If you have an interest in working in sales or love the world of fashion, starting a wholesale clothing business might be right for you. Wholesale clothing companies are very popular startup ventures due to their versatility and potential financial success. What does it mean to sell wholesale versus selling private label or retail?
Selling Wholesale Clothing for Boutique Owners
Wholesale clothing sales is a wonderful choice for those who are interested in opening a shop that sells to retailers. When selecting your products, you can browse through dozens of catalogs, and you can sell clothing to retailers around the world. This explains why you as a shopper might see the same outfits in different stores regardless of their location.
When purchasing clothing to sell wholesale, you can make purchases based on what has sold well in other shops or locations, which offers you a bit of protection when placing large orders. At first, you’ll likely have to spend a lot of money to buy a larger supply of merchandise and set up shop, but the purchases that follow should be smaller and less expensive.
Wholesale differs from retail in that wholesalers are purchasing clothing and selling it to retailers, namely stores and online companies that sell directly to consumers. Wholesalers do not sell directly to consumers.
What Is Private Label Clothing?
Unlike wholesale clothing, private label clothing is the sort that you can’t find at suppliers like Amazon or other big-name shops. You might need to arrange a special contract with these labels in order to sell their products. They also tend to cost more, which could put you at a greater risk until your business model is proven.
Licenses, Permits and Taxes
Before you begin buying wholesale clothing for resale, there are several license, permit and tax considerations that will need to be part of your wholesale clothing business plan. To begin, you’ll want to get a business license and seller’s permit if they are required in your area.
However, the process behind obtaining the proper documentation for your business will depend on the state in which you’ll be operating. You will likely need a state and city business license to operate, and business insurance is also an essential purchase.
There are other licenses that you might need to operate a wholesale clothing company. For instance, a wholesale license specific to your state might be required so that you can legally conduct transactions. Also, depending on your state’s laws, you might need to acquire a sales tax license, which will allow you to charge sales tax on any clothing items you sell.
Securing a Physical Location
Important to any business is an operating location. Be sure you carefully complete any leases or other documents needed to secure your location and protect your interests in the long term.
If you’re looking to buy a storefront out of which to wholesale rather than renting a facility, be sure to consider whether you are going to stay in the area for a prolonged period of time. In addition, if you would prefer to keep most of your sales online, a permanent location might be unnecessary. Depending on your circumstances, leasing a space might make the most sense for you. The amount of money you have to spend will also help shape your decision.
At the very least, you will likely need an office and warehouse space to keep your inventory, to handle orders and to prepare shipments. If you have staff members, this might be a space you need to buy or lease. If it’s just you running the business, you could probably operate out of your home if you have an extra room or a garage that could function as an office.
Creating a Marketing Plan
Creating a marketing plan to target your ideal customer is an essential aspect of your business plan. For example, if you’re selling clothes for teens and children, you’ll likely want to opt for an energetic space or website with brighter colors.
If you plan to wholesale suits, elegant dresses or other high-end clothing and accessories, you might prefer a more traditional location or website. The way you market your products will go a long way toward attracting the right retailers.
Determine an Overall Strategy
Before you begin to invest in inventory, you should determine your purchasing strategy and whether you’ll be acquiring your wholesale bulk clothing from overseas or domestically. If you’re buying from an overseas manufacturer, you may end up paying less money, but you may need to purchase larger quantities of clothing at one time. There’s also the chance that you might face issues with communication or logistics when dealing with merchandisers from overseas.
If you work with a domestic merchandiser, you may spend more to purchase clothing, but it will likely be easier to deal with your suppliers. The choice you make depends on your budget and how accessible working internationally might be for you.
Drop shipping is a viable option when selling wholesale clothing. However, it could also create more problems than it’s worth depending on your business structure. Drop shipping is the process of going straight from the manufacturer to the retailer without having to deal with the distribution channels that are typically in place.
A lot of people who sell wholesale clothing love this option because they don’t have to stock merchandise and because there are no fulfillment obligations or inventory. All you need to do is take the orders.
However, the profit margins in drop shipping aren’t always in the seller's favor, and that’s something worth considering. You’ll also need to often run customer service interference regarding problems that you can’t actually solve or handle. For instance, if a drop shipper sends the wrong order or delivers it late, even though it isn’t your fault, you have to address those issues with the customer.
Connecting With Merchandisers
Once you’re established with all the necessary processes and permits for your business, you’ll want to find a supplier whom you can trust and who will deliver you the type of clothing that you want to be selling.
After you’ve found the merchandisers with whom you’d like to work, it’s likely that you’ll need to fill out an application and be able to prove that your business is legitimate. This process might involve sharing your business license or even invoices to illustrate that you’ve made transactions already. After you establish multiple successful relationships with merchandisers and distributors, you’ll be on the path toward being seen in a more serious way in the industry. Networking in any industry is essential for growth, and this is one way you can help grow your wholesale clothing company.
As with any business that you’re owning and operating yourself, you’ll want to ensure that the marketing plan you have in place clearly maps out your course of action and how you can grow. You’ll need to consistently make efforts to reach retailers and entice them with the exciting new clothing you’re buying in bulk. Advertisements, marketing your business on social media, newsletters and even flyers are just a few of the ways that you can start to spread the word about your budding business.
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- Depending on how small your wholesale clothing business is, you can start from your home and branch out to a warehouse as you get bigger. Register your business with your local county clerk's office and obtain your Doing Business As (DBA) or Assumed name certificate before starting your business. Visit your state comptroller's office or website and apply for a Reseller Permit. No manufacturer or distributor will sell clothing items to you without this permit. It also allows you to buy in bulk without paying taxes. Open a bank account for your business and establish a merchant account with your bank so you can accept electronic payments. Obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) if your wholesale clothing business has employees or if you incorporate your business (see Resources). Keep accurate accounting of your business sales and expenses. This is important for end-of-year tax purposes. It also helps you gauge the success or failure of your business. Microsoft and Intuit have accounting products that are free to download and use (see Resources). Order business stationery for your wholesale clothing business. Having a business card makes you look professional no matter the size of your business.
- If you decide to specialize in a niche or you order from overseas manufacturers, beware of imitation merchandise from China, Korea and the Philippines.
Danielle Smyth is a writer and content marketer from upstate New York. She has been writing on business-related topics for nearly 10 years. She owns her own content marketing agency, <a href="https://www.wordsmythcontent.com/">Wordsmyth Creative Content Marketing</a>, and she works with a number of small businesses to develop B2B content for their websites, social media accounts, and marketing materials. In addition to this content, she has written business-related articles for sites like <a href="https://www.sweetfrivolity.com/">Sweet Frivolity</a>, Alliance Worldwide Investigative Group, Bloom Co and Spent.