Background

I think there's a market for dj equipment in my area, but all the
stores in my area mark their prices up almost to the suggested retail
price (which is often hundreds of dollars more than you could find it
for online). I know nothing about reselling electronics. I am trying
to find out what it would take for me to start selling dj gear locally
(out of my home) via friends, local messageboards, dj email lists,
word of mouth, and so forth. I have spare cash I can use. I live in
the US.

Question

How do I go about buying consumer electronics (dj gear specifically,
if it differs from market to market) wholesale?

In Particular

I'm interested in details like whether a business license is required
to make purchases; if its usually possible to work directly with
manufactorers, or whether I have to go through a middleman; whether
manufacturers limit the number of people they sell to in a
geographical area; potential problems I'd encounter; maybe where to
start; and so forth.

NonQuestions

Whether shipping is going to be a pain. Whether I want to spend the
money or not. Whether consumer electronics is a tough market. Which
turntable is the best :) etc etc etc

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Clarification of Question by darkblue-ga on 04 Oct 2002 12:10 PDT

BTW, I'm not interesting in selling more than maybe a half dozen
different items. Probably just a single item (e.g., Technics 1200 m3d
turntables) at first. What would follow would depend upon demand.

Hi Darkblue,

I think it’s great that you have an idea and want to start a business.
 I also sympathize with where you’re at, because if you’ve never done
it before, starting and running a business can be quite daunting.  So
hopefully I can answer most of the questions you’ve asked in a way
that will encourage you to continue to pursue your idea without giving
up too easily.  Just remember to take it one bite at a time – easier
to swallow that way!

First of all, as to where you can find sources for electronic DJ
equipment, fortunately that’s not too difficult.  I’d start with the
Thomas Register at http://www7.thomasregister.com/index.cgi?som_upd=1
.  This is a list of most manufacturers in the US.  You have to sign
up with them for an account to search their database, but registration
is free.  What you do then is type in the search box what you’re
looking for specifically.  For example, in your business, you’re going
to need such things as

CD players
amplifiers
mixers
effects processors
sound processors
feedback eliminators
speakers
subwoofers
microphones
karaoke machines
computers (for compiling and automatic play of song lists)
software 
turntables
tape players
light controller/switches
haze machines

and probably a lot more than I’ve been able to come up with here. 
Your search will come back with a list of manufacturers of those
items.

You’ll be provided with at least a mailing address, and often with a
website, email, contact names and other useful information.  It will
then be up to you to contact these companies regarding their policies
on wholesale sales.  Also keep in mind you can do an online search for
electronics manufacturers, using search engines like Google and
others.

Some companies do use distributors (middlemen) to move their products,
but very often yes, you can also work directly with them on your own. 
It will just depend on the company.  If they refer you to a
distributor, you might check it out just for comparison sake with
companies who’ll work with you directly.  Keep in mind the competition
probably also has to use the distributor, so it might not be a
disadvantage. True, some distributors do have protected territories,
but as a potential retailer, well, most companies are in business to
make money and will sell to whomever wants to buy their goods, so
being shut out is probably not something you need to worry about.

However, one thing you will need to keep in mind is that many, if not
most manufacturers deal in very large quantities, like they will want
you to order 100s of CD players or mixers by the dozens.  What that
means for you is a very large cash outlay, as well as the headache of
how and where to store all your inventory.  Also, with that type of
relationship, you might be required to demonstrate a particular net
worth, or credit in a specified (large) amount or even demonstrate the
existence of an already established business before they will even
consider setting up an account with you.  In addition, not all
companies will even let you buy on credit, but will want cash up
front.  Check out

But there’s another way to buy wholesale.  It’s becoming more common
to use the services of what’re known as drop shippers, that is,
manufacturers who will let you buy from them at wholesale while they
will ship directly to your customers.  And many of these will also let
you buy in small quantities, some of them even one piece at a time. 
So it seems to me this could be the direction that would hold the most
promise for you, given what you’ve said about how you’d like to start
your business.

In order to find these manufacturers, do your search as above, and
then contact them by email, phone or letter and simply ask if they do
drop shipping in small quantities.  If so, add them to your list, if
not drop them, etc.  You will eventually need to sort out your list as
to the most likely supplier(s) and set up an account and establish a
relationship with one or more from whom you plan to purchase your
goods, so make sure you ask upfront about their prices, terms, credit
requirements, etc.

There’s also a directory called The Drop-Ship Source Directory
available online at  http://www.mydssd.com/main/source.htm?1013  For a
reasonable charge you can get this already assembled directory of
manufacturers willing to work with small entrepreneurs, complete with
contact names/numbers and terms available.  The downside is that it
also includes a lot of items you have no interest in, and may be
limited in what you are looking for.  But the website is worth looking
at all the same, and there is a good little e-book there on the
business of internet selling via drop-shipping that you can download
for free.  I’ve got it, and it’s full of good general advice.   There
is also a wholesale online source for electronics at
http://www.buydirectelectronics.com/  but I have to say I don’t know
much about them, so be cautious.
  
As to the mechanics of starting a business, yes there are a few things
you’ll need to do, but they’re not too bad and don’t take a lot of
either time or money.  Basically, call your state comptroller’s office
(or the equivalent) and get the lowdown from them on the specifics,
but you should be able to get going by filing an assumed name, (or
“dba” doing business as), and you will likely need to get a sales tax
id number if your state has a sales tax.  Also get online at the IRS
(ugh, I know) website
http://www.irs.ustreas.gov/businesses/small/index.html  and read the
information pertaining to small businesses.  Better know what they
want.  Of course, I can’t give you any professional advice here as you
know, and you should probably plan to consult a lawyer and an
accountant for assistance at some point.  But most people do just fine
in the beginning on their own.   The biggest thing is to do your
homework:  meet your state’s and the IRS’ requirements and keep
records of everything you do.  Even if your record-keeping amounts to
receipts in a shoebox, never, ever underestimate the importance of
saving and/or writing down in some way some evidence of everything you
do, spend, buy, sell, etc.  Believe me, you will never be sorry for
that.  Oh - and you can also get great business advice from the Small
Business Administration at http://www.sba.gov .
 
Ok, as to your “non-questions:”  oh yes, shipping can be a pain. 
That’s another reason why working with drop-shippers can be such a
good way to do business.  However, if you choose to take care of your
own shipping, check out the main ones to get an idea.  UPS is at
http://www.ups.com , FedEx at http://www.fedex.com , and the US Postal
Service at http://www.usps.com  All of them will let you put in your
info to estimate rates for various size/weight packages.

The best turntable?  Well, I’m glad that’s a non-question, since I
really have no idea.  But you can use a number of resources to find
out.  First, call all the DJ services and radio stations in your area
and simply ask what kind of turntable (or CD player, or amp or
whatever) they use.  You can also do an online search, using terms
like

disc jockeys
electronic equipment
sound equipment
lighting equipment
equipment for disc jockeys

and whatever else you can come up with that’s specific to what you’re
looking for. Basically, check out your competition. Here are a few
sites to get you started:

http://www.djaudiosuperstore.com/
http://www.edancing.com/dj.htm
http://www.topdjgear.com/
http://www.digibid.com/

See which brands are most popular, or have the best price, or the most
bells-and-whistles.  It shouldn’t take too long to come up with a list
of brands you think will sell best in your area or online or wherever
you try to sell.  Also bear in mind that you can search the Thomas
Register by brand name too to save time if you already know the
manufacturer you want.

Conclusion?  Yes, consumer electronics can be a tough market. 
However, you’re looking at a small niche segment of that market, and
it’s usually good business to do just that.  Also, there’s always room
for someone who can do it better, cheaper or just different that
someone else.  So good luck to you if you decide to go for it, and
please allow me to clarify if there’s anything here that isn’t clear
to you.

Search terms used:

Electronic equipment manufacturers
Sound equipment
dj gear
disc jockey equipment
buying wholesale
drop shipping
starting a business

Best wishes,   

Byrd

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Clarification of Answer by byrd-ga on 04 Oct 2002 12:58 PDT

I didn't see your clarification until posting my answer, so I would
say to disregard what I said about buying in quantity, etc. and just
go with the information on asking wholesalers upfront whether or not
they will deal in small quanities and/or single items, as well as drop
shipping.

Also, it is possible you can start your business small without
necessarily having to have an assumed name.  Some states will let you
use your own name on a sales tax application for example.  But if you
do get a dba, one additional thing you will probably need to do is
open a bank account under that name (for all your profits!).

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Request for Answer Clarification by darkblue-ga on 04 Oct 2002 13:14 PDT

Thanks. Couple of items:

1. Was there supposed to be a link following "Check out" at the end of
the paragraph in the middle of the response?

2. This is very good information, but is it a *requirement* to have
started a small business (i.e., have tax id, etc) for these companies
to sell?

3. For future reference, by "non-questions" I meant "I'm not
interested in the answers to these questions" because I already know a
lot about them (e.g., I know exactly what kind of equipment I want to
sell).

Thanks again.

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Request for Answer Clarification by darkblue-ga on 04 Oct 2002 13:19 PDT

Oh, and by "single item" I meant that I would only be buying/selling
one particular model. I did not mean that I would only be buying in
quantities of one. Most likely I would buy a dozen of that item (e.g.,
Technis 1200 m3d) at a time.

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Clarification of Answer by byrd-ga on 04 Oct 2002 14:53 PDT

1. My apologies, you’re right, the information did not get pasted.  I
meant to say, check out these examples of standard wholesale account
applications:

http://www.aedwis.com/creditapplication.html
http://209.219.234.176/volutone/dealerapp.html

2. Yes, wholesalers do require you to present evidence that you are in
fact a business in order to purchase from them.  There are several
reasons for this.  First is sales tax. Most wholesalers do not collect
sales tax, and in order to sell to you, they will need evidence that
you can and do, i.e. a tax id certificate and/or resale certificate. 
In fact, in the e-book I mentioned at
http://www.mydssd.com/main/source.htm?1013 , the author states, “A
real wholesale distributor MUST have a copy of [your tax id
certificate] in order to sell you products at wholesale.”  Also,
wholesalers would be cutting their own throats by not requiring that
you be a business.  Selling directly to individuals at wholesale
prices would undercut their mainstay customers, which are retail
businesses.  So yes, you will have to obtain a legal business identity
if you want to purchase wholesale.  The only exception would be if you
bought your goods from a place like
http://www.buydirectelectronics.com as they are essentially lowball
retailers, who do their own purchasing from wholesale distributors,
and just cut the price lower than regular retailers.

3. I'm sorry, I misunderstood you.  I knew you were being a little
tongue-in-cheek :-) but I still thought you wanted to explore those
areas.  I’ll know better in future! Thanks for the correction.

And to address your further clarification, I have never seen any
requirement that you must buy a variety of items, only what I
mentioned in regard to bulk quantities.  Keep in mind, however, that
even a dozen is considered a “small” quantity by some distributors, so
you will have to do some research to find those willing to sell at
that level.

Hope this helps.

Very helpful!