When you think of wholesaling, what comes to mind? Perhaps images of a team of shady characters operating in a dingy warehouse. While there is truth to this image (and countless others), wholesaling has much more depth than that. In the world of business, wholesaling is selling goods or services directly from one business to another instead of marketing them to the general public. This practice helps businesses reduce costs and increase profits by tapping into pre-existing suppliers rather than creating their own inventory. Wholesalers buy products in bulk from manufacturers or other wholesalers at a lower price and sell those items for a higher price to retail customers or other wholesalers. Read on to know more about wholesale operations.
What is the meaning of wholesale?
A wholesale operation is when a company purchases goods or services from manufacturers or other wholesalers and resells them to retail customers. The word wholesale comes from the days when merchants would bring goods by barge or ship to the city docks and then sell them from carts that were pulled through the city streets. The word wholesale means to sell goods or services in large quantities to retailers or other businesses for resale to customers.
Why buy in bulk?
When buying in bulk, you’ll have access to a much wider selection of products to choose from, as well as competitive pricing. One of the best ways to ensure consistent sales is to always have a large selection of products available at any given time. Most wholesalers sell products in bulk so that they can reduce their costs and offer competitive prices. Depending on your business, you may want to buy in bulk to save money or to ensure that you have consistent sales with a wide variety of inventory options available.
Types of Wholesale Businesses
Distributors may actually be the most common type of wholesale business. They purchase products in bulk from manufacturers and then sell them to retailers and other distributors. Distributors will also work with sales representatives and/or sales reps to sell and/or distribute products for manufacturers.
Drop shippers purchase products from wholesalers and then send them to the customer. The drop shipper’s name won’t be on the sales receipt or the shipping information. The drop shipper will use a third party (such as a distributor) to purchase products from manufacturers and ship them to the end-user. Drop shippers often work with online retailers and help them avoid getting tangled in the legalities of ordering, stocking, and shipping products.
A manufacturer’s rep sells the manufacturer’s products directly to retailers and wholesale distributors. In this case, the manufacturer’s rep acts as a hybrid between a wholesaler and a sales rep.
A wholesale distributor purchases goods from a manufacturer and then resells them to other businesses. You may come across wholesale distributors that specialize in specific types of products.
A sales rep sells goods directly to businesses but does not purchase goods from them. Instead, sales reps get a commission for selling a manufacturer’s products to retailers. Sales reps typically focus on specific industries, such as retail, agriculture, or construction.
While it’s true that some retailers sell their products at wholesale prices, this article is referring to retailers that purchase products in bulk from wholesalers and resell them to consumers.
Benefits of wholesale operations
Access to wider selection: A wider selection of goods will lead to more sales. This is why many businesses choose to buy in bulk.
Competitive pricing: Sometimes you can negotiate a better price when purchasing large quantities of a single item. This is beneficial for both the seller and the wholesale buyer.
Consistent sales: Having a large selection of goods available for consistent sales allows for more business opportunities.
Sourcing goods from multiple sources: Purchasing goods from multiple sources allows you to diversify your business risk. If one supplier goes out of business, you’ll still have others to fall back on.
Reduced costs: Purchasing goods in bulk to reduce costs is something that many businesses do. Having a lower cost per item will allow you to charge a higher price, leading to increased profits.
How to find a reputable wholesaler?
Make sure they have a valid business license: Many jurisdictions require wholesalers to obtain a license to operate legally. You can search for their name and location on the internet to find out if they’re legit.
Ask for references: Other wholesalers, retailers, and manufacturers are great sources of information on who is legitimate and who is not. You can also check with the Better Business Bureau
Check the internet: Wholesalers will often list themselves online. Make sure they have a legitimate website that’s up to date and that they don’t have any negative reviews.
Find out what your state requirements are: Each state has different regulations and requirements for businesses purchasing goods from wholesalers.
Find out what their payment terms are: Reputable wholesalers will offer standard terms for payment.
Ask about the quantities they purchase: Not all wholesalers buy products in large quantities. Some only purchase small amounts, which may not be enough for your business.
Ask if they offer drop shipping: Drop shipping allows you to sell products without having to purchase inventory.
Ask about the terms of their return policy: If you receive your order and you find that it’s damaged or not what you ordered, you’ll want a return or exchange policy to protect your business.
Wholesaling is a great way to get discounted goods and earn a profit from them. You can buy in bulk from larger companies or import goods from other countries and then resell them for a profit. When you buy from a wholesale company, you have access to a wider selection of products. This can help you expand your business because you’ll have more inventory options to choose from. There are many advantages to wholesale operations, including wider selection, competitive pricing, and reduced costs. To find a reputable wholesaler, you should ask for references, check the internet for reviews, and ask about the payment terms and return policy.