Every wholesale and closeout business is faced with a difficult issue when it comes to selecting the prices for their wholesale and closeout products. To address this challenge,
has introduced articles written by experts on developing accurate pricing.
Like every business, wholesale and closeout businesses understand the basic science of establishing pricing for their wholesale and closeout merchandise. The most widely used pricing formula is based on factoring in fixed and variable costs, and then adding in the mark up.
But while this formula is true for all business markets, it needs to be modified for the wholesale and closeout business. Just like on shoe cannot fit all feet, one pricing formula cannot be used for all business markets.
For starters, what makes the wholesale and closeout business very different from other businesses is the end user need.
While in most business markets the end user need is based on consumption, in the wholesale and closeout market the end user need is based on resale.
The difference being that while IBM will purchase paper supplies for its offices, and Steve Smith will purchase orange juice to drink, the customers of a wholesale and closeout business have a different purpose behind their buying decisions.
The wholesale and closeout customer is only purchasing products with the intention of reselling at a profit.
As long as the profit margin is high enough to cover his or her costs, and still leave them over with a net profit, will the customer continue to buy from the wholesale or closeout supplier.
For this reason, the wholesale and closeout business must factor in what profit will their customers be able to make when they resell their merchandise.
“This equation must factor in the nature of the wholesale customer. Is the customer a dollar store, flea market vendor, or eBay seller?”, said Donny Lowy, who is the CEO of
and
According to Donny Lowy, the success of a wholesale and closeout business will depend on how much their customers can make in the resale market, on their wholesale and closeout products.
Therefore the pricing equation must reflect the profit margin that the reseller will have when they take their merchandise to their retail outlets.
To have a further understanding of this subject, one needs to be able to understand that the wholesale and closeout business are based on sales to repeat customers.
As long as the wholesale and closeout customers enjoy a decent profit margin they will return to the wholesale or closeout vendor.
This relationship can lead to an increase in sales volume which makes it worthwhile for a wholesaler or closeout dealer to sacrifice profit margins for long term sales revenue.
Donny Lowy is the CEO of
, an online wholesale and closeout business, and
, an educational resource for the wholesale and closeout business.
