How To: Purchase more (US) products for your (non-US) secondary business

You are a foreign (non-US) company, looking to find new supplies of phones or tablets. The US market looks promising. You heard this was the biggest secondary market in the world. Still, you aren’t sure how to proceed and don’t want to spend days or weeks to figure it out. So what do you do? If you are like most, you decide to outsource this and buy from large wholesalers. After all, they are already set up in the US and churn out tens of thousands of products a month. Yes, the quality isn’t always great and you suspect the prices aren’t optimal. Sure you sometimes have to do an RMA overseas, but… at least this is a source of products you need right?

Good news, there is a better way! First, let’s review some of the options you have; Then, I’ll suggest a plan of action.

Here are some sources of products available to you:

Buy from global wholesalers in your home country

The easiest solution, it puts all the work (and risk) back on the wholesaler. Since no-one works for free, it can only mean one thing: this source of products is also more expensive on average. You will still feel the need to retriage the products though, so simple does not mean efficient

Buy from international auction houses

I suspect you do this already but worth mentioning. There are a few in Europe but highest non-US volume will be in Dubai and Hong Kong. Buyer beware, you need to learn how each seller grades their products and creates the lots. This is good to buy large volumes of products but the quality is uneven

Buy from US/Canadian auction houses

Most have somewhat limited and irregular volume, so you will need to buy from a few sources. This means you also need to become comfortable with their individual grading standards, which may not match yours. Same drawbacks as the international auction houses. One more wrinkle: you may need to be R2 certified + have a US address. More on this below

Buy from enterprises or large entities (school districts…)

This might be the cheapest source of volume but requires direct relationships. The supply will be uneven as well so you need multiple enterprise partners. Great solution if you have the right infrastructure but expect competition. In the scenario above we agreed you needed more supply than you already have. Can you get these relationships in the US? Yes, but expect a lot of competition from the local players. Your best bet might be to target the subsidiaries of large corporations headquarters in your homeland. All in all, this isn’t a likely source of supply for you

Buy from eCommerce platforms

I am thinking here of eBay, Amazon, but also other companies catering to businesses. Buying in large quantity will be even harder than from auction houses. Besides, retail buyers are competing with you so prices tend to be much higher

Buy from wholesalers and brokers in the US

Prices should be a more competitive than buying in your home country since you are taking on more of the work and risk (e.g., import headaches). Within this bucket, we can find various models. For example:

  • Buy over the shoulder: the broker gives you a list of products available via auctions, you identify the lots you want and the broker buys on your behalf. You bear the risk of the lot’s grade mix (e.g., buy “A” but get 10% “B” and 20% “C”)
  • Open buy: you list products you want and maximum price, the broker goes out to find them across channels. If the broker doesn’t test the products, you again bear the grade mix risk
  • Buy from curated list: Broker buys products and triages, then resells to you. This is simpler for you since the broker has standardized the grading and taken on more work and risk. In other words, you also pay a premium now

Buy directly on carrier/retailer/OEM auctions

This is where most companies want to go initially… at least until they understand the implications. There are two main complexities here:

  • First, large auctioneers sometimes demand a US address. There are workarounds and some players offer this service for a fee, but it adds complexity. If the products have to also be delivered to that address, now we are adding shipping cost and delays
  • Second and more problematic, most auctioneers actually demand an R2 certification. There are R2-certified facilities all over the world. You may even have one yourself. Often though, the request is for an R2 certified facility in the US. It is possible to set up, but the cost and process complexities can be prohibitive

Bonus suggestion, get refurbished products out of Hong Kong

Your goal is get more volume of high grade products right? An other option is to go through a remanufacturer. There is a very large coterie of companies who specialize in this model. Broken products (Grades C or D, see article for high level explanation) are cheap. Bringing them to a Grade A or B can sometimes be cost effective. Most of these players are in countries with low cost of labor (e.g., China, Philippines, Central America). Finding a competent and trustworthy partner takes time but can be worth the trouble

What is the best solution then?

Based on all the above, my recommendation is usually a two-step process:

  • First, use a broker for quick access to standardized products. In the beginning, you buy from their curated list. As you gain confidence, start going to the ‘open buy’ and ‘over the shoulder’ options and get to know the market
  • Second, set up a legal structure in the US + open an R2 facility. You will need to perform a financial analysis to decide when this makes sense. The R2 certification also takes a few months and I recommend hiring an R2 consultant. Good ones aren’t cheap but can also help find a location and source the equipment. If your procurement needs are large enough, this option quickly becomes the cheapest. Beyond the costs, you still need to ensure it fits your needs though. For example, this may not be the best strategic option if it ties labor & capital resources you would need elsewhere.

Unsure how to proceed?

Back to the strategy question: what are your core strengths? Focus on them, hire or outsource the rest. It isn’t all that complicated, but you need to follow a process.

Still unsure what to do? I have developed partnerships with trustworthy brokers, remanufacturers and R2 consultants. Reach out and let’s see how I can help you.

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