THE BLOG
06/28/2013 04:58 pm ET Updated Aug 28, 2013

A Return to the Wholesalers: The Intellectual Technology of Entrepreneurial Education

On 30th Street and Broadway in New York City, the untrained eye sees a community where everything is half price. It is the New York wholesale markets. Lying between 27th and 31st along the legendary Broadway are many small stores that only sell products by dozens. People come from across the globe to buy and sell here and if you listen closely you can hear languages from around the world. Missing the energy of the neighborhood and needing to buy presents for over 12 people on an upcoming trip, I decided to head to the wholesalers to see if there were any good deals. Deep down, I was hoping some of my old friends, the store owners would recognize me and say hello.

Watches, handbags, jewelry, scarfs, perfume, oils, clothes, and many items are sold by the dozens at low prices. Starting in 1982, the organization I founded, the Network for Teaching Entrepreneurship, has taken thousands of young people to make their first buying experience at these wholesalers. Soon after the young entrepreneurs would go to a flea market and try and sell their goods for a profit while keeping accurate records.

This effort utilizing the ultimate technology -- buy low, sell high and keep good records -- is at the heart of all business education. When done well it changes a young person's perspective dramatically as they realize that prices are often quoted in units of 12. So, if a newcomer walks into a store and asks for watches you may hear a $150 quote. The watch will look overpriced until you realize that they are quoting for a dozen or 10 a piece. The customer is then coached on what to sell if for. Many times you will hear the word "keystone" or "double your price." As an example, today I wanted to buy 12 tee shirts at very nice wholesalers on 29th Street off of Broadway on the second floor.

They said $30, meaning each one was $2.5. That every price quoted is divided by 12 makes going to the wholesaler is a fun and educational experience. For an entrepreneurial educator it is a goldmine of lesson plans -- helping us to show a production structure, the difference between retail and wholesale. So, if the watch is $20 at a retail store say on 14th Street, then it was most likely purchased at the wholesalers for $10.

It gets better as the students' internal sense of entrepreneurship starts to come to the conscious mind.

I have seen nearly a thousand students turn and ask me after their second visit: "So Mr. Mariotti, if this is the price behind the retail -- what is the price that the wholesalers pay for it?"

From there it is a short step to explain and then arrange a trip to a manufacturer to show a product like a watch being made. Many times it is as simple as the manufacturer making the dozen watches for $24 or $2 a piece and reselling them to the wholesalers, who are often geographically closer to the retailers, for $24, or $4 a piece. The wholesaler then doubles the price still using the unit of 12 as the measure and resells to the retailer in smaller quantities at $8, who then sells to the customer at $16. One of the great, rare educational joys is to see the look of recognition when the young entrepreneur realize that something that costs $2 to make is actually sold to the final customer at $16, and many from that moment on never buy retail again if they can avoid it. Perhaps therein lies the heart of the economic rebirth of the low income communities, who are so often taught that retail is the only price.

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