Starting an online reselling business- The important details

Even though some of us were skeptical about online businesses even five years ago, the C.o.v.i.d 19 pandemic has all but erased most doubt about the potential of the online market. Customers and markets are more likely than ever to google the products they need and they are also much more trusting of online sellers. Global supply chain improvement also means it is much more affordable and efficient for smaller entrepreneurs to penetrate global markets via minimal marketing expenditures. And one of the businesses that have taken centre stage in this new online based economy is the reselling business.

But what is a reselling business?

At it’s very basics, a reselling business is exactly what it sounds like. It means taking products from a manufacturer and selling them to the consumer at a profit margin. However, the scales are a lot more diverse and the opportunities are insane. This form of business is essentially referred to by the term dropshipping which means sourcing products from varieties of suppliers or liquidators and making them available to the market in one space. What resellers do is act as a middleman who organizes similar products to a singular place which allows customers to compare and choose a product from the market without having to do the research themselves. 

At it’s smallest version, reslleing can look like thrift shops sourcing used goods from people who don’t need them anymore and making a profit by selling that good to someone who needs it. However, this takes on many forms as it grows in scale.  Some resellers not only create a unique customer experience but also create a brand around the resale business which increases the business’ valuation. 

Your profit margins depend on how well you market your business and how much markup you are charging per product.

Marketing- The lifeblood of the resell business

While marketing is important to the succes of any form of business, this is especially true for the online resell business. This is primarily due to the fact that an online reseller most likely has no product of his or her own that they can offer. Since suppliers will often supply their products to multiple sellers, it is also very difficult to have a unique customer experience. And thus, the success of the business almost entirely depends on marketing and lead generation. Dropshipping or reselling requires unique marketing knowledge and requires good lead generation strategies to get off the ground. 

This means your business plan should be more about packaging rather than quality development. If you are an expert in animal behaviour and understand pet owners well, you can understand this specific niche better and market to the specific needs of your target audience when you are selling pet toys or essentials. 

But before you get carried away and start buying from suppliers all over the world, it is important to get a reselling permit. 

Getting a reseller permit

Each state and each country has their own forms and methods of taxation. Some states just charge a flat sales tax on any sale based business, others have special incentives for online based businesses while some even tax based on the type of product you aim to sell. In each of these instances however, getting a resell permit is necessary for you to qualify as a legit business that falls under taxation. Here is how to get your permit:

Register Your business:

Before going in to the details as to how you can apply for taxation of your product, conducting any business requires you to get a business license. Register your business by noting a business address where you are basing your supply out of and you should have a permit pretty quick with the help of a lawyer.

Get your application straight:

It is just not enough to apply for a business permit and start selling right away without being aware of your state’s laws. Your application may be rejected for a multitude of reasons and it is always a great idea to consult a legal expert before putting your application in.

Get a reseller’s permit:

In some states, sales tax can almost be completely voided by getting an out of state reseller’s permit. However, this is highly discouraged in states where the law does not protect you since it counts as tax fraud. In that case, file for a reseller permit in each state you plan to operate your business in. Associated fees and application costs must also be kept in mind.

Picking the right marketplace:

Once you get your permits straight, it is time to source your products and sell them. But where do you start selling?

That is where online marketplaces come in. Marketplaces like ebay and daraz are somewhat generalized however your target audience will be too broad for you to accomplish focused marketing. Depop is a website that is somewhat famous within resellers selling Gen Z fashion products. However, it is important not to get stuck on one marketplace and expand your brand to as many marketplaces as possible. Focus on the ones that bring in the most profit while slowly cutting out low yield outlets. 

Reminding yourself about your margins

It is pretty easy to get sidetracked while buying from suppliers. Sometimes, the products look to good to pass up on and resellers tend to stock up on low yield products that have little to no margin. While this might be a great strategy to get your business trending, it is definitely not sustainable. 

If you are sourcing your product from another continent, calculate if you can make profit on it to a degree which makes the labor worth it. This also works for products that are pricy at the source. A good way to ensure this is to have a fixed profit margin for yourself. Decide how much markup you want to put on each of your products and don’t invest on stuff that does not go for that price on the market. 

Overall, if you have the basics of your business right- success is just a few clicks away!