If you sell products, expanding your business into wholesale is an excellent opportunity to up your game.
There are tons of benefits. You’ll have a fixed profit margin, gain exposure and credibility, plus you have the freedom to approach other ventures further down the line.
However, selling wholesale to retailers requires excellent planning and organization.
They’ll want to do business with a reliable wholesaler – someone who provides high-quality products for exceptional value and has excellent customer service.
So with that in mind, here are seven quick tips for starting a thriving wholesale business.
1. Set up your online store
Start with the essentials. A wholesale eCommerce store will help you to showcase your business and be visible on a global level.
To prospective customers, your store makes you look a whole lot more professional. It’ll also be easier to manage orders through a robust online system.
However, there’s a difference between creating a wholesale eCommerce store and a standard online store.
Most wholesale distributors put their product information behind a login page. In other words, they make much of their content private.
Only registered retailers who have applied for a wholesale account and want to buy can access the website.
While it seems counterintuitive, this move helps protect the supply chain.
The companies buying products from you will add their own markup to make a retail price that covers their overheads, so it’s crucial that the end user doesn’t see your wholesale prices.
Luckily, it’s super easy to create a wholesale online store and password-protect it with Zyro’s online store builder.
Simply pick a template that fits your brand, upload your products and information, and then configure the privacy settings.
You don’t have to hide everything away. Feel free to add a handful of product photos to your landing page – after all, you need to convince visitors to work with you.
2. Find and understand wholesale buyers
Next up, you need to figure out exactly who your small business should be working with.
Make time for some thorough market research so you can find and understand your wholesale customers:
- Ask yourself who your wholesale buyers are. Are they mainly brick and mortar retailers, or are they online retailers as well? Will they want you to help drop ship products?
- What’s the demographic of their customers? Try to get some sales data to understand who your potential customers are trying to appeal to and how successful they are.
- Where else do they buy their products? If it’s online, focus on your website and online B2B marketplaces.
- If your buyers are searching offline, too, be where they are. Join industry trade shows, forums, and other professional networks.
Answering these questions will help you create a more effective marketing plan, and eventually let you get started with making sales to the right people.
3. Set your wholesale prices
Becoming a wholesale supplier means being structured about what you sell each product for.
To determine your wholesale pricing strategy, calculate the cost of producing your inventory. This is otherwise known as the cost of goods manufactured (COGM).
To calculate COGM you add the cost of direct materials, direct labor, and factory overheads.
Once you have this number, divide it by the total units manufactured to get your break-even price (BEP).
Sticking by your BEP ensures you cover all costs. Anything higher than this amount will be your profit.
Depending on the profit margins you’re after for your sales, you can multiply the BEP by two or more to get your wholesale price.
This price must be attractive to retailers while still profitable for you.
Bear in mind that your customers will often want to negotiate product prices with you, depending on the volume of their order and what their profit margin requirements look like.
You can check industry prices to make sure your price is competitive enough when selling wholesale, and that it remains in the right range for buyers.
4. Decide on a minimum order quantity (MOQ)
Minimum order quantity, or MOQ, is the minimum quantity of products that you’re willing to produce or sell at a time. It helps you stay profitable while weeding out non-serious shoppers.
Your MOQ is based on your COGM, with the addition of other expenses in handling an order such as taxes, shipping, and security.
Work backwards to figure out how much revenue you need to cover the costs per order while still making a profit.
If you create each product in-house, the space on your production run and the capabilities of your workers will influence MOQ.
For example, if you make and sell printed mugs, you might need each customer order to require a minimum of 500 mugs.
That’s because the most cost-effective way to run your machinery is to create 500 mugs in one go. Any smaller quantities, and you’re wasting ink and electricity by stop-starting the process.
Manufacturing practicalities aside, the average cost per unit decreases with high-volume orders.
If you enter into a product cost negotiation with buyers, you can leverage MOQ to maintain a viable unit price. It’s simple: if they buy more, you’ll sell the product for less.
5. Offer discounts on large orders
On the subject of high-volume sales, consider what else you could offer in order to attract new customers and reward loyal buyers.
You might want to offer unique discounts for those who often bulk buy to resell through your business:
- You can give flat discounts, like 10% off for all product orders above $500. Every customer likes to be incentivized to buy, whether they’re an individual or a business.
- Or, categorize your retailers based on purchase history and give them special promotions. Select products that will appeal to their needs.
- As you know, there’s also quantity-based discounts. If an item is $10 if a retailer buys 100 units, reduce the price to $8/item for 500 units, $6/item for 1000 units, and so on.
Make sure that whatever the incentive you opt for, your business can afford it. Buyers will understand that a small business will want to sell wholesale products at healthy prices.
6. Understand policies for wholesale orders
If they’re operating properly, wholesalers sell a large number of items at any given time. So a lot of things might go wrong in the process.
With that in mind, it’s important to set clear terms and conditions to protect your business if a legal or logistical problem arises.
Most retailers will expect you to agree to their rules before they buy your product, so ensure you publicize your terms and conditions before you start selling:
It’s critical that you communicate when and how retailers need to pay you for product orders. If they don’t ask for your terms at the very outset, ask them.
Typically, a retailer must pay the total or remainder of an order value within a predetermined number of days.
For example, you could ask for 50% of the payment upfront, with the remaining 50% paid once the order has been received. Enforce a invoicing period, too, for example 14 or 30 days.
Return and exchange policy
There’s every chance you could be penalized for a late, faulty, or incorrect shipment of goods. Often the retailer is within their rights to do this, but set your own policies, too.
Will you offer a money-back guarantee if there are defects? If you’re shipping products by boat, should you claim no responsibility for transit damage?
Check out your legal standing and make sure you strike a balance between being careful and being fair. After all, you want to make sales without scaring people off.
There are many different ways to get a product from wholesaler to retailer to customer. Your retailers might want you to drop ship, which is where you send products directly to the end-user.
Or, they could ask you to get orders into their warehouse instead. Delivered duty paid (DDP) is where you arrange the entire journey to the retailer, and factor this into your product costs.
Freight on board (FOB) means the retailer pays for transit from the exit port onwards, and ex-works is where they cover the entire journey from the doors of your warehouse to theirs.
Finally, make sure that you tell your buyers upfront how long it will take to create, complete, and deliver every product.
You might want to keep this simple, for example by just providing customers with blanked production and shipping lead times.
Or if you’re manufacturing goods, it could be useful to explain the whole order process. Add details like how long it takes to source materials and process paperwork.
7. Create branding and marketing strategies
Now that you’ve got almost everything in place, it’s time to perfect your branding and marketing strategies.
Having a clear brand identity helps retailers recognize your products and understand what differentiates you from other wholesalers.
Maybe it’s the exceptional customer service you offer, great value for money, high-quality products, or all of the above.
Whatever it is, show it in the ways you present your business:
- Create a color palette, select suitable typography, and design an amazing logo. Think like any other premium brand who wants to make tons of sales.
- Write beautiful product descriptions and make sure you have a long list of SEO keywords to boost your presence online.
- Implement an ‘About Us’ page on your website to tell the story of your business. Retail buyers love to read a compelling success story.
As for marketing, there are many ways you can get the word out there.
Join industry groups and forums, and set up a booth at trade shows and craft fairs that are relevant to your products.
Don’t forget to print line sheets and hand them out to potential buyers. Ensure that you have your stock ready for sales in case they want to order right away.
If you’ve already had some buyers, ask them to leave a review on your site. You can use their testimonials as part of your marketing strategy.
What is wholesale distribution?
Wholesale distribution is where you sell products in bulk at a discounted price.
Wholesalers typically sell a predetermined minimum of goods for 50% of the suggested retail price.
Historically, a wholesale business would only sell to brick and mortar stores that buy in bulk to resell to customers.
But with advancements in online marketplaces such as Amazon, wholesalers can sell directly to end-consumers, too.
Plus, thanks to the accessibility of eCommerce, more small business owners than ever before can enjoy the benefits of selling wholesale.
Advantages and disadvantages of wholesaling
Let’s recap on the benefits of selling wholesale:
- Product focus. Compared with business-to-customer sellers, you can focus a lot more time on upgrading your product or developing new ones behind the scenes. Meanwhile, retailers will take the pressure of marketing and selling to customers for you.
- Low customer acquisition cost (CAC). Acquiring a broad market of new customers can be expensive – you’d need to spend time and money on marketing and logistics. As a wholesaler, you manage a smaller customer base and retailers take care of CAC.
- Stable income. Retailers usually place weekly or monthly orders for wholesale products depending on their sales. Once you’ve established a steady customer base with your own frequent sales, you’ll be able to enjoy a stable flow of income.
Just bear in mind that wholesalers might experience some unavoidable drawbacks:
- Capital. Starting a wholesale business typically requires a lot of investment, particularly if you’re manufacturing as you’ll need to purchase raw materials and machinery in bulk. Plus setting up packaging and logistics can hit your finances hard.
- Inventor. As your wholesale business grows, you’ll need lots of space to store your products. Whether you purchase a warehouse or rent storage space, this will increase your expenses. Don’t forget to find a great inventory management system, too.
- Close competition. With the help of giant marketplaces such as Amazon and Alibaba, small businesses can easily find wholesalers that suit them the most. You need to keep up with the industry and research the competition in order to succeed.