From home appliances to cosmetic products to mobiles and eBay consignments, the opportunities of becoming a reseller are endless. This article is a 101 guide for small business owners on how to become a reseller.
What is a reseller?
A reseller refers to a business or a person that buys a product from a vendor, manufacturer, or a wholesaler at a lower cost and ‘resells’ it to the customers with a higher cost or with profit margin, or it can be on a commission basis, either using the traditional offline direct channels or using online mediums.
There are some companies which require you to carry inventory physically, other may transport goods directly to the end customer, whilst you acting as an intermediary or order processing interface, which makes reselling a popular business medium for home bases businesses.
This business model makes it easier for the average consumer to find and purchase products.
Buying directly from a vendor or a manufacturer is not easy as they usually sell their stuff in minimum purchase quantities which is again not easy for a consumer to buy in a lot.
Here is where resellers play their part, selling individual units with a smooth buying process.
The reseller sometimes has to acquire a permit – also known as resale license, resale certificate, and tax exemption certificate which allows the reseller to purchase certain items with a tax exemption.
This popular business model is a form of drop-shipping where resellers often add some sort of buying experience for the customers.
If you have your niche expertise, starting a reselling business often turns to be a profitable business model. You can launch an ecommerce website where you can list products you have bought from vendors and sell directly to the customers without understanding the steps of product development and building an audience persona.
By now you must have an idea about what is a reseller, and we have just started with this detailed guide on how to become a reseller. Go through it all and tell us is the comment section, did you find what you were looking for on how to become a reseller, or even if you are looking for more information, you can email us at [email protected]
What should I resell?
People often have an idea about what is a reseller, but are usually confuse on choosing what products to resell. The resale business model is almost limitless in its scope and opportunity.
Some people take it as their main source of earning. Others choose to make it a passive source of income for better living. Some become channel or affiliate partners with vendors (a common approach for small technology businesses).
Finding what you want to resell start with finding the right product or even service to resell. It could be something of your choice, and it definitely doesn’t mean you have to be an expert in that service/product to resell it.
Only things that really matter are your struggle in market research, ability to demonstrate the motivation and time investment needed to make your reselling business a true success.
To assess the potential success of you chosen product, you will also need to do the market research which may include the following points;
- Demand of the product in your niche
- Competitive strategies and marketing tactics
- Supply of that product (places, suppliers, vendors)
- Choosing the right profit margin
- Channels to market your product
- Logistics management
How to become a reseller?
There are many ways you can resell goods. Some business owners resell through eBay or Amazon or via their own ecommerce website. Others sell through their physical stores, or directly though b2c or b3b channels.
Some even buy from Amazon and resell through online marketing using social media, SEO and other digital marketing strategies.
Likewise, every business, becoming a reseller also involves certain portions of risk, skills, trainings, luck, home work, and your hard work.
How to get a reseller permit: 4 steps
If you are interested in becoming a reseller, below are four generic steps that you may follow to become a reseller.
Register your business:
You need to get a business license where your business is incorporated and/or operates. If you are running business outside your state, then you’ll need to have a Foreign Qualification.
Research state wise rules and regulations:
Properly research stat laws before buying across the border, both for in-person and online sales. Some states do not allow out-of-state permits. However, many will let you use and out-of-state reseller’s permit to avoid paying sales tax on reselling items.
Prepare your application materials:
Prepare all necessary documents, once you are ready with what you need to register and submit your application.
Get a resale permit:
Submit your application in each state where you want to do the dealing for goods. You might have to pay associated state service fee.
Finding the right opportunity
Understanding about how to become a reseller is easy but finding the right opportunity is always the hardest part. If you want to expand your business or compliment it with reselling business – for example, you specialize in mobile phone repairing services, but want to include mobile parts and peripherals – you might lookout for a resale opportunity with a renowned brand manufacture.
If you are looking to supplement your existing products and services with a resale relationship—for example, you specialize in computer repair services, but want to expand your offerings to include computer hardware and peripherals—you might want to consider a resale opportunity with a known brand manufacturer.
On the other hand, if you are a newly launched business and interested in becoming an Internet reseller, then you can read “Step One to Becoming an Internet Reseller: Choosing the Right Product,” in which startup expert Erika Wilde offers tips for not only finding the right product to sell, but also how to find and approach the source of that product, whether it’s a manufacturer or Internet wholesaler.
So many enticing fraudulent schemes are out there in the market that seems lucrative to home-based business owners but are actually on a hunt to do a fraud with innocent people. scheme related to
Be mindful of business opportunity scams, many of which prey on home-based business owners with enticing work-at-home schemes. The government keeps a keen check on much of these activities, and the SBA website offers advice about evaluating business opportunities, looking out for frauds, as well as how to report cons and scams.
Have a strategic business plan
Being an entrepreneur without a proper business plan is not a good idea. Always have a business plan, if you planning on becoming a reseller, then you should have a reselling business plan and not only make you think long and hard about the opportunity, it will also help you picturize a bird’s eye-view of the situation, goals and most important how you’re going to make it.
It will show potential affiliates, wholesalers, and lending institutions that you are serious about your venture.
The application process
Most reselling businesses starts with an online application. You should be prepared to submit information like your business profile, company size, years in businesses, expertise, might need to crunch some revenue numbers in the profile, demographic area where you are going to provide the service or already providing it, your marketing channels, online web presence, merchant tools and so forth.
From this application your manufacture will determine whether you are a good fit for their reselling program or not so make sure you make a professional-looking business profile to make it work for you.
From here the manufacturer will determine whether they believe you are a good fit for their program.
Choosing the right compensation model
Reselling businesses have typically two types of compensations i.e. ‘buy rate’ or a “percentage/margin” on the products sold.
What is buy rate?
This model is simple where the reseller buys products from the wholesaler at a low cost but in a bulk quantity and sell it to the retailer on the market rate. You net revenue is the difference between the two.
What is percentage rate?
This model involves an agreement whereby the reseller sells the products at the vendor’s price but with a commission involved in each sale or unit sold. To ensure profitability and competitiveness, this model will require upfront and possibly ongoing negotiations from your end.
If you are making grants out of your reselling business then sure you’ve understood about how to become a reseller.
Reading the T&Cs is a must
It is always good idea to read before accepting or giving consent or acknowledging anything in real life. So, the rule applies here as well, before signing any contract with any vendor or supplier, go through the contract terms and conditions, see if there is any bounding clause that might be a roadblock for you in near future while working with that vendor, make sure you are aware of your rights and no one is taking an advantage over you or playing a smart card with your business. You can always go for references or reviews before working with any vendor.
Reseller as business owner
Becoming a reseller also makes you a business owner. And for every business there are important elements before starting a business that you should observe. Go through the article 15 Success Tips for First-Time Entrepreneurs to better understand and navigate the key planning, financial, and regulatory factors involved in starting a business.
You will also need to acquire business license and official permits from the states you are planning to do the business. The SBA website has information on what type of licenses and permits you will need and how to apply for them.
Reseller marketing and market development funds
If you are reselling brand name or products, you will have a good start with your business because people would be aware of the offerings you have but that doesn’t mean you are not going to bear the marketing expense, eventually you will need to spend dollars to market their product and make a sale leading to your revenue.
Remember, no sale, no commission, and no revenue! Be sure to have a marketing plan that you can execute and scale.
Some larger suppliers support their affiliate marketing by providing Market Development Funds (MDF). Under an MDF program, a reseller receives marketing dollars to promote the product and brand name that they are selling.
These dollars are usually skimmed off as a percentage of net sales revenue once you reach a particular sales goal and awarded as a rebate towards an approved marketing program.
The last say
By now you have understood about how to become a reseller. Its always about the hard work, passion, dedication and common sense that you put in to make any business a true success.
This was our effort on making a comprehensive guide on how to become a reseller, and showcasing the real potential of reselling businesses. If you like reading this article do share in on your social channels and don’t forget to link our website when talking about this particular topic.
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