how reselling works

RESELLERS - HOW IT ALL WORKS

Selling products in the Food Industry (Business Opportunities)

How does everyone who touches products get their little piece of the action and make a go at a profitable business? Well nowadays products are priced to the marketplace and everyone wants their piece of the pie, there is no magic here. So I am going to share with you, the "secrets" of the food retail industry. We will use a 4 ounce bag of beef jerky as an example. But before I do, we need to understand some basic terminology;

Manufacturer- this is the entity that is making the products to sell. They procure raw materials and add value, to convert them into finished products. Manufacturers will sell through distribution or to larger retailers/business owners. They are interested in selling skids or palettes worth of product, not cases or single units.

Manufacturer's Rep/Agent - This is usually an independent organization that helps to sell or represents a manufacturer or group of related manufacturers. They are knowledgeable about the manufacturers, their products capabilities and the industry in general. They have worked in the business and are well networked. The manufacturer is more than willing to pay for these services, usually a small percentage of the sales generated as the Rep/Agent brings business to the manufacturer. The Rep/Agent will hunt out and find business opportunities for the manufacturer, focusing on distributors and Larger Retailers/Business Owners. This frees up the manufacturer to focus on operations management and not marketing.

Distributor- This entity acts as a buffer to the manufacturer buys product directly from them and stocks products to be sold to retailers/business owners

Retailer/Business Owner - This is everyone who owns a convenient store, gas station, Family store to a chain of grocery stores. They may have enough volume of business to go directly to a manufacturer but more frequently work through a distributor for their product. Smaller stores may actually not be able to get mindshare of a distributor (the store doesn't generate enough sales volume) and will rely on a wholesaler or jobber to support them with products as required.

Wholesaler/Jobber - This is a glorified delivery or route person that will basically fill a truck with product, and drive around on his/her daily route attempting to sell products to smaller retailers/business owners. This usually centers around building relationships with owners, recognizing the market and what the customer wants/needs. A lot of store owners really appreciate this kind of service as the products come to them, the shelves in their store can be managed by them.

Super Retailers
Super retailers like Walmart and Sam's attempt to deal directly with the manufacturer cutting out all the middle man, saving you money and maximizing their profit margins. They buy in incredible volumes and negotiate their price so far down that frequently manufacturers are sorry they even got the business in the first place. They spend all their time manufacturing for their new god (small "g") and frequently wind up walking away from their lower volume, higher profitable business. Last thing to consider when shopping at these fine establishments is that, frequently, only the most profitable, high volume, lower quality (cheap) manufactures can afford to align themselves with these super retailing companies. What you buy is what you get! Even so recently, Walmart has recognized this and will occasionally, align themselves with local manufacturers on a store by store basis, giving smaller manufacturers a chance to sell products at lower volumes, but this is not Walmart's normal business model.

Consumer/Internet Shopper
This is frequently the end user looking for something to purchase, with cash or credit card in hand

Distribution Example
Ok now, back to the 4 ounce jerky bag example; This is the typical channel that brings products to market.

You as the consumer or end user/eater can expect to pay about $5.99 for this bag of jerky (less tax) if shopping at a typical convenient store or gas station.

Consumer	Retailer- Gas station/Convenient	Distributor	Manufacturer
$5.99	$4.13 (marks up 45% or 1.45 X $4.13) Gross Profit = $1.86 per bag	$3.07 (marks up 35% or 1.35 X $3.07) Gross profit = $1.06	Estimated cost to produce is $2.00-$2.35 Gross profit = .72-$1.07

A Super retailer like Walmart might actually deal in such volume and put so much direct price pressure on the manufacturer that the manufacturer might be selling his products for as little as a nickel a bag profit. In the example above, Walmart might sell that same product in their store for $2.97!!! In effect, sucking profit right out of the manufacturer, and putting the distributor out of business. Good for you in the short term ( if you like cheap jerky) as a Walmart shopper….but as soon as there is no competition to keep Walmart honest…you will see there prices go up, with no relief to the manufacturer!!

A wholesale jobber will typically buy from a distributor (distributor will markup only about 10% or about $3.38, from our example above) or the manufacturer for about the same. Sometimes, especially when the wholesale/jobber is picking up product directly from the manufacturer, the manufacturer will usually cut this guy a break and give him a price somewhere close to what a distributor can buy for. That wholesale/jobber will then sell to the retailers at a slightly lower profit or the retailer will recognize the value add provided by the frequent visits and restocking by the jobber and will accept a slight premium on the products, slightly cutting into his margin. A wholesaler may also take products directly to the end customer through craft fairs, county fairs, hometown events, festivals or other various events, by setting up a booth or table, passing out some sample product and seeing what the customer like.