Wholesalers are mediators between manufacturers and retailers. This puts them somewhere in the middle of the supply chain. In this article, we’re going to cover all the basics you need to know about starting a wholesale business and excelling in it
- 1 Meaning of Wholesale
- 2 How Are Wholesale Goods Distributed?
- 3 How to Start a Wholesale Distribution Business
- 4 Benefits of Wholesale
- 5 Types of Wholesale
- 6 Conclusion
Meaning of Wholesale
Wholesale refers to two possible business models. A business may buy goods in large quantities directly from manufacturers, warehouse them, and resell them. Or wholesale may refer to businesses that produce their own products and sell them directly to retailers, who then sell products to the end user. This second option has been popularized by wholesale marketplaces such as Handshake.
How Are Wholesale Goods Distributed?
Those in wholesale purchase goods from a distributor and pass them to a retailer to be sold to the end-user. Wholesale goods suppliers source trending products to make sure that they can supply the most up-to-date goods to retailers. When a trend is identified, those in wholesale will research and source the most cost-efficient products, choosing from a multitude of manufacturers and distributors. Wholesale operators then supply these products to retail businesses for purchase.
How to Start a Wholesale Distribution Business
Wholesale distribution business works with products that other businesses have manufactured and delivers them to retailers to sell. Although you’re not directly involved with the creation of the products, you can still build a signature presence in your industry by carefully curating your offerings and delivering them with high-quality service.
Work out your margins and business model carefully before starting your wholesale distribution business to avoid costly changes down the line.
Scope of the Product Line
Unless you have a massive cash startup fund to build an impressive inventory right off the bat, you’ll need to narrow down the focus of your product line to avoid stocking too much of items that don’t quickly sell. Clearly defining the scope of your product line not only helps with cash flow, but also gives you the opportunity to put out a concise and easily understandable marketing message. It’s easier to identify your target market if you’re selling magazines with a sports or spiritual focus than if you’re selling all magazines to all people.
Your product line should be extensive enough to be interesting to potential customers but limited enough to not be cumbersome. You don’t need to carry every possible option, but you do need to carry enough for your offerings to be diverse and it helps to have a few items that your retail accounts have a hard time finding elsewhere. If your offerings are perishable, you should be especially careful to walk the line between having enough on hand to meet demand but not so much that you have unnecessary waste.
Marketing to Retailers
To start a wholesale distribution business you’ll need to market your services to retailers. Your marketing efforts should emphasize both the benefits to the retail customers served by your wholesale accounts, and the ways your distributorship will specifically benefit the retailers who are your direct accounts. The benefits to the retail customer might be quality and affordability and the benefits to the retailers might be frequent deliveries or offerings they have difficulty finding elsewhere.
Marketing also includes customer service and ease of ordering. These processes, delivered well, can increase the likelihood that the retailers you supply will want to order from you rather than from your competitors. If you offer an online ordering platform, make sure it is easy to navigate. If your customers place orders over the phone, make sure that someone is always on hand to answer their calls.
Warehousing and Storage
Unless you receive your inventory directly before you distribute it, you’ll need storage space for your wholesale distribution business. If you carry small items such as spice packets you’ll need less space than if you carry larger items such as cardboard boxes. However much space you have, it should be proofed or insulated to keep your product safe: Storage space for food products should be sealed to keep out pests; a warehouse for plants should be warm or cool enough to keep them alive; and storage space for books should be dry.
Your warehouse should also have infrastructure in place for easy loading in and out, especially if the product you carry is heavy or bulky. Set up a space with a loading dock or look for a place that already has one. Invest in shelving and, if necessary, purchase pallet jacks as well.
Delivery of Products
To distribute your wholesale products you’ll need a dependable vehicle large enough to carry the volume you’ll typically distribute. When investing in a vehicle, think ahead to when you build up your customer base into a full-fledged business. If you distribute refrigerated product, you’ll probably need a refrigerated truck. And if you distribute live animals, you’ll need a vehicle with ventilation.
Benefits of Wholesale
By buying products in bulk you can save money through discounts that wholesale get with larger orders. This means that you can get products for less while selling them for more. Depending on how much you invest initially you can get ahead of competitors through buying and selling in sheer volume.
It Builds a Network of Suppliers
Those in wholesale need a good network of suppliers and manufacturers that they can rely on. Deliveries must be on time, products must be to a high standard, and relationships honored, to make sure that business runs smoothly for a wholesaler. This means that supplier relationships should be positive and well maintained so that your brand is established and sustainable.
Become an Expert
Through researching and selling products you become an expert in this field. Whether you are selling car parts, jewelry, or wedding supplies you gain knowledge in your industry that customers will come to trust. Use this knowledge to entice more people to your online store and share information that will help customers make a purchase
It Helps to Expand with Ease
Once you have a good foothold on your industry you will start to see connections with other markets. These connections could be upselling or cross-selling opportunities that can help your business gain even more success. This expansion will be easy as you have already set up your brand and established relationships with those offering their products for wholesale. Any new ventures will be quick and simple compared to setting up.
Types of Wholesale
It can be hard to navigate the wholesale environment as some wholesalers work independently, while others work closely with one or two producers. Overall a wholesale businesses can fall into one of three categories, or types. These are:
This is the most common wholesale types. Merchant wholesalers engage in purchasing larger volumes of products which they sell in smaller quantities for a slightly higher price. Merchant wholesalers do not manufacture their own products but they have in-depth knowledge of products to know when is the right time to start selling them to retail businesses in different industries.
Brokers typically don’t own the products they’re selling; they are the intermediary between a wholesale operator and their clients. A broker negotiates a good deal between the two parties and works off a sales commission structure.
Sales and Distribution
Instead of relying on wholesale businesses finding a manufacturer, a manufacturer could hire people to actively represent them to wholesalers. This means that a manufacturer will reach out to wholesale operators to offer their products to them, creating wholesale deals that are tailored to individual cases.
Map out a distribution area where you can find a critical mass of retail stores. Calculate a delivery minimum that will make each stop worth your while. Plan your routes to avoid rush-hour traffic. As your business grows, you’ll likely add additional delivery routes, and this will help you avoid covering too much ground with a single vehicle.