Define Your Primary Lines
Many new retail stores get lost at this point. They have been so focused on setting up their store that they are not ready to stock it. Others are chomping at the bit and already have purchased their wholesale stock, which is now sitting in storage. Some will find that the initial stock they purchased doesn't quite work in the store they designed.
Fortunately, you have developed a comprehensive business plan (Chapter 6) that answered the questions of what business you are in. Now you need to focus that plan toward buying the stock you need to open your store.
What Are You Selling?
It may seem to be an obvious question—What are you selling?—but it is more complex than that. Gift stores sell gifts, yes, but which gifts will your target customers buy? Before you invest thousands of dollars in buying the inventory, make sure you know exactly what your customers want.
For example, there are many wholesale sources that will attempt to sell you what they want to sell rather than what your customers will buy. You'll get a wholesale lot of 1,000 purple widgets that the wholesaler has been trying to unload since buying it from the manufacturer three years ago, when purple was the hot color for widgets. Therefore, it is critical that you know what your customers will ask for before they recognize their own needs.
What if I'm not totally sure what my customers will buy?
Stock what you're sure of. One retailer put up a false wall at the back of her store and stocked the front with what she was sure would sell. Within two months, when she knew her customers’ tastes, she moved the wall back farther and added more stock. Alternately, you can take merchandise on approval or consignment that you're not certain will sell. Make sure you understand the terms of the return agreement.
What Are the Wholesale Sources?
In some retail businesses, wholesale sources are a guarded secret. If that's the case for you, you're going to have to do some sleuthing to learn where your competitors buy at wholesale. For most, however, the sources are easy to identify. Here are some proven ways that you can find primary wholesalers for your merchandise lines:
Attend trade shows for retailers as well as for consumers.
Identify trade associations that cater to retailers in your field. Find out about membership requirements.
Read the trade magazines for your type of retailing. Wholesalers advertise there.
Check the ads in regional business magazines and newspapers.
Look up your product line in your area phone book and check for “wholesale” sources: Widgets—Wholesale.
Search the Internet for online wholesale sources.
Snoop around your competitors’ stores, looking for address labels on shipping boxes for received merchandise.
Ask. Some retailers and clerks will tell you where they get their stock. This is easier to do if you identify yourself as a non-competing retailer from outside their market.
Work for a competitor and learn about wholesalers, being sensitive to the legal and ethical issues.
Ask a business counselor at your local SBA office to help you identify potential wholesalers.
How Is the Product Delivered?
The cost of shipping wholesale product to your store can be as much as 5 to 10 percent of the wholesale price. This expense cuts into your profits, so make sure you consider the cost of shipping (smaller lots) or freight (larger lots) for your initial inventory. The price can be significant when importing wholesale product in small lots.
A related issue is time. How quickly can you get the product once it is ordered? If the wholesale ordering process is slow and the shipping method also is slow, it can be weeks or even months between your order and delivery. If ordering for a specific customer, delays can end the sale and you're stuck with a special order.
Many wholesalers are sensitive to the delivery issue and have regional warehouses from which stock can be shipped within one business day of an order. Some even have their own delivery trucks and build the delivery expense into the wholesale price. Expect to pay a little more for the convenience. Of course, if you're not opening your store for two months, you can have stock shipped by a slower and less expensive method.
When choosing sources for your inventory, look for more than one source for each line and test them. One may be less expensive, while another may offer faster delivery. Or one may offer you a better price if you buy from that company exclusively.
Be aware that many wholesalers (and retailers) keep their pricing low by padding the shipping and “handling” costs. Make sure you are comparing prices delivered to the destination—your store.