How to Start an Online Resale Business

The internet is creating countless opportunities for starting a business. Now, you can create standalone online stores or leverage ecommerce marketplaces, like Amazon, to flip low-cost items for a profit. If you want to skip a brick-and-mortar business’s high overhead costs and learn how to start an online resale business, stick around. 

Here’s what you need to know.

What Is a Resale Business?

An online reseller or resale business buys products at a lower cost, usually from a manufacturer or vendor, and resells those products at a higher price online. In other words: buy low, sell high.

Since you’re not creating your own products, you can save money on production costs. Also, resale businesses operate across many industries—you can sell anything from clothes and shoes to home decor and pet toys.

How to Start a Resale Business in 8 Steps

With this definition in mind, let’s walk through the steps you’ll need to take to start an online resale business of your own.

Step 1: Write a Business Plan

If you’re casually browsing garage sales and reselling your finds here and there, you might get away with not having a  business plan. But if you want to learn how to start a reselling business that is fully operational, you’ll want to write a business plan. This document will guide you through the following:

  • Understand your target market: For example, will you target bargain-hunting middle-aged mothers or fashionable college students on a budget?
  • Budget for startup costs and operating expenses: Dive into your business knowing your financial obligations.
  • Build your marketing plan: It isn’t enough to have a product. Your marketing plan will help you put it in front of people who will buy it.
  • Describe your product: Know what type of product you will sell and at what price point.

Step 2: Register Your Business

Next, it’s time to make your business official. To do so, you will:

Choose a Business Entity

If you’ve never heard about a business entity, researching and choosing one can be overwhelming. To simplify the process, we’ve outlined the three most common business entities below:

  • Sole proprietorship: This legal structure is the easiest to form because you don’t have to register it with the state formally. You’ll report your business profit and loss on a personal tax return. However, sole proprietorships don’t offer any liability protection if you ever encounter a lawsuit or bankruptcy.
  • Limited liability company (LLC): Unlike a sole proprietorship, an LLC enjoys some liability protections. That means your personal assets are protected should somebody ever target you in a lawsuit. Also, you can choose for your LLC to be taxed as a corporation.
  • Corporation: Corporations are recommended for large businesses that intend to issue stock in the future. Similar to LLCs, you enjoy additional liability protections. However, corporations are more complex; you must submit additional paperwork and comply with certain restrictions (e.g., S-corp entities are allowed up to 100 shareholders).

Choose a Business Name

Choosing a business name holds more significance than you might think—it will likely be your potential customers’ first impression of your brand. Make sure your business name is memorable, representative of your company, and unique. A business name generator can help you brainstorm ideas.

Once you’ve narrowed down your options, run your shortlist through your secretary of state’s online database to ensure the business name is available for use. Since you are learning how to start an online resale business, you should also check if the domain name is available.

Obtain an Employer Identification Number

The IRS uses your employer identification number, or EIN, to track your business for tax purposes. Think of it as the social security number equivalent for your business. Obtaining an EIN is easy—just apply online for free through the IRS website.

Step 3: Apply for Licenses and Permits

After registering your business, you must complete a few more steps before you can start selling.

Depending on your state, you may require a business license or permit before starting your online resale business. Be sure to research regulations specific to your industry, state, and county. To ensure you’re complying with all regulations, consult your local business agency. You might also want to consider meeting with a business lawyer—their legal expertise can ensure you’re starting your resale business legally.

Also, the U.S. Consumer Product Safety Commission created a Reseller’s Guide to Selling Safer Products. Reading this will help you better understand your restrictions and requirements.

Step 4: Open a Business Bank Account and Credit Card

Separating personal and business assets is a best practice all business owners should follow. The main reason is personal asset protection. When you mix the two, you risk your personal assets (your home, car, and savings) should your business ever face a lawsuit. If you’re forming an LLC or corporation, you absolutely must separate your personal and business assets to upkeep your personal liability protections.

Bank Bank Account

The first way to delineate your personal and business assets is to open a business bank account. You should deposit all business-related income, including your sales revenue, into your business bank account. Keeping all your business assets in one location also makes accounting and tax filing easier.

Business Credit Card

You should also have a dedicated credit card for your business expenses to further separate them from your personal spending. Many people don’t know that you have a separate credit score for your business. In addition to maintaining your personal liability protections, a business credit card also builds your financial health over time.

Step 5: Source Your Products

With the legal setup complete, it’s time to turn to what you want to sell—and where you’ll obtain your products. You have options when it comes to sourcing your products.

Wholesale Marketplaces

Since you’re not creating your products yourself, you’ll need to find suppliers to work with. While resale businesses can sell a broad spectrum of products, it may be prudent to pare down to a specific niche. This narrow focus will serve you in your branding and marketing efforts.

When you’ve chosen a product or family of products, you can search through online wholesale marketplaces. Online marketplaces hold many product sourcing opportunities through domestic and international suppliers. Here is a list of some popular sites to kickstart your research:

  • Alibaba
  • Oberlo
  • ThomasNet
  • AliExpress
  • IndiaMart

When inquiring about products, ask questions regarding pricing, shipping, payment terms, and delivery dates. You should also order a sample to test the quality yourself. After all, it’s your business on the line if your customers are dissatisfied with the products they receive. 

You’ll also want to decide if you’ll order in bulk from the supplier (at a discount, hopefully) and store the inventory yourself, or if the supplier allows for dropshipping. If they do, this will cut out the expense of storing and shipping items yourself.

Once you find a vendor, be sure your contract explicitly outlines the terms of your agreement and what happens if these terms are broken.

Consignment Stores and Yard Sales

Learning how to start a resale business doesn’t always mean creating sophisticated operations with dedicated suppliers. If you want to run a more casual online resale business, you can source your inventory from various stores and local sales. Keep in mind, though, this will require significantly more work on your end.

Step 6: Build Your Online Store

The key to starting an online resale business is having a beautifully designed, user-friendly website. Whether you create your own or utilize a marketplace, decide which direction you want to go.

Ecommerce Platform

One way to build your online store is to use an ecommerce platform. Many entrepreneurs use ecommerce platforms because you can create a standalone store and have greater control over your branding and marketing.

Shopify is one example of a popular ecommerce platform.  Their drag-and-drop store builder, 100+ custom themes, mobile optimization, and more make it easy to build your online store and start selling asap. For $29 per month, their Shopify Basic plan will fulfill most of your online business needs, but they also have more expensive plan options with greater capabilities. 

Ecommerce Marketplace

Don’t think that building a standalone store is necessary when learning how to start a resale business successfully. There are also advantages to selling on ecommerce marketplaces, like Amazon and eBay. For example, you can access their millions of loyal customers, leverage their trusted brand to boost your credibility, and quickly set up your store and start selling.

Of course, you may also decide to leverage both your own platform and ecommerce marketplaces to increase your brand reach.

Step 7: Secure Startup Funding

Next, it’s time to turn your attention to funding. All new businesses require capital to get off the ground. If you’re looking beyond your savings and those of your friends and family to start your resale business, consider these options. 

Inventory Financing

Inventory financing is a business loan used to purchase inventory specifically—perfect for those learning how to start a reselling business. Since sourcing product inventory will likely be your highest expense, this loan will help you get your online resale business started. 

Also, getting approved for inventory financing can be easier because your inventory serves as collateral. So long as you make timely payments, you don’t have to worry about the lender repossessing your inventory.

Business Line of Credit

A business line of credit is like a more powerful credit card. You’ll be approved for a set amount of capital, and you can draw from this line for any business-related expense. You only pay interest on the funds you use and, in most cases, your balance will reset to its original amount once you repay what you’ve borrowed, making this a revolving funding source you can depend on again and again.

Step 8: Market Your Business

If you want your business to succeed, you’ll need to refine your small business marketing strategy. How you market yourself determines whether your target customer perceives you as a flea market vendor or a high-end resale retailer. Here are a few tips to help you reach your target market successfully.

Rank for Ecommerce SEO

Search engine optimization (SEO) is one strategy to help you attract more customers to your online store. Targeting specific keywords on your product pages will push your listings to the first page of Google or ecommerce marketplace search listings. For example, if you’re reselling 8×10 ornate picture frames, you’ll want to put “8×10 ornate picture frames” in the product title and description.

Build Your Social Media Presence

Social media is another powerful marketing tool that can benefit your business. Posting social media content that demonstrates your niche expertise can slowly build your following and subject matter authority. You can also hold giveaways and share limited-time deals to drive more sales and expand brand awareness.

Influencer Marketing

Within any niche, you will find “gurus” and rising stars. Creating partnerships with these influencers is a great way to “borrow” their audience and expand your brand reach. You can also leverage the influencer’s reputation to increase your credibility. Influencer marketing is a great way to boost your brand awareness, drive sales, and expand your network.

Bottom Line

Learning how to start a resale business can seem like a daunting task, especially if this is your first entrepreneurial venture. However, there is no better time to get started. The internet is removing the barrier entry to start a business you can grow and love. Hopefully, this guide on how to start an online resale business has inspired your next business idea. Now, all that’s left is to get started.

Dan Marticio

Dan Marticio is a small business owner and contributing writer at JustBusiness, specializing in business finance and entrepreneurship. He’s written on a broad range of topics from stocks and net worth to productivity hacks. He helps SMBs scale and profit through compelling content.

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