Perhaps you have some free time on your hands that you’d like to make some money with, or perhaps you’re bored of your desk job and fancy running your own show. Many people start reselling as a way to earn easy money on their own terms.
Is it really as easy as it seems to start your own reseller business? We’re here with the lowdown on what reselling entails, the types of different reselling models, tips to make money as a reseller, and some questions to help you decide whether reselling or retail is the best option for you.
Overview: What is a reseller?
Generally, a reseller is considered to be someone who purchases goods with the intention of reselling them for a profit. The benefits of reselling include not needing to make or manufacture products yourself and few inventory management requirements.
Levels of reselling sophistication can vary. Anyone can start at home, picking up stock from thrift stores or department stores, storing them at home, and listing them on platforms such as Amazon or social media marketplaces. Other reseller companies are more vast and list products virtually once they’ve sourced products from a wholesaler.
4 types of resellers
There are multiple types of reselling business models, and confusingly, some of them include sales models we explored above. Let’s take a look at four of the most common and explain their role in the reselling world.
A retailer is technically a reseller, but when it comes to “reseller vs retailer,” what’s the difference?
A retailer owns an established business, either a brick-and-mortar store or an online store, and buys products and sells them directly to the end user.
A reseller, on the other hand, is often the “middle man.” Resellers buy stock and sell products however they see fit. They can sell them to end users, but also sell them to retailers.
Here is a good illustration of the contrasts:
- Retailer: Home Depot sells a barbecue grill, marked down 50% during a sale. Jerry purchases the grill and takes it home that day. Home Depot is the retailer.
- Reseller: Jerry buys a barbecue grill from Home Depot at half price during a sale. Jerry takes the grill home and waits a couple of weeks for the sale to end. Then, Jerry uses Facebook Marketplace to sell the grill for closer to its original price to another Facebook user. Jerry is the reseller.
Wholesalers purchase discounted products in bulk in order to resell at higher prices to consumers or other retailers. Most of the time, wholesalers offer retailers bulk quantities of goods at a lower price than if they had bought them as single items.
A distributor is another type of reseller, but when it comes down to the difference between resellers and distributors, distributors have a different place in the supply chain. Distributors buy products directly from manufacturers and then resell them to wholesalers or retailers.
Arbiters likely most closely resemble the idea of reselling you already have in mind. Those who practice retail arbitrage purchase products at brick-and-mortar stores such as Walmart or Target, and then sell those products for a higher price — usually via Amazon.
3 ways to make money as a reseller
The internet offers unlimited ways for you to make money as a reseller. Here are the three most common methods of making money as a reseller:
1. Retail arbitrage
Retail arbitrage is probably the most common type of reselling. This consists of purchasing products from stores and reselling them on Amazon. To do this, you’ll need to follow a few simple steps:
- Create an Amazon seller account
- Download a retail arbitrage app that helps you identify the best items to sell on Amazon
- Research and source profitable products
- List and sell your products
Read our full guide to getting started with retail arbitrage here.
2. Private labeling
Private labeling is the practice of buying products directly from a manufacturer, and thereafter putting your own label or logo on the product. This is most common where manufacturers sell a very generic product and resellers are able to brand the products themselves.
Dropshipping is done exclusively online. Online resellers source products directly from manufacturers, and sell them online to customers without storing their own inventory.
The biggest difference between dropshipping and retailing is that no inventory is owned. Resellers purchase inventory from a third party — usually a wholesaler or manufacturer.
Should you become a reseller or a retailer?
Still can’t decide between resale and retail? Let’s take a look at some scenarios that will help you decide.
When becoming a reseller is right for you
Here are a few scenarios where reselling makes sense:
- You don’t want to manage your own store: Setting up your own online store and managing e-commerce marketing can be time-consuming and costly. As a reseller, you can use existing platforms such as Amazon and eBay to avoid managing your own store and focus on selling.
- You don’t want to be responsible for shipping items: E-commerce fulfillment can be another costly expense if not done correctly. Many platforms take care of shipping for you. For example, when you sign up for Fulfillment by Amazon (FBA), product storage, shipping, packaging, and customer support are all taken care of by Amazon.
- You don’t have a lot of capital to invest: Reselling doesn’t require a lot of upfront investment. Depending on the reselling route you go down, sometimes you don’t even need to carry inventory.
When becoming a retailer is right for you
Let’s consider when the retail model might be a better fit for you:
- You want more than just a quick way to make money: If you dream of owning your own store where you can interact with your customers rather than listing items on Amazon, retailing might be a better fit.
- You make or create your own products: Maybe you bake cakes, make greeting cards by hand, or sell handmade jewelry. Whatever it is, if you make it, it’s likely you have a stronger connection to your products that would suit the retail model.
- You want to build a brand: Reselling might present opportunities to make money, but it doesn’t present a lot of opportunities to build a strong brand.
3 best practices and tips for becoming a reseller
If you’re set on reselling, here are our top three tips to help you succeed:
1. Do your research
Before investing in inventory or deciding which reselling method you want to use, research the reseller market and business model extensively. Think about the following questions:
- Do you want to/have the time to source products yourself from places like Target and Walmart?
- Do you have space to store inventory? What happens if your business grows?
- What type of products do well on marketplaces like Amazon?
- How can you stand out from the reseller crowd?
As mentioned previously, reselling carries low overhead, but you need to think about your reselling business plan, too.
2. Make customer service a priority
If you plan to sell on marketplaces such as Amazon and eBay, be prepared to offer the same level of customer service as you would if you were an in-store retailer. Good ratings from your customers will help propel your success and help you get recommended to other customers.
3. Track your profits carefully
If you’re turning a certain amount of profit, your accountant needs to know about it. Start tracking your expenses and income from day one so that you don’t get stung by taxes. Plus, make sure you have your resale certificate that allows you to make purchases for resale.
To resell or not to resell?
Reselling can be a great way to empty your garage of the useless but valuable items you’ve had in storage for years, or a way to start a legitimate and scaling business without needing to invest in a storefront.
Our advice is this: Start small and scale up. Once your reselling business gets going, and depending on which reselling route you go down, you might find yourself with more inventory and customer orders than you can keep track of. Retail management software can easily help you take care of your stock and your customers.
View more information: https://www.fool.com/the-blueprint/reseller/