by Jamie Craig

Created on: November 24, 2009

Wholesale is a very simple concept; it is simply the distribution of goods in large amounts to buyers at a reduced price. This reduced price can only be achieved via the increased volume of items traded, hence maintaining a large enough income for the seller to be benefited and a large enough reduction in price for the buyer to gain an advantage also. These two perspectives (that of the buyer, and that of the seller) are key to understanding how wholesale works, not only on eBay but in the "real life" business too. More importantly, wholesale is a vital part of the supply chain which our economy relies on very heavily.

>>The First Seller- Where the Product is Created<<

Products have to originate from somewhere and typically this will be from a factory or a chain of production plants which will be scattered around a particular region; for instance many mass produced toys tend to originate from Chinese and Vietnamese factories. These factories will churn out these goods in vast quantities, typically for a predetermined buyer. A production plant will tend to decrease the price per item as the overall number of items within the order increases. This encourages increased turnover and prevents stock from "lying around" in storage. The buyer who has demanded this lot of items will purchase them for a price which will usually have been negotiated beforehand. This is wholesale in its simplest form.

For the sake of my example the factory may have produced 1000 items for a cost of 70 cents each, and sold them to a businessman for $1 each; this results in a net profit of cents $300 for the factory. If this order was to be increased to 2000 units the price for the businessman may have been reduced to 90 cents per item. This means each item is sold for less profit, but the factory has a higher net profit of $400. This is ultimately beneficial for both parties.

>>The Intermediate Sellers<<

It is highly unlikely however that the businessman who purchased the goods from the factory will have had the intention of keeping them all for himself. It is highly plausible that a lot of 1000 items would be broken down into 10 lots of 100 items and sold again on eBay or through another commercial outlet.

These packs of 100 items may be sold for $120 each, resulting in each individual item having a cost of $1.20. This would result in an overall profit of $20 per pack for businessman, who has now become a wholesaler himself. Because this bulk lot of items has been

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