Original equipment manufacturer or OEM products are sold by manufacturers to distributors, who resell them to retail customers. These products are shipped from the manufacturers without some non-key components such as instruction manuals, packaging, or software. This drastically reduces the cost of the product compared to retail products.
The business opportunity
Buying and selling OEM products offers a great business opportunity. After purchasing the products directly from the manufacturer, the distributor performs a value-added process whereby the product is prepared for the retail market. For example, a reseller can add value to a computer product by installing new software on it. Other resellers add accessories to enhance customer appeal, print and insert instruction manuals, or improve product packaging. The merchant then resells the items at the current market price. The difference between the purchase cost and the market cost is the reseller’s profit.
Market assessment
Selling OEM products requires more investment than other reseller marketing plans. For one thing, you need to order merchandise and store it, rather than drop shipping, in which a reseller ships products to customers directly from the manufacturer. This involves higher cost and higher risk, especially if you can’t sell all of your shares.
To avoid risk and eliminate unnecessary costs, value-added resellers should evaluate the market before ordering products. In particular, they need to find answers to the following questions:
• Is there a considerable demand for the product?
• Can I buy the products at low cost?
• What is the manufacturer’s minimum wholesale order?
• Can I move all of my stock?
• Can I maintain a good profit margin?
• Do I have the necessary experience to add value?
• How much will I have to spend on added value?
Avoid common mistakes
Original equipment reselling requires considerable planning. The reseller must also have the skills to add real value to make the product attractive to consumers. For this reason, most resellers specialize in computer-related products. It is easier to add software or simple code to a device than to invent in the manufacture of accessories for the product. If a reseller is experienced in creating software, then they can add value to the product at low cost.
This does not mean that all resellers should buy and sell computer-related products. The wrong niche can ruin a business before it takes off. Value-Added Resellers should select products that they are familiar with and can “play” with without damaging them. The product must also generate enough profit to cover the purchase, as well as the cost of adding value. It also helps if they like working with the products.
In addition to computers, laptops, and accessories, resellers can trade in electronic products such as digital cameras, Bluetooth-enabled devices, and e-readers. Car accessories are also popular. A very lucrative product niche is the market for medical products. However, due to the strict standards, it is important that only people with knowledge of medical products and regulations specialize in this niche.
Another mistake value-added resellers make is in vendor selection. Your source for OEM products should be reliable, provide timely delivery, and have a ready supply of products. If you are purchasing products from different vendors to put together a single item for sale, you need to make sure that the products are of high quality and compatible with each other.
Some inexperienced resellers pass off fake products as genuine items. This has serious consequences. First, your business may be closed for selling fake brand name items. Second, your reputation can suffer. The original manufacturers can sue the reseller for copyright infringement or the authorities can bring criminal charges against the reseller.
Choosing a business model
Using your own experience to add value is a low-cost, high-performance OEM product business model. If you are not a skilled coder or programmer or have no idea how to write how-to booklets, there are other business models to follow. However, they are more time consuming and require the reseller to have access to a basic manufacturing facility. For example, if you can make computer accessories or packaging, a supplier may sell you simple products that you can assemble and sell at market prices. The downside is that this business model is not feasible for those who want to work from home.
Sell online
If you work from home, you are most likely reselling original equipment online. Creating your own website involves additional costs. You must also ensure the foolproof security of the website as the site will handle customer data such as credit card and contact information.
If maintaining a website seems like too much work, you can sell through online auction sites like eBay or Amazon.
Value-added resellers can make a lot of money buying and selling OEM products. This is a perfect work-from-home business opportunity that allows you to earn an income beyond a paycheck. It can even become a full time business.