Online reselling is an exciting opportunity for new and experienced entrepreneurs, especially if you don’t want to research and develop your own products. You can resell second-hand and specialty items or wholesale products through third-party platforms like eBay and your own ecommerce storefront.
Reselling can be competitive, so it’s important to start on the right foot. We’ve laid out nine crucial steps to navigate this ecommerce industry and set the stage for success.
What Is a Reseller?
An online reseller buys products or merchandise from manufacturers, wholesalers, liquidators, second-hand stores, or other retailers and then resells them online. People resell online through:
- Online marketplaces like Amazon and Etsy
- Personal websites and social media
- Branded business websites and apps
Some online resellers specialize in a particular type of product, like Hive Foods which sells grocery items. Others, such as Overstock.com, sell many different categories on one platform.
9 Steps to Start an Online Reselling Business
You’ll be on your way to a thriving online resale business with these nine steps. We’ve done the research to help you develop a business model, set up financial systems, and comply with local laws.
1. Research the Market
First, decide what you want to sell. High-demand products have a higher price point, so they make good resale items.
You can review popular ecommerce sites like Amazon and Alibaba to find trending and top-rated products to sell. Popular reseller markets include:
- Apparel, specifically women’s clothing
- Baby products
- Accessories like bags and purses
- Electronics and accessories
As you research products, be sure to read the reviews to learn about quality. Avoid choosing inferior items, which can damage your reputation and impact sales. You should also pay attention to pricing so you can decide what to charge at your own shop.
2. Select a Fulfillment Model
After you figure out what to sell, you’ll need to decide how to fulfill customer orders. Online resellers have three main options:
In-House Order Fulfillment
If you fill orders in house, you hold all inventory and manage the entire process, including packing and shipping. In-house order fulfillment is best if you have a small inventory that’s mostly unique or specialty items. Read more in our complete guide to ecommerce stock management.
You can start a dropshipping business if you want to manage the front-end ecommerce platform but don’t plan to hold inventory. Instead, you’ll receive customer orders through your online shop and forward them to a supplier. This third party owns the products and handles order fulfillment.
It’s affordable to get started with dropshipping since you don’t hold any stock. You’ll need to set up your web store and connect with a vendor for the types of items you plan to sell.
Downsides of dropshipping include less control over the products, potentially creating stock or quality issues. Additionally, dropshipping companies often have high per-unit pricing that reduces your profit margin.
You can hire a third party to manage inventory, fulfillment, and shipping for your reselling business. The third-party logistics (3PL) model differs from dropshipping in that you own the inventory and pay for storage separately.
3PL is best if you want to resell bulk wholesale products without holding and distributing inventory. You’ll probably save money on per-unit cost compared to dropshipping, but it’s important to check for high fees when you select your third-party provider.
3. Find Suppliers
Consider these factors when selecting a supplier:
- Quality: Your ideal supplier should provide top-notch products. Make sure their items aren’t obsolete, counterfeit, or otherwise inferior.
- Price and minimum order: Try to balance the price per-unit with the minimum order number. You want to be able to sell the products at a profit without overstock.
- Customer Service: When things go wrong, you need a supplier who is easy to reach. Check customer service options and read reviews before signing a contract.
Tons of different dropshipping and wholesale marketplaces can help you find good suppliers at a low cost, including Alibaba, SaleHoo, Tundra, and Handshake.
You can also source inventory by reaching out to your favorite brands. For instance if you want to start a snack reseller, connect with small local companies to see if they offer wholesale discounts.
4. Create a Business Plan
Your business plan details how you’ll make money as an online reseller. This document can be simple, but it should include:
- An overview of your business
- A detailed list of your products and suppliers
- Your marketing plan and sales strategy
- A growth plan and short-term goals
- Financial projections
- Your operations and logistics plan
Your business plan is a living document and can change over time as your company grows.
5. Take Care of Legal and Financial Matters
Before starting any business, it’s important to fully understand your legal and financial obligations. You need to look into local business and tax laws since the specific requirements vary by city and state.
In most locations, you’ll have to register your business with the government. You can generally form one of several legal entities, such as a sole proprietorship, partnership, limited liability company, or corporation.
You may also need to register with your local tax authority. Online resellers typically have to charge and remit sales tax. You may also have to pay a goods and service tax or value-added tax.
You can sign up to pay federal taxes for your business by registering for a free employer identification number (EIN) from the IRS. You’ll use this number to file taxes and open a business bank account.
7. Build a Website
While you can start your reselling business on third-party marketplaces and social media, this may limit your growth potential. Instead, I recommend creating your own website with a custom domain name, which you can use in addition to other platforms.
It’s easy to create a professional-looking online store with website-building tools. Your business should have a functional, easy-to-use ecommerce presence with strong security. These factors help new customers trust your brand.
Once your site is set up, you’ll add all your products to your webstore. Focus on creating specific product descriptions, uploading high-quality product images, and including clear pricing information. These components attract customers and help the site look legitimate and reliable.
8. Set Up a Payment System
Before your online reselling business can start selling, you’ll need to set up a payment system. Pay.com provides a quick and easy way to accept a wide variety of payment methods, including credit cards, digital wallets, and bank transfers.
You can customize your branded checkout page with pre-built templates to ensure a seamless experience for your customers. We also have full API integration if you prefer to code your own personalized platform with our intuitive tools.
Pay.com provides access to unique customer insights and transaction reports. You can develop a deep understanding of your customers, their buying habits, and their preferred ways to pay so you can tailor your sales and marketing strategy further.
9. Start Selling
Once your website and payment system are live, your business can officially open! To start making sales, you’ll need to market your ecommerce company to potential customers.
Many resellers use social media to get started with marketing. On Facebook and Instagram, for example, you can visually show off your products and even integrate shopping features.
As your business takes off, monitor the performance of the products you sell. Don’t be afraid to adjust your inventory as trends change and you learn what works and what doesn’t. Armed with this knowledge, you can scale your online reselling business and increase profit margins.
The Pros and Cons of Starting Your Own Reselling Business
Understanding the upsides and downsides can help you decide if reselling is right for you. Some of the advantages of this business model include:
- Low start-up investment if you use dropshipping.
- Easy to scale once you’ve attracted customers.
- Incredibly flexible as either a side hustle or full-time job.
- The ability to set your own prices and determine your profit margins.
- Straightforward business model.
You should also be aware of these possible disadvantages:
- Online reselling is a crowded market with lots of competition.
- Finding a good, reliable supplier can be challenging.
- You have no control over product quality and availability.
- It takes time to build customer loyalty and drive strong profits.
- Getting started requires a lot of work and a big time commitment.
The Bottom Line: Is Starting an Online Reselling Business Right for You?
Starting an online reselling business involves researching and sourcing products, creating a website, and marketing to potential customers. Once you set up your business and build a following, you can earn money as an ecommerce entrepreneur.
Like any venture, online reselling has its hurdles. Following our steps can help you weather these challenges to build a successful online resale business.