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.
What is a wholesale distributor?
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?
The concept of 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.
How to become a wholesale distributor (step-by-step guide)
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:
- Research and develop a strategy
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.
- Connect and build relationships
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.
- Register your business/ Get a wholesale license
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.
- Plan the company’s logistics
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.
- Plan the company’s capital and start-up Budget
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…