The marketplace is more competitive than ever. Many online sellers often fall into the pitch of targeting the same audience. This makes selling unnecessarily difficult. Moreover, the global crisis has forced many people to turn to the wholesale distribution business as a last result.
Irrespective of what you sell online, you have to keep the cash flow steady.
We have documented a compressive step-by-step guide that will arm you to become a success in your online endeavors. Also, we provide you with the concept behind the supply chain and tips that will boost your wholesale distribution business.
Here is a quick tour of what we’re covering.
Table of Contents
A wholesale distributor is a person who buys finished products in bulk directly from the product manufacturers. Next, they redistribute these products to retailers’ distributors or the end-users (final consumer). However, they lean more on distribution to the retailers.
The business idea behind the wholesale business is buying high-quality products at a cheaper rate. The wholesale or retail distributors ideally purchase the products in bulk quantities. This enables them to cut discount deals between the product manufacturers and distributors.
There are two types of wholesalers: the first type is the wholesale distributor, also known as a merchant. This distributor buys products from the manufacturers and resells them to retailers. The second type is the retail distributor. The distributor buys directly from the manufacturer and sells directly to the consumer.
Merchant wholesale distributors have warehouses and storage spaces. This is where they store the products they receive and store the products from the manufacturers before they ship them to the retailers. Wholesale distributors are middlemen in the supply chain between product manufacturers and end-users (consumers).
It leads us to the next question: what is a supply chain?
A supply chain involves the entire activities surrounding distributing finished products from the product manufacturer to the end-user. It always follows a chain, as its name implies: the manufacturer produces the finished products. The distributors supply these finished products to the retailers. The retailer, in turn, gets the products to the end-users. It also involves supplying raw materials from suppliers to product manufacturers to make the finished products.
The supply chain has a sector known as the distribution channel. A distribution channel has to do with the product manufacturer, wholesale distributor, retailers, and end-users. It’s established when finished products move from the manufacturers to the consumers. However, it’s not always a smooth ride as disruption usually occurs. Thus, you need to know how to prevent these supply chain disruptions.
Success in the wholesale distribution business requires you to take certain steps as a seller. However, these steps depend on your location, financing level, and your chosen industry and niche.
Here is a step-to-step guide to becoming a successful distributor:
The first step in becoming a distributor is deciding what part of the distribution channel you want to be a part of. Wholesale distributors can sell any products; this is why it can be tricky deciding what to sell. One of the best ways to decide what products to sell is researching products in high demand. Also, you must pay attention to recent trends. Moreover, you can choose any channel, ranging from accessories, beverages, tech gadgets, clothing, amongst others. A smart idea is to invest in high-demand products by small-sized retailers and supply them to retail stores. Another method is to supply small businesses, like brick-and-mortar grocery stores. However, you need to decide if you want to be a retail distributor who sells directly to the consumers (end-users) or a wholesaler distributor (merchant); that sells in bulk to retailers.
Next, find a good location for your business. Running a wholesale business requires a storage space. The storage space could be your basement, garage, or ideally, a warehouse, where you can store inventories. When looking for warehouse space, you need to consider the size of inventories that you will stock in the warehouse, your garage, or wherever you decide. You also have to choose the method of delivery best suitable for your distributing business. It is essential to consider rent and the geographical location of the storage space.
There is a famous saying: “closed mouths don’t get fed.” This saying applies strongly to the wholesale business. Networking is the basis of the distribution industry. Attend conferences, participate in webinars. It is vital to study your target market to formulate an understanding and improve your relationship with them. Your target market is the manufacturers, retailers, and end-users; this is your customer base. Subscribing to different industries’ newsletters is a way to build relationships. That way, you would get the industry news and updates. Additionally, look out for ads on Magazines and blogs; these ads can lead you to retailers and manufacturers looking for your services. You can also use ads to promote your business to reach a bigger customer base.
You need to know the basic business rules and have the basic skills to succeed in the wholesale business. The skills that concern the wholesaling market are: supply management, team development skills, negotiation skills, marketing skills, experience in finance and accounting. Team development and negotiation skills should be at the tip of your finger as a wholesale distributor. These are the skills you would exercise in your daily business activities and putting a team together. In the educational aspect, many manufacturers require distributors to have; a bachelor’s degree. A bachelor’s degree in accounting and business administration will give you an edge in the wholesale business.
As an entrepreneur, it is essential to register your business and comply with local business licensing regulations. A registered business gives you credibility. Manufacturers and retail businesses involved in your supply chain would sometimes request proof of business certification. You must register your business before you can get a wholesale license. A wholesale license means you do not have to pay a sales tax fee; when products get purchased from manufacturers. A licensed business is a legal permit, ensuring you don’t encounter any inconvenience with local regulations as you run your wholesaling. Register your business and contact your state tax office to help with an application form and a state tax ID number to obtain your wholesale license.
It’s essential to plan for an efficient logistic team that helps you save package costs and boost your revenue. An efficient logistics team provides value to your customer base by delivering the products at the right time. Logistics involves adequate training and thorough planning. With a properly trained team, they can process orders as swiftly as required. An efficient logistics system gives a wholesale distributor a competitive edge.
You must know how to calculate the bargain-basement set for the general business model. Your budget plan must involve the money reserved for rent, buying enough inventories, logistics, and employee salaries. A start-up budget Primarily includes equipment required to start a business, such as; a scanner, a printer, a computer, and internet access. Different wholesale businesses call for different budgets, depending on the products the distributor buys. An enterprise like tie businesses can run from one’s basement and do not have to start from scratch, as it requires a few types of equipment to manage inventories. A distributor who runs a wine wholesale business would need more storage space and equipment for temperature control, automatically making his budget higher than the latter. Another thing to consider in budget planning is the shipping cost from the manufacturer to your storage space, alongside the shipping cost from the storage space to the retail stores. It would give you an idea of how to spread out your budget.
“Do not overextend Credit,” this is a rule of thumb in the B2b business. Overextending credit to customers affects your cash flow and leaves you exposed to the risk of running into debt. It is why Finance and negotiation skills are essential in wholesaling; because even though you are overly extending credits to customers, your manufacturer is asking for their pay; without extending credit to you. It is vital to set up a reasonable credit policy from the start and adhere to it. Credit limits and discounts should only be increased based on history. It is for the retailers/end-users who certainly pay on time.
If your wholesale business lacks proper inventory management, your B2B business could lose a good amount of money if products go to waste due to overfilling. With proper inventory management, you would have a system of preserving minimal inventories in the warehouse. It means you would not have too many stocks stored at once in the warehouse. You will know when to restock enough inventories with good management as soon as they get to the set’s minimal level. With good inventory management, a distributor knows the products to safeguard against a spike in price or demand, thereby maximizing profit.
To run a successful B2B Business, you need to provide good customer service that keeps your customer base coming back. You achieve this by paying attention to your customers’ needs and meeting them. Retailers want a fast shipment to help meet their customer’s demands, do this by ensuring your logistics team always delivers top-notch service. Maintain contact with your customers even after their goods get to them, making sure they know you care about your services to them and their patronage. Keep in mind that your revenue is dependent on your network of Retailers and end-users.
To be successful in the B2B seller, distributors must keep up with the wholesaling trend. The E-commerce market has made things easier for buyers and sellers by creating buying and selling platforms online like Alibaba.com. B2B e-commerce is expected to account for 17% of all B2B sales in the US by 2023, reaching $1.8trillion.1 Ecommerce has proven convenient for retailers and even consumers, thereby giving the distributor a direct connection to B2C.
This emanates from the ease of access from payment and the feature to track their orders with tracking numbers. The Ecommerce platform allows you to display your inventories with marketing details, giving your product a visual appeal. Distributors; are recommended to combine offline and online marketing to maximize sales profit and increase outreach to potential customers.
Alibaba.com is one of the largest B2B wholesale marketplaces in the world. Established in 1999, It has over 20 years of experience in helping wholesale sellers all over the map increase sales and outreach to buyers; while saving time and money.
The platform is recommended for all B2B sellers looking to join the e-commerce train. The platform effortlessly puts wholesalers on the map, with an outreach of 13 million global buyers looking to purchase wholesale products. Alibaba commits to increasing the B2B seller’s profit by a wide margin; all you have to do is sign up and join! They have a team of experts waiting to guide you on every step, making your e-commerce journey seamless and profitable.
Are you looking to achieve success as a wholesale distributor? Get on Alibaba now to unlock to take your online business to a new level.