How to Buy Initial Inventory for Your Business the Right Way

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Credit: | How to Buy Initial Inventory for Your Business the Right Way | While you can set up an ecommerce site or storefront and say you have a small business, you aren’t really in business until you have products ready to sell. Many people rush out to buy the first deals they find, but smart wholesale buying will make the difference between breaking even and being profitable. The next question is how to do just that. Here are four tips for buying initial inventory for your business.

Know Your Customers

Don’t make the mistake of buying items you like. Know your customers. Build a profile of each customer segment. Then “be” your customer. Look at your business the way a customer would. What products do they expect? What prices are they willing to pay? How much is too much for them to buy it? 

Buy what they’ll buy from you and at a price where you can sell it for what the customers are willing to pay. Focus on what the best buyers in your product category will be, since they are the ones who will generate most of your income. Once you’ve explained what you are to offer based on your client’s explanations of what they need, you will have done half of the job. That’s the best way to go when it comes to setting up your Vendor Managed Inventory.

Understand Your Inventory

Don’t make the mistake of buying inventory and assuming your job is done. You must understand your inventory. For example, it is a waste of money to buy products when you already have a lot of it in stock. You can’t afford to run out of popular products, either. This is why you must, at a minimum, track inventory levels.

Determine your sell-through rates – how many of each product or product category you sell every month. Then you will know how long the current inventory will last and how much you need to order to stay in stock until you’re ready to order again.

After you’ve collected inventory and sales data for a few months, you can start identifying seasonal peaks. This eliminates the risk of running out when your customers are flooding in. Conversely, if something isn’t selling well, stop buying it and move it out the door so you can stock up on items that sell better.

Be Careful with Your Financing

While most business owners carefully shop around at wholesalers, online, and at trade shows to get the best deal on inventory, far fewer do the same level of research when it comes to financing their purchase. 

For example, a number of manufacturers require you to have a business credit file number or DUNS number to purchase inventory, even if you’re paying cash for it. Alternative lenders like LoanPig USA offer a variety of options. You can choose the loan amount and, sometimes, the repayment schedule. You can apply for short term loans regardless of your credit. In many cases, this might be your only option until you get all the paperwork in order.

Pay Attention to the Competition

You should pay attention to the competition, because your customers will be. Visit their stores incognito and see what they’re selling similar products for. This might give you a lead on new products to stock, if you see it selling well in their stores. Browse websites to see what your customers might buy the same items for online. Whether you sell it cheaper or come up with a value-added proposition to justify buying it from you is your decision. For example, you might identify what are called “product gaps”- related items that customers tend to buy together.

Customer service and marketing will impact your business. However, you can’t afford to ignore the factors that go into buying your first batches of inventory and then maintaining your stock levels.

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