Pros and Cons of Official Retailing

Becoming an official retailer has its advantages and its drawbacks. Let's look at each.

Pros

If you're thinking of becoming an official retailer, take a look at these good points:

If you're already a dealer, you're ready to go. Augmenting your bricks-and-mortar sales with eBay sales is a good deal. You can increase your sales volume without increasing your rent or advertising expendituresyou just sell more of what you already sell. And since increasing sales means increasing your purchases, you can often buy at lower prices. Assuming your supplier lets you sell online, this is a good deal all around.
Some customers prefer to buy from an authorized dealer. Let's face it; not everyone is comfortable buying merchandise from unknown sellers. Some people like buying brand-new merchandise from authorized dealers. You'll have a better chance selling to these cautious buyers if you have legitimate goods to sell and if you can claim "official" seller status.
You may be able to get higher prices. Since you're selling new goods from an official source, you may be able to command higher prices than unauthorized sellers. Some people will pay more for the real deal.
You'll have first-line merchandise to sellno closeouts or factory seconds. Selling closeout and liquidated merchandise isn't for everyone. There's something special about selling brand-new items, fresh out of the factory-sealed box. If this rings your bell, there's no other way to go.
You can develop a very efficient operation. Selling a limited assortment of merchandiseand the same merchandise day-in, day-outleads to a very efficient operation. You can save by bulk-purchasing the necessary boxes, and by getting good at packing and shipping those same items day after day.
Your supplier may offer drop shipping services. Some suppliers don't require you to stock their merchandise; they'll take your order and drop ship directly to your customers. This can be a very good thing, both for cash flow (you don't pay until you make a sale) and for warehousing (there's nothing to store).

Official status definitely has its benefits, not the least of which is that you're somehow more legitimate than the average eBay sellerat least in some customers' eyes. Being an authorized dealer lets you play with the big boys and (sometimes) command higher prices.

Cons

Official retailing isn't for everyone. Here are a few reasons why you might want to avoid this sort of authorized reselling:

Getting set up as an authorized dealer is tough. If becoming an authorized dealer were easy, more sellers would do it. Fact is, it's notat least, not always. Many manufacturers have stringent requirements for their dealers (in terms of sales volume, location, advertising, and the like), and you might not meet them. Many manufacturers just don't like dealing with small fry, which is what you are when you're first starting out. You may have better luck working with a distributor, but it's still tough. You'll have to work hard to convince suppliers to accept you as a dealer worth dealing with.

You may have to live with minimum purchase requirements. Even if you can get set up as an authorized dealer, you still may have to work with a supplier's minimum order requirements. Do you really want to buy 100 DVD players or a gross of blue jeans? If you're an authorized dealer, you may have towhich could strain your finances and your storage space. (Plus, are you sure you can sell all those items?)

There may be limits on how you can sell your merchandise. Some suppliers won't let you sell online, or they limit the prices you can advertise. Make sure you know the rules before you sign up and that you can live with them.

You have to compete with other authorized dealers. Now that you're an authorized dealer, you have to compete against other authorized dealers. Depending on what you're selling, your competition might include Best Buy and Wal-Mart. Do you really want to play head-to-head with these big boys? (Remembernot all authorized dealers buy at the same price; chances are Best Buy and Wal-Mart are paying a lot less for their merchandise than you are!)

You have to compete with other unauthorized dealers. If you're an authorized dealer, you're buying off the manufacturer's or distributor's official price list. Unauthorized sellers might be able to buy similar merchandise for less from liquidators and closeout suppliers, which means that your "official" goods might end up being priced significantly higher than these similar items on eBay. This could drive your pricesand your profit marginslower, or put a big dent in your sales rate. In many categories, eBay is a buyer's market, wherever the merchandise comes from.

In short, becoming an authorized dealer carries its fair share of limitations. You simply may not be big enough to buy direct from the supplier, or you may not be able to work within that supplier's rules and regulations. Even worse, you may find your prices getting undercut by black market or liquidated merchandiseand if this happens, there's little you can do about it. In other words, becoming an authorized dealer doesn't let you write a blank check, especially when it comes to eBay sales.