Starting a wholesale business can be a lucrative business strategy.
By partnering with retail stores and distribution channels you can get access to new markets without investing in marketing, shipping, or storage.
Many entrepreneurs want to start a wholesale business but don’t know how to go about it. This article will help you start your own wholesale business with all the basic steps involved.
However, before diving into the process, it’s essential that you properly understand the crux of a wholesale business.
In a wholesale business, you simply buy goods directly from manufacturers or distributors in bulk and sell them to retailers in smaller quantities.
Since you buy in bulk and buy as a wholesaler, you pay a discounted price, also known as the wholesale prices. You sell the same products to retailers for a slightly higher price or retail price, and the difference is your profit margin.
Wholesalers are sort of mediators between manufacturers and retailers. This puts them somewhere in the middle of the supply chain.
Here are some of the steps involved in starting a wholesale business.
1. Build A Business Model
A wholesale business could have a wholesale model or a distribution model.
In the former, the wholesalers procure products from manufacturers, supply them to the retailers, and the retailers then sell them to the final consumers.
In the latter, the wholesaler provides the products to the final consumer directly. Decide which model you want to start your wholesale business with.
2. Find Reliable Suppliers
Since your business is all about acquiring products from supplies and providing them to retailers, you need to make sure that your supplier is highly reliable.
Your business is completely dependent on the products you acquire and you can’t compromise on their quality.
Sometimes, wholesalers pick suppliers that provide cheaper products but that is usually at the cost of the quality.
Besides, you also need to make sure that your relationship with your supplier involves trust, understanding, and cooperation.
Besides, try finding a direct supplier of the products you plan to sell because if it directly comes from them, the products will be priced lower giving you a higher profit margin.
On the other hand, if you buy from other resellers, the prices will be slightly higher and your profit margin will automatically lower.
3. Adapt A Enterprise Resource Planning (ERP) System
ERP refers to the use of software and systems for planning and managing all the core supply chain, manufacturing, financial, and all other processes of any organization.
Adapt a good ERP system to make sure the processes of your wholesale business is streamlined.
4. Build A Website
Just like any other eCommerce business, even your wholesale business needs an accessible website. With the help of it, you can have wholesale pricing that would integrate with your accounting and inventory systems.
5. Set Goals
Just like a retail business, goals play an important role in a wholesale business as well.
Set incremental sales goals for steady growth, or goals with an increase in the number of retailers to provide products to, or expand the geographical location you’re functioning in.
6. Check All The Legalities
Before you start your wholesale business, you need to make sure that you have acquired the necessary wholesale license for it. Make sure to fulfill any other legalities involved. Hire a lawyer if your budget allows ensuring you get all the paperwork right for your wholesale business.
7. Find Reliable Retailers
For your wholesale business to grow, you’ll need to find retailers to whom you would be selling your products. Make sure that the retailers have the capacity to regularly buy from you and have a good customer base to sell to.
8. Provide Impeccable Customer Service
Even in a wholesale business customer service is of prime importance. The retailers would be your customers, and to make sure that they keep buying from you even in the future, you need to provide them with excellent customer service and cooperation.
9. Build An A-team
You need to build an A-team that can help you manage all the complexities of a wholesale business like bringing in new customers, managing supplier relationships, purchasing, tracking inventory and warehousing, billing, estimating, and financial reporting.
10. Have A Clear Vision
Nothing in life comes easy, and the same applies to the world of business. You definitely need a play for the best of times, but you should also be prepared for the worst of times.
Having a clear vision is of utmost importance for your wholesale business. Plan ahead and try foreseeing scenarios that according to you could go wrong in the future.
A business without hiccups doesn’t exist, but what you can do is prepare well for those hiccups. Your supplier runs out of stock, your reseller denies buying from you, or your stock gets damaged or lost in transit or storage, are all possible scenarios that could happen.
Try to have a plan for such situations, so that you can quickly control the damage without letting it affect your business. The clearer your vision, the smoother will your business be, and the bigger it will grow.
11. Predict Cash Flow
A wholesale business involves a lot of cash flow.
Buying goods from manufacturers and suppliers, and selling them to resellers, incurring storage and shipping expenses, and so on.
You will need to make sure that your cash flow is streamlined; your customers are not delaying too much in making the payments, your suppliers are providing you credit for a decent timeline.
Also, try to find out additional discounts for advance payments, and provide the same to the customers to receive the money from them timely.
12. Effective Marketing Tactics
Even in a wholesale business, products won’t sell on their own. You will at least have to do some promotions to make sure the resellers get to know about you and consider buying from you.
Besides, it’s also a good idea to sometimes help resellers market the products. Your business is dependent on how much the resellers sell your products, and to make sure they are selling well, you can help them market the products.
At the end of the day, these are your products too that require effective marketing plans. If your resellers require some product training to showcase to the end customers, don’t hesitate in providing them with that.
13. Have An Understanding With The Supplier
You need to build a strong understanding with your supplier to make sure your goal is achieved.
Whether your goal is to have a high margin or the price or sell a higher volume of products, your level of understanding will influence it.
Build a rapport of trust with them as well. Sometimes things don’t go as planned and either of you could make a mistake.
A strong bond of trust will help you overcome such situations easily.
14. Always Stay Updated
Lastly, it’s all about the basics. Ask yourself the following kind of questions to own an efficient wholesale business:
- Did you work out the sales forecast?
- Did you get enough stock to fulfill the forecast?
- Besides the initial pipeline fill, does it also cover the onward sales?
- Did you calculate enough margin for everyone in the chain?
- Did you plan on when to hit the launch date?
Conclusion
With your wholesale business, you can create levels of wholesale access, set the product and pricing structures with detailed control, and make it easy for resellers to order what they need quickly.
Follow the above-mentioned steps to start your own wholesale business.
