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6 Hidden Sourcing Costs and How to Avoid Them

Both first-time sellers and seasoned pros know sourcing is an important part a reselling business. However, it can be difficult to find a balance between how much to spend vs. potential profits. Especially for newer sellers, hidden inventory sourcing costs can put you in the red if you don’t know what to look for. 

Fortunately, when it comes to avoiding these sneaky charges, a little know-how can go a long way. Check out these 6 hidden sourcing costs and how to keep them from adding up.

Minimum Purchase

Before adding items to your cart, see if the inventory source has a minimum purchase requirement per order. These minimums can fall on a wide spectrum, with some demanding hundreds or thousands to make a purchase. Knowing if a store or wholesaler requires a minimum can help you  determine if they’re a good fit before you invest time browsing. More importantly, you also avoid purchasing extra merchandise just to meet a minimum requirement.

Bid Rate vs. Fixed Price

Wholesale lots are usually priced at either a bid rate or a fixed price. Bid rate merchandise is sold via auction, where sellers choose their own price and hope they come out on top. Fixed prices lots, on the other hand, are marked at a single accepted cost with no opportunity to negotiate.

Both pricing options come with their own hidden inventory sourcing costs. Bid rate merchandise provides the opportunity for you to source great inventory at a low cost. However, other bidders may drive the price of the lot up, reducing your profit margin. To avoid sinking too much money in a single lot, set a limit for yourself when attending auctions. If the cost of a lot rises above that limit, try to find another option that’s a better value.

On the flip side, while fixed price lots may be attractive for their consistent cost, the value of the merchandise may vary. Before making a purchase, see if the lot includes a manifest that lists every item in the order. This can help reduce your risk and also help identify if the inventory provider itself is reputable. Some sources, like BULQ, even come with a manifest accuracy guarantee to help ensure you make a smart sourcing decision. 

Scams

Rule of thumb – if it seems too good to be true, it probably is. Inventory scams can come in all shapes and sizes, including pyramid schemes, hidden membership fees, and even false manifests. When you’re evaluating a new source, do a quick check online for lists of scammers and attempt to see if the provider is verified. You can also consult review sites and reselling forums, such as the BULQ Community Group, to see if other sellers have had experiences with that particular source. 

Market Fluctuation and Variation

Research, research, research- that’s the reseller’s mantra when it comes to sourcing. While buying inventory at the cheapest price may seem like the goal, those items are worthless if you can’t then flip them for a decent profit.

Before committing to a certain item, use websites like Keepa.com and CamelCamelCamel.com to take a look at the product’s selling history. If the item in question never seems to sell at its original asking price, you’ll probably want to avoid it. Similarly, if sale prices for that item frequently fluctuates, making money on it could be a gamble.

Specific language can also tip off items that are a good investment. For example, if sourcing in-person, take a look at what’s written on the item’s clearance tag. Products labeled “online return” or “as-is” may only be discounted at that particular store, which could mean an opportunity to resell them at near-retail value. 

Shipping Charges

Shipping costs can be a major drain on your margins, so it’s worth investigating which sources provide affordable options. For example, if you’re sourcing from a retail chain, check if a nearby location has that item available for pickup. If the product or store isn’t available, see if a similar retailer will match your desired price.

Certain inventory providers may also let you drop-ship, where you purchase the inventory but the source holds onto it, shipping it directly to your customer once you make a sale. Sources with flat-rate shipping costs, such as BULQ’s $30 charge per case, can also help you easily calculate shipping costs before making a purchase. 

Taxes

As a reseller, it’s important to be aware of tax requirements for not just the state you operate in, but also the states your customers are in.

Even if you’re a smaller seller, consider registering your business so you can receive a resale certificate. While many sources don’t require these certificates, having one enables you to avoid paying sales tax on items you intend to resell. You DO, however, need collect sales tax from your customers once you actually resell those items. Requirements and charges vary by state, so check out your state’s unique .gov site for accurate information. 

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One Response to 6 Hidden Sourcing Costs and How to Avoid Them

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