Starting a Wholesale Business: The Finer Points

So you want to start your own wholesale business. Or maybe you are a new retailer or manufacturer who is looking for wholesalers for your business. Whatever the case, whichever spectrum of the demand-supply-chain you are at; the fact is that you need to know and understand the finer points of the wholesale business.

Who is a wholesaler?

A wholesaler is the key link between the manufacturer and the retailer. They buy products in bulk from manufacturers or other vendors and sell those products to the retailers at a profit. You can be a merchant wholesaler who sells a variety of products or a specialty wholesaler who only deals in specific products or a category of product.

How to start a wholesale business?

Just like any other business, you also need a step-by-step plan for your wholesale business.

  • Research. Begin by a basic research into different types of wholesale businesses. For beginners it is a good idea to become a specialty wholesaler and set up your business from grounds up. Look into different product categories if you not sure what you want to sell. The basic food business or basic household supplies like soaps, cleaners, and stationary are all good options to begin a wholesale business.

You can become a wholesale grocer who sells different types of food and other household products. Or you can decide to deal in only one food category and then add more to your inventory as and when possible for you.

Also look up distributors or vendors in the category that you are interested in. Check out the competition in your preferred category. Scout different neighborhoods and visit the retails stores in those areas. Make an assessment of the disposal income of each neighborhood you visit and see what types of products convenience stores in those areas stock and sell.

  • Get the basics. Draw up plans for your storage and transport. Will you lease or buy? What is the size of the warehouse you can afford? How many transport vans you need to buy? Will you be the owner/driver/labor? Find out about your wholesale business license and how much it will cost you. Draw up an initial marketing budget.
  • Arrange the funds. Draw up your investment plan and a detailed business plan. Your initial capital investment will include your inventory, your storage, transport, marketing, license fee and any other fee you might incur.
  • Contact. Meet with manufacturers and vendors for your inventory. Find out which manufacture is best for you, negotiate your discounts, credit policy and seal a deal. Then go meet retailers. Talk about your inventory and try to get a few retail clients. Start with one neighborhood. And add more as you settle into the business. Your business plan must include the type of retail stores you want to target. These could be only convenience stores or a mix of convenience and high-end stores.

What are the skills required for a wholesale business?

Apart from a keen business sense, a successful wholesaler must possess many skills and qualities.

  •  Excellent accounting skills. Wholesale business is the business of crunching numbers. As a wholesaler you are going to be constantly working the numbers whether you are placing orders, supplying those orders, negotiating discounts, adding figures, subtracting or multiplying digits, balancing your financial books and so on. This is also the business of credit payments. You will need to record and maintain these numbers all the time. Your financial acumen will largely determine if you can have a successful wholesale business or not.
  • Good communication skills. Wholesalers are constantly meeting new vendors and retailers. They have to always talk about their business in these meetings; sell their products and maintain relationships. All this is not possible without good communication skills. The better relationships you maintain in this business, the greater your chances for success in the wholesale business.
  • Expert negotiation skills. You can’t succeed in the wholesale business if you can’t negotiate the largest discounts for your purchases. This is how wholesalers make most money. For instance, you buy your product for $20 per piece at a discount of 5 percent on an order of 5000 pieces, then if you sell per piece at $22, then you don’t make much. The larger your discounts, the better you will earn.

 What is the scope of growth in a wholesale business?

 This is a good long-term business to get into. There is ample scope of growth for a wholesaler. It all depends on what type of business you want to have and how much work are you willing to put in to achieve your targets.

  • If you start out with a small wholesale business supplying to only few convenience stores, then you can expand on this number every year. You can also add more retail clients like high-end stores, specialty stores or online retailers.
  • If you start your wholesale business with just one product in your inventory or just one category, then you can expand your business by diversifying your product range. The scope to expand your wholesale business is unlimited. If you just started out by selling bread and milk, you can add more types of breads in your inventory and more dairy products. You can also start dealing in more food categories. You can become a wholesale grocer who sells all essential products required by a household.
  • If you started out with just one locality or neighborhood, you can add more locations to your business plan and target new stores in those locations. You also have the choice to make new retail clients in different cities and states depending on your investment scope and capacity. You can always add more online retail clients who sell their products nationwide or even all over the world. For instance, if you are in the wholesale business of selling t-shirts, then having online retail stores as your clients can greatly expand your business. You can now sell your t-shirts all over the world through ecommerce companies.