Selling stuff in bulk is one of the great opportunities to get into the e-commerce business in 2022 with a small start-up budget. What is a wholesaler? It can be a single person or a company that vends numerous parties of goods to retailers. Where do the wholesalers get stuff from? They buy it directly from the manufacturer or other merchants.
Wholesalers can also be producers themselves. However, this activity requires more financial outlays for renting production and storage facilities, purchasing equipment, and hiring staff. In the article, we will consider a less expensive wholesale option when the vendor buys goods in large volumes for further reselling in smaller lots.
You will also learn:
- How to set up a wholesale business in 2022?
- Helpful tips for growing your margin.
- What are the advantages of wholesalers under retail sales?
How wholesale trade works in 2022
Speaking of 2022, wholesaling may seem a challenging thing. However, when looking a little closer, everything becomes clearer. So, a merchant purchases products from a supplier to trade them to another business (a retailer). The latter, in turn, already sells item units to the final buyer. Thus, the wholesaler vends large quantities of stuff directly from the plant or factory (manufacturer) for further resale in smaller amounts to retail stores. They act as an intermediary between the two businesses, owning warehouses or other areas for merch storage.
What are the advantages of wholesaling?
The more products vendor buys from the manufacturer, the lower the cost per unit of the goods is. Next, they set their price (higher than the purchasing one) and resell products to another trader in bulk. For the mediation, storage, and resale, the wholesaler makes a profit.
Can a business be both a wholesaler and a retailer type?
Bulk sales are vital in the B2B (business-to-business) commercial chain. However, a B2C (business-to-customer) scheme is also possible. For example, if a wholesaler vends items through an online store, then cooperation with bulk buyers and single customer orders is possible. The decision on the business model is up to the seller.
Why can't a retailer buy directly from a manufacturer?
Because the store’s batch usually sold for a certain period of time is not large enough for the manufacturer to provide a good discount. For example, a shop trades 100 cups per month. If you buy them directly from the supplier, each one will cost $15. At the same time, the retail price will be $18. You will receive $300 in revenue, which is not very profitable. This is where the benefits of wholesale enter the arena. They will buy 1,000 cups from the factory for $8 and resell them to the retailer for $10. Now the store owner will be able to receive $800 income, which is 2.6 times more lucrative than direct cooperation with the plant.
As you see, by opening your vend-in-bulk business, you can count on the profitability of your enterprise. Other advantages of buying from a wholesaler include:
- Easy online ordering and payment process.
- No need for frequent purchases.
- Good logistics coverage.
- A large selection of goods and the opportunity to be the first on the market to sell trendy items.
How to become a wholesaler?
First, create your internet store, find a product to vend, and make strong relationships with manufacturers and retailers. If you are thinking of a business model to choose, remember that e-commerce is quite flexible. You can even run a print-on-demand wholesale and start advertising a unique brand.
How to set up a wholesale channel
To ensure the smooth and secure operation of your wholesale business, you must create an online store on an e-commerce platform and protect it with a password. It will help to secure your websites from unauthorized access and ensure the reliability of financial transactions.
You can also connect additional shops to your trading flow: for direct-to-consumer goods and wholesale lots. Channel settings allow you to define discount prices for different items or send hidden links to retailers. Finally, our guide to marketing for wholesalers will give your some useful tips on flourishing trades.
As discussed earlier, you can wholesale your products to other businesses and direct customers. Set a discount price when vending bulk stuff, or propose merch individually to the end-user at a markup. In your online store, regulate a minimum order quantity, or restrict access to non-wholesale buyers.
5 differences between wholesalers and retailers:
- A bulk trader works with a business, not with small buyers.
- A wholesaler needs a warehouse to store goods.
- A retailer must advertise the product and attract customers through digital marketing channels.
- Retailers can enjoy the convenience of dropshipping.
- Direct-to-customer vendors need to communicate with each client and give feedback.
Benefits of wholesale vs. retail:
- A bulk seller can introduce their own brand and distribute them to retail stores.
- For one or two orders, a wholesaler may immediately get a monthly profit.
- There’s no need to look for numerous buyers; a few weighty customers are enough for vending in bulk.
The otherness and advantages of both types of sales will help you understand what suits you best: being a wholesaler, retailer, or dealing with their combination.
The quick guide to marketing for wholesalers
The key to your successful bulk sales is reliable retailers whose names and reputations attract thousands of customers to their stores. If your product is in demand by the vendor’s target audience, they will continue interacting with you. But first, it would be great to find such a business partner.
You can search on marketplaces. In some cases, if you have a retail store set up, other vendors themselves may contact you and offer wholesale sales. In addition, merchandising partners often attend trade shows to advertise their products. Try to find and connect them.
You can motivate biz partners for long-term cooperation by offering special conditions:
- promotions and unique discount programs;
- partial payment or loyal terms for the reckoning (usually about 30 days);
- dropshipping (in this case, you assume the obligation to send orders to the final buyer), etc.
Offer free samples and test runs of your product, shipping reductions, and other exciting proposals for attracting retailers.
The best wholesale pricing strategies
All the business participants must receive profit: both bulk sellers and retailers. The pricing strategy for wholesale has to ensure this plan. Suggest a 50% discount from the retail price to raise the desire to buy your product in bulk.
You can specify the minimum order amount and offer a low sum that will bring you margin. Keep in mind the production costs from the manufacturer. If you sell goods also to the end client, your markup can reach 75% or more.
These are the wholesale vs. retail examples:
- the income from direct-to-customer vending is higher, but you will hardly sell all the items at once at retail prices;
- trading in bulk can free your warehouse sooner and bring you 50% revenue or more.
When concluding an agreement with business partners, indicate the recommended retail price. Thus, item costs will approximately stay the same throughout the market, and your online vending will not become unprofitable…
