I want to be a broker

I received this question quite a few times in the past week, so I’m combining all my answers here:

Question
I just reviewed your website and I found the information very helpful. I am an apparel broker just getting started in the business. We specialize in locating quality apparel at 20 cents or less on the dollar for our retail customers. I supply primarily smaller retail businesses, ones that have 5 stores or less. As you probably know, these folks don’t buy in great volume and therefore can’t get the price breaks that the bigger guys get. I’m still learning the business and trying to build a customer base.

After one month of faxing and calling my “potential customers” I still have not made a sale, so I’m looking to get every edge that I can to present my stores with excellent, name brand merchandise at very low prices.

As a broker, I don’t buy or warehouse merchandise. I don’t do e-bay. I simply try to get the seller and buyer together and collect a commission. I don’t know if your book covers techniques that I could employ to get more buyer interest. I’m wondering if your book covers the kind of techniques required to build a successful brokerage like the one I just started? I appreciate your insight on this.

Answer
If you’re just getting started, you don’t have the knowledge yet to be a good broker. Most of the good brokers/”finders” sold retail for at least a year, maybe two or more, before brokering. They had the knowledge of the market, and the relationship with the jobbers to do this. The markup is not killer. To put yourself on the line when you’re new and don’t know that much is a recipe for disaster. Believe it or not, some people that ended up being scammers started out like you– brokering. But since they didn’t really know enough about what they were doing, they would lose someone’s money on a bad deal. Then they would try and find another to get out of the hole, only that would be a bad deal too, then another, and pretty soon they lost $50-60,000 of other people’s money because they didn’t know what they were doing.

That is the downside of brokering. I don’t think, for the retailer, buying from a broker is a healthy long term strategy. The retail buyer is always better off dealing with the person that owns the merchandise and that is always their ultimate goal. There is a level of communication that is missing when everything gets filtered through a third party. Are you going to visit every jobber in person and check out each deal to make sure it’s what the client is looking for? Do you embellish sometimes and a salvage load becomes one with “minor damages” because you are trying to sell it? Is your taste the same as the buyer’s and the seller’s so that when you say something is “great”, you’re all on the same page?

It’s very difficult to do that and to be completely honest. An exception would be if you already found a jobber or two that had quality, consistent merchandise and good prices and just did not want to go after low volume business. That’s the exception. But finding buyers and then finding sellers (or vice versa)— recipe for disaster. I know you haven’t bought as a buyer yourself because you don’t understand where the problems lie with this. I can’t blame someone for not buying from you. I wouldn’t.

Put it this way: When someone says I want designer suits and you say, okay I’ll find a seller. Well how does the buyer know the seller is legit? How do they know the merchandise is what they want? What does it look like? Is the merchandise in good condition? They haven’t seen it. How do they know the seller will ultimately deliver? WHO IS RESPONSIBLE WHEN SOMETHING GOES WRONG?

It’s not just about the name. Maybe if I told you I had Gucci men’s shoes, 100 pair for $90 each, you would think that’s a great deal. And you might sell it. But then your buyer will get it and find out they are 3 seasons old and all size 9. That would be a bad deal. Do you have the experience and the relationship with the seller to make sure things like that do not happen?

Put yourself in the buyer’s shoes.

I advise my buyers to stay away from brokers for this reason and many others. Apparel is not a commodities market like saying “I want 100 factory refurbished 10 GB iPods.” There really is not that much standardization where buyers can consistently “buy blind”.

I’ll write more about this topic later