Member Workshop: Understanding Wholesale Pricing - Dec 04 in Community Help Boards in Community

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Last Post Dec 4, 2007 12:22 PM by: deirdre@ebay.com

Replies: 38

Member Workshop: Understanding Wholesale Pricing - Dec 04

Nov 29, 2007 11:08 PM

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Topic: Member Workshop: Understanding Wholesale Pricing

Host: worldwidebrandsinc
Date: Tuesday 12/04
Time: 11:00 a.m. to 12:00 p.m. Pacific Time
Location: Workshop Discussion Board

Description: Understanding wholesale pricing is very important to running your eBiz. If you don’t understand the different pricing tiers, you may get discouraged when you see other retailers selling the same product for a cheaper price. Colette Marshall, Business Development Manager for Product Sourcing Experts, WorldwideBrands.com, will share this valuable information with you so that you can understand how the wholesale structure works when it comes to purchasing products at wholesale and how to compete with the current market, even if you can’t get the best price possible.

Cheers,

Deirdre
eBay Community Development

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Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:01 AM

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We often hear the term wholesale used when promoting products, but do you truly understand what is wholesale and what is not wholesale? Wholesale prices are offered by Distributors and Manufacturers of products in large quantities to merchants for the purposes of reselling to the consumer. When the product is offered at “wholesale” directly to the consumer in individual quantities, it is not considered wholesale.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:04 AM

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What defines a wholesale price?

There are many variables that impact wholesale price:

Manufacturer Operating Costs

Wholesaler Operating Costs

Bulk Order Quantity (i.e. Drop Shipping Vs Large Volume)

Time of year

New Product Inventory

Economy

The manufacturers have a set manufacturing cost when producing products. They sell the product to the distributors with a small margin. The distributors in turn have operating costs that they add on with a small margin. They in turn sell the product to the retailers.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:16 AM

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How does order quantity impact wholesale price?

Wholesale Supplier's business is based on volume sales. They don't make very much of a profit on the products they wholesale. That means that they have to sell a lot of product in order to make money. That’s where the term “bulk” plays a big part. Bulk refers to buying in large set quantities. Based on their operating costs, Wholesalers will predefine what set quantities will equal set wholesale prices. This is where you’ll find a pricing tier structure where the wholesale price per item will change based on the bulk quantity. Every wholesaler will have a different pricing structure based on the products that they carry. It is defined in the Volume Pricing Sheets.

For Example:

As an online retailer, you want to order the largest bulk order possible to benefit from the lowest wholesale prices. You also want to make sure that you are dealing directly with the factory authorized wholesale supplier so that you’re not paying for any unnecessary additional charges.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:17 AM

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Why does Drop Shipping have the highest wholesale cost?

As shown in the above chart, Drop shipping is the most expensive when it comes to wholesale price. Drop Shipping at first glance appears like the ultimate solution for online retailers, because the seller does not have to maintain an inventory or handle shipping. Instead, the wholesaler is taking on the cost and risk of selling the products individually. Remember, wholesalers make the most money when they sell large bulk quantities. There is additional cost associated to selling in individual quantities. Inventory has to generally be stored longer and additional labor costs are required for handling. It’s also a higher risk for supplier when a box of set quantity can no longer be sold because the quantity has been reduced by one or two.

Many retailers quickly find out that it’s difficult to compete because of the higher wholesale prices associated with drop shipping. They’ll also get frustrated, especially when selling common items, that they can’t beat the prices of other sellers. The number one reason for this is that one seller is buying in bulk quantities and the other seller is trying to sell via drop shipping.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:19 AM

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How do you determine wholesale price when researching wholesalers?

Wholesalers are very protective of their pricing structures. They will not list their wholesale prices directly on their websites or offer the wholesale information out for several reasons:

Manufacturing Agreements – Many products come with manufacturing agreements that the product will be sold at a minimum set price to encourage a higher market value. For example, some name brand products are very inexpensive to produce but the profit margins are over 50% when the product reaches the consumer . The Manufacturers will set the lowest price that the product can be sold for. This is referred to as MAP (Manufacturers Advertised Price). Many wholesalers will require on particular products that as a retailer you can not sell below MAP. The MAP will vary based on product and is constantly changing.
Business to Business Arrangement - Selling wholesale means selling to merchants for the purpose of resale. Wholesalers have to insure that they’re no selling to the end consumer. An account with the wholesaler is required before wholesale costs can shared. By not publishing their wholesale prices to the public, they help drive the market value for the retailer.
Competitive Market – Just like in retail, there are many wholesalers that sell similar products. Some wholesalers can undercut their operating costs to offer the best deals. To remain competitive, their pricing breakdowns are only shared with resellers.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:21 AM

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Finding wholesale deals

At the end of each year, wholesalers have to pay taxes on the inventory that remains in their warehouses. To reduce the inventory, many wholesalers will offer big price cuts at the end of the year to clear out the shelves. Another method for finding wholesale deals is to pay attention to the product cycle, especially for products that have new models coming out each year. Wholesalers will always keep the latest product inventory and have arrangements with the manufacturers to receive the new inventory at set times in the year. To clear the shelves for the new inventory, the old inventory will be heavily discounted. The state of the economy also plays a big part in wholesale costs. I recommend listening to Chris Malta’s special announcement about wholesale costs this year to learn more about how you can take advantage of a low economy for your business.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:25 AM

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I'm sure you have many questions, so please don't hesitate to ask as soon as the workshop is open for Q&A.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 3, 2007 10:45 AM

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Hi everyone:

We've posted the workshop material early so you can read through it prior to the workshop.

We'll be back tomorrow (Wednesday, December 4) at 11:00 a.m. Pacific time to take your questions and comments.

See you then,

Deirdre
eBay Community Development

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 4, 2007 10:54 AM

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Welcome and thanks for joining us today!

We love workshops to be interactive, so please feel free to ask your questions that directly relate to this topic.

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Cheers,

Deirdre
eBay Community Development

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 4, 2007 11:05 AM

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The workshop is open, so if you have any questions. Please ask away.

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 4, 2007 11:05 AM

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Does the same tier pricing structure apply with book publishers / wholesalers and their products ?

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 4, 2007 11:06 AM

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"Our job is to do the very time-consuming research it takes to find genuine wholesalers who are willing to work with eBay Sellers, so that you can spend your valuable time where it’s needed most; running your eBay business, instead of searching for suppliers."

So how do I get this information?

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 4, 2007 11:07 AM

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How do I know which wholesalers to use?

Member Workshop: Understanding Wholesale Pricing - Dec 04

Dec 4, 2007 11:10 AM

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I've never done a workshop before: how do I view the answers to the questions?

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