A genuine wholesale supplier might use the term: At Cost. Do your research carefully on this before you go ahead and buy at cost. When a wholesale supplier sells ‘at cost,’ it means they are making no profit on the sale since they are selling at the same as it cost them to buy from the manufacturer.
Also, if the wholesale supplier’s customers are NOT buying the product, you may want to check out the demand using your Worldwidebrands.com Product Sourcing Tool before you place any orders. Unless people want to buy, you may be the next person selling ‘at cost’ or probably much ‘below cost.’
When you deal with genuine wholesale suppliers, you will frequently hear the term: SKU. A SKU is the unique number a wholesaler assigns to a product type. It may be a model number or a product number. If a wholesaler carries 8,000 unique products, in the industry they talk of the wholesale supplier carrying 8,000 SKU’s.
A model with three colors is likely to have three SKUs to identify the product, one SKU for each color. Note this is not a number that is unique to each product (like your Social Security Number). It is a number that is unique to each product description.
What is RA? You need to know the wholesale term, RA or RMA. Either refers to product returns. RA means “Return Authorization”. RMA means “Return Merchandise Authorization”.
Most wholesale suppliers have a strict process you must use to return any item. When wanting to return an item, you must contact your wholesale supplier to obtain an RA Number. The reason for the return may affect the method of return. The wholesale supplier may set up a UPS or FedEx, pre-paid pick up. You must clearly mark the RA number on the outside of the return package. Once the wholesale supplier receives the product, they will pass you a credit.
The process is similar with wholesale drop shippers. Your customers must contact you requesting a replacement. You then contact your wholesale supplier to request an RA and submit a replacement order. In some cases, the drop shipper will ship the replacement product even before they receive the damaged product. This saves the customer having to wait for their replacement to arrive.
UPS, United Parcel Service, has some very helpful hints on handling ‘Returns.’ View this UPS video now.
Here’s our next term: ”Net 30″. Net 30 refers to the credit terms your wholesale supplier extends to you. When your wholesale supplier types Net 30 on your order and invoice, this means you have 30 days to pay for that invoice. The advantage of such payment terms is that you have some time to sell all of the products on that invoice and actually receive the money before you have to PAY for the goods.
If you are new to that wholesaler, you cannot expect to get Net 30 terms from the start. Wholesalers base your credit terms on your business credit HISTORY, not your personal credit history. You begin by paying up front for your purchases with cash or credit card until you build a good purchase and credit history with your wholesale supplier. At that point you can apply for Net 30 terms from your wholesale supplier. The more business you bring them, the sooner you can request a Net 30 order.
Once your account is approved, you can begin to establish a business credit history. This will also help you get Net 30 terms with other wholesale suppliers more quickly.
What is ‘FOB’? The fifth wholesale term is FOB. FOB is a shipping term that stands for “Free On Board” or “Freight On Board”. Whatever city is listed as the FOB, is the destination to which the wholesaler pay the costs of shipping. If it says FOB Atlanta, GA, for instance, this means the wholesaler pays the costs to get the shipment to a terminal in Atlanta, GA.
From that point onwards you must either pick up the shipment yourself, or have it forwarded. However, all logistics and expenses after the shipment arrives at the Atlanta, GA, terminal must be paid by you.
Typically, the FOB will be the same city where the supplier is located. In that case, you’ll pay the shipping cost to get the shipment from the wholesaler’s warehouse to your destination. To determine the right Cost of Goods Sold, COGS, you must add this cost into your own shipping costs to determine the correct profit per item.
Here’s a wholesale term you want to watch carefully: QOH, ”Quantity On Hand”. The QOH reveals the quantity of an item the wholesaler has in inventory at any given time.
Some wholesalers keep the QOH in private areas of their web site so that only their retailers can see the QOH of any item. Some wholesalers keep their online retailer interested via email. If you don’t have the QOH for each item you are selling, keep in contact with your wholesale supplier regularly to find out.
This is essential on products you drop ship. Becareful to remove a low stocked item from your Amazon listing, auctions and eBay store when your supplier’s QOH drops too close to zero. You should avoid having back-orders thus being unable to fill your customers’ orders. When you see the QOH stabilize, you know the wholesale supplier has restocked and you refresh your listings. Pay absolute attention to the QOH on hot selling items especially during the holiday season. Back orders typically result in angry customers and negative feedback.
The third wholesale term you should know is: MOQ. Typically the Confidential Dealer Price List has a column headed: MOQ, ”Minimum Order Quantity”. When you place orders, the MOQ determines the smallest quantity of the item you can order at a time. The MOQ is different for different items. Typically, the larger, pricier products have a smaller MOQ than the less pricey and smaller products. This also determines the smallest quantity at which the wholesaler can make a profit on an item. Remember that wholesaling is a volume business. Because profit margins are thin, wholesalers only make money by selling in large quantities.
Once you set up an account with a real wholesale supplier, you will receive a Dealer Price List from them. This is a confidential price list. The column headed: ”MSRP” refers to the Manufacturer’s Suggested Retail Price. This is the price that the manufacturer suggests you sell the product for. The MSRP is intended to help you set price levels. The MSRP is not mandatory. Within reason, you can modify your price to compete with other sellers in your niche.
Don’t make the mistake of being the lowest price seller. You will start a price war where everyone ends up with no profit margin left. This way nobody wins. If your Dealer Price List does provide the MSRP, ask your supplier for a MSRP List. The MSRP can be used as a quick method to see which products offer you better profit margins.
It helps when you talk with your wholesale suppliers, to talk in their own language. Online sellers should know the common terms that REAL Wholesalers use. This absolutely helps in building good business relationships with them. Wholesalers have their own industry terms and jargon. As a retailer, it’s good for you to be able to talk with them in their own language. This avoids misunderstandings. Also, you won’t have to stop them and ask that they explain what they mean. They’ll treat you more seriously if they sense that you understand their business.
In this next set of tips, we will explore a few of the most common terms you’ll encounter when talking to your wholesalers. While many online retailers have heard these terms, most don’t really know what they mean or even how they influence their selling.
MAP - “Manufacturer’s Advertised Price”
Let’s begin with: ”MAP” or “Manufacturer’s Advertised Price”. When a wholesaler requires you use MAP pricing, they are instructing you NOT to sell their products on eBay (or anywhere else!) for LESS than the MAP price.
There’s a very good reason why Suppliers enforce the MAP. The MAP sets the market’s perception of the value of their products in the marketplace. Price cutting on eBay or other selling platforms by online sellers trying to out-do each other, devalues consumers’ perception of the product and brand. When this happens, the large brick-and-mortar stores, with overhead costs higher than eBay sellers, stop selling the product because they cannot afford to sell it for those prices and still make a profit margin.
The wholesaler’s biggest volumes come from those large brick-and-mortar stores. If they stop carrying the wholesaler’s products, the wholesaler’s sales volumes slump and they can no longer justify selling the product. The small online sellers eventually loose out because they can no longer source the products. They have in fact, shot themselves in the foot.
The MAP is a protective measure to retain the product’s market value. This protects everyone in the product supply chain.
