thing to consider for this niche is making sure your branding is unique and appealing, to make sure you stand out for your competition.

Conclusion:

Choosing the right products for your E-commerce website or physical store can be daunting.

But with thorough market and product research, establishing and scaling a profitable business is certainly achievable.

Just make sure to build a robust business plan and most importantly, choose the best China factory to partner with.

They should be interested in your long term goals and scaling your business, not just in your first wholesale order.

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