What is a reseller, and how do you become a reseller? We take a look at how to start a resale business and give you some top tools and tips to help your resale business grow.
Source: Thomas Publishing Company, 2022.
Source: Assisted Digital, 2021.
Source: Statista, 2020.
Source: Assisted Digital, 2021.
What is a Reseller?
A reseller is a person who purchases products in bulk from manufacturers, liquidators, or retailers intending to sell these items rather than consume them. Most resellers are retail organizations that buy merchandise to sell to end consumers.The Climate for Resale Businesses
Small businesses are booming. The number of small businesses in the United States by the end of 2021 reached 32.5 million, growing 2.5 percent over the previous year. Small businesses make up 99.9 percent of all U.S. businesses. Discount stores, in particular, have been doing well: in 2019, sales at discount stores in the United States amounted to $95.1 billion. However, one of the effects of the COVID-19 pandemic has been the increase in the number of small business closures. According to a Yelp report, some 163,735 small businesses closed their doors in 2020 alone. This could be an opportunity for you, as it creates potential market gaps that you can fill as the economy continues to recover.
Source: Thomas Publishing Company, 2022.
How to Get Started?
You need to take several steps to set up your resale business before placing your first order. You need to register with the state and apply for a reseller certificate to not pay sales taxes when you make a purchase.Register your Business with the State
The process of setting up a business entails fulfilling some legal requirements, which vary between states. Your local authorities are the best source for state and local requirements. You can also consult an attorney.- Choose a legal structure. Sole Proprietorship is typically the most suited for the needs of an individual starting a small business. But keep in mind that this means you are personally liable for your business’ debts.
- Apply for a Federal Employer Identification Number (EIN) from the IRS, if you’re thinking of employing help. This will give you protection from issues such as employing anyone that has undertaken identity theft. Some states also let you use Social Security Numbers (SSN).
- Check your tax requirements. Find out your tax obligations at the local, state, and federal levels. There are many guides to this online.
Apply for a Resale Certificate
A tax exemption certificate, or resale certificate, allows you to avoid paying tax when buying products strictly for resale purposes. Check out our series of guides for registering for sales tax exemptions here.
Source: Assisted Digital, 2021.
Research Merchandise Sources
Look for wholesalers, distributors, and liquidators to buy products in bulk. Typically the more merchandise you order, the less you pay per item. Here are some guides to help you locate wholesalers and liquidators in your area:- Where to Buy Pallets of Merchandise Near Me
- How Retailers Liquidate Surplus Inventory
- Truckload Liquidation Auctions: How to Get Started
- Finding the Right Wholesale Supplier
- How to Find Liquidation Sales Near Me?
- Why Liquidators are the Best Wholesale Suppliers
Considerations when Buying Merchandise to Resell
- Choosing merchandise that interests you, or that you are knowledgeable about will make the process of sorting and pricing them easier.
- You need to consider how much you can store. There is no point buying a full truckload of merchandise if you’re operating out of a spare room. On the other hand, the more you can buy in a single order, the less you will pay for shipping, and the per-item cost may also be lower with some wholesalers due to volume discounting.
- If you’re planning to sell online, avoid bulky merchandise that have high shipping costs.
- Be aware of minimum order requirements from distributors or wholesalers.
- Source merchandise close to your location to save money. Some liquidators and wholesalers will allow you to pick up the merchandise yourself.
How to Resell Near You
Many buyers prefer to shop in person, allowing them to directly see products and deal with sellers. Selling in-person in your local area is a great way to build relationships with your customers. Good customer service helps create repeat customers as well as attract new customers through word-of-mouth.Facebook Marketplace
Facebook Marketplace allows you to sell merchandise locally. The platform is free to use, but you can choose to pay for some additional tools and plugins. No fees are charged for listings or sales, but you can choose to use Facebook’s Commerce Manager (5% flat fee on sales). This tool allows you to create a product catalog and helps you run sales both on Facebook and Instagram. Additionally, it provides payment processing services. Globally, more than 800 million people use Facebook Marketplace every month to discover, buy, or sell items. Moreover, 71% of small-to-midsize businesses use social media for marketing themselves, and of those who do so, 52% post at least daily - something these businesses wouldn’t spend time on if the returns were not worth it.Facebook Groups
Facebook is an incredibly powerful tool to reach potential customers. You can do so through the numerous buying and selling groups on the platform, as well as community groups that let members buy and sell through them. Facebook actively encourages posting Marketplace listings to groups and has made this very easy to do and completely free. However, you must comply with the posting rules for the group to avoid getting your posting privileges revoked.OfferUp
OfferUp has millions of visitors every month. OfferUp is a platform that provides a convenient and easy-to-use smartphone app (iOS and Android) with straightforward registration and listing processes. Products can be listed quickly by simply uploading a photo of the item. Posting is free, but some transactions carry service fees – you will be told the costs when creating the listing. There are also two paid plans to choose from, Promote and Promote Plus. These will help you with listing promotions highlighting your products to more users.Craigslist
Craigslist is a local classified ads platform with 60 million users, 50 billion page views, and 80 million ads posted each month. As long as it complies with the terms of use, any product or any service can be listed. Posting on the platform is very easy. Registration is not required but will make reposting, editing, and deleting easier to do. Apart from a few specific exceptions, posting is free.
Source: Statista, 2020.
Flyering / Notices in Local Papers/Shop Windows
You can also sell from your own home using local advertising such as community classifieds, radio, magazine ads, or flyers. Whether selling locally through these methods is a viable option for you depends on several factors, including local population density, the demand for the product in your market, and the availability and affordability of alternatives.Garage Sales
Garage sales are a perfect way to clear out storage space quickly. If your primary storage space is your home, running regular garage sales will allow you to sell slow-moving stock quickly. Check with your city authorities and your Home Owner’s Association for the regulations on how and when garage sales can take place in your area.Flea Markets
Flea markets are regular events in many areas. Rents for booths or stalls are relatively low, much lower than renting your own retail space. Flea markets are particularly suited for selling items at lower prices. Flea markets are bigger businesses than many people realize - 1100 markets nationally make more than $30 billion worth of sales each year. More than 2.25 million vendors make this a vibrant resale market to explore.Opening a Storefront
You can either rent or buy a space for a physical store. A physical store gives you a local presence and you get to interact with your community. Also, you won’t have outbound shipping costs to worry about as customers will come to you. However, stores are costly, and will need a lot more capital than the other sales channels mentioned in this guide. Unless you already have access to a store, we recommend starting with other sales channels before leasing a retail location.How to Resell Online
You can also run your business from home using online marketplaces. You will need to add shipping costs and fees. But selling online has benefits: it provides you with a broader reach and a larger market for your products. Another option is to set up your own website. But keep in mind that this will add hosting and additional marketing costs to your budget.eBay
If you are a non-professional seller or a beginner, eBay is easy to use and might be the ideal marketplace for you. However, if you plan to sell in large quantities, you will need a business account. Options range from the Starter pack ($4.95 for a full-year subscription) to the Enterprise package ($2,999.95). Fees vary depending on the product category and total price. However, in most cases, the final fee is 12.55%. In addition, there is a payment processing fee (2.9% + $0.30) charged by PayPal - Check your fees with this handy calculator.Amazon
Amazon is the world’s largest online marketplace and one of the most visited websites. The Amazon app is accessed by more than a hundred million users per month. With great selling opportunities, you will need to comply with the complex set of rules Amazon set up for resellers of certain merchandise - especially electronics. Depending on the needs of your business, you can register for an Individual or Professional seller account. Each option comes with its own rules and guidelines that set the monthly sales volume and fees that need to be paid. The commission charged is 15%, including processing fees, which is higher than eBay. This handy guide outlines the conditions products can be sold in for each category, including electronics and accessories.
Source: Assisted Digital, 2021.