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Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
Whether you’re a product manufacturer or business retailer, selling wholesale goods can be a great way to grow your business. The sales model itself has become increasingly popular in the past decade, with wholesale sites like Amazon, Shopify, Handshake, and others helping boost the market and streamline distribution. In fact, in 2020, the UK wholesale industry was estimated to be worth £828.2 billion, with the year previous experiencing a growth of almost 9%.
In this guide, we’ll break down what exactly wholesale selling is, what it entails, and how you and your business might get involved in this expansive sales market.
What is wholesale?
Wholesale selling is where the product manufacturer sells batches of items in bulk directly to other businesses, which then buy these large quantities of items to sell on to customers. This is either done directly (from wholesaler to retailer), or through a middleman (wholesaler to distributor, to retailer).
These wholesale products tend to be popular, in-demand, and produced with the confidence they are likely to sell quickly and easily, both to other businesses and consumers. This chain of bulk manufacturing, supplying, and selling has become extremely popular with businesses that want to either sell their products with ease or profit from a simple sales model.
How does wholesale work?
Wholesale is a simple and straightforward sales model that, at most, involves four parties: the wholesaler, the distributor/middleman, the retailer, and the customer.
In some cases, the distributor – usually third-party sites that sell wholesale products to other businesses – is not necessary, and retailers instead purchase goods directly from the wholesaler.
However, the process itself can be broken down into a few steps:
- Research
Wholesale manufacturers research and identify market trends to see what products are selling well. - Manufacture
These companies then create these products and price them to be sold in bulk. - Market
Wholesalers will then market their goods to the relevant businesses. This is mostly done on online platforms such as Amazon and Shopify, which act as the ‘middleman’. - Distribute and sell to retailers
After also identifying these popular products, other business owners will search for and purchase goods in bulk from these supplier sites, or directly from the wholesaler. - Re-sell to customers
Retailers will then re-price these products in order to make a profit and sell them to their customers.
Is wholesale a good opportunity for my business?
Wholesale can be a good opportunity for your business, depending on whether you have the resources and flexibility to accommodate the sales model. For example, as a retailer, buying and selling wholesale goods might be the perfect way to get your business off the ground and start making a profit. Online wholesale retailers have made the process much more accessible, too. So, wholesaling can be good for entrepreneurs looking to begin, or expand, their retail empire.
However, if you’re a new product manufacturing company or are at a comparatively early stage of business, diving straight into wholesaling might be overwhelming if you’re not used to high production demands. Here are a few things to consider:
Three advantages
As a wholesale producer and/or seller you can re-divert time and money previously spent on customer marketing to other areas of your business. A B2B (business to business) brand selling products to retailers will use less budget on client/consumer marketing than a B2C (business to customer) operation.
As your business grows, you’ll build a network of regular retailer clients and establish relationships with them as you fill out large orders. Many retailers prefer to do business with only one or two providers to fulfil all their stock needs. As these relationships develop, you can reallocate marketing budget.
With consistent orders and stable relationships, you can more accurately predict profit margins and estimated EBITDA. This helps to budget and organise for the quarter and year ahead, more accurately manage stock control and production, and confidently plan and expand business operations.
Three considerations
As a wholesaler, you must consider whether you’ll be able to meet increasing production demands. If you’re a new business, you might lack the capacity, both physically and monetarily, to consistently produce and/or manage large quantities of stock.
Remember, because you are selling in large quantities, goods will need to be sold at a wholesale price. And this is often considerably less than what products would sell for on the shelves. Consequently, your profit margin might not be as healthy as those obtained by retailers.
It’s often difficult to get your foot in the door as a wholesaler, as the market is already competitive. Retailers may be hesitant to ‘switch’ to you as their provider, especially if they have already built up a long-standing and reliable relationship with other wholesalers. It may mean that, to begin with, you have to sell your products at a lower price than you originally intended.
Determining your pricing strategy
When pricing products for wholesale, remember that these bulk prices need to be, per unit, lower than the general retail price. While your profits may appear smaller, you should price goods with unit costs and number of units per sale in mind to make a healthy profit. Your aim is to sell products at a higher price than the production cost, whereas retailers price their products for the customer.
Like retailers, you should still research your client and competitor market to learn what others are buying and selling similar goods for. You also need to identify where, among these competitors, you fit into the market. You don’t want to be pushing wholesale goods that are already well accounted for, as this could result in low sales.
Once you’ve found your place in the market, you need to identify your USP/s. Do you sell products at lower prices than your competitors? Or perhaps you’re on the pulse with the latest retail trends? All of this determines the value of what you’re producing and selling.
How to sell wholesale products
How and where to sell
First, you need to decide how and where you’re going to be selling your wholesale products. Once you’ve determined the perfect price, it’s a matter of whether you choose to sell goods online, via distribution sites such as Amazon, or directly to your clients.
Both have advantages – online wholesale sites allow for accessible, quick, and easy sales, which are often more suited to larger companies equipped to deal with regular large orders. Selling direct to retailers helps to build reliable B2B relationships, meaning you can more easily create a substantial customer base and thus garner more predictable profits.
How to market your products
When you first start out as a wholesaler, it’s important you identify who exactly you want and need to be selling to. Wholesale sites provide a great avenue to identify these client bases, and help to attract traffic across markets you may not have been able to reach.
However, once you start building strong business relationships, cross-network marketing may not be as necessary as you’ll have a reliable client base who come to you for the majority of their stock.
Accepting payments
To keep track of large numbers of units and general sales you need a payment system you can trust. When dealing with bulk wholesale orders, keeping track of invoices, and making sure all payments are accounted for, is a must when maintaining client relationships. With Square invoices, you can manage everything on one platform – from sending digital invoices to accepting customer payments, and even tracking unpaid orders.
Also, if you don’t want to be a wholesale distributor, you need to make sure you have an online platform where you can confidently manage and sell stock directly to businesses without any hiccups. Square Online is adaptable to any business type and is an all-purpose platform for marketing and sales combined. Plus, you want to make sure your store is easily navigable and, of course, looks good – which can all be achieved by building your site in minutes.
If you’re thinking about stepping into the world of wholesale, you should consider whether your business has the capacity to deal with orders in bulk. If you’re confident in how, where, and what you’re selling, wholesale has the potential to be an exciting expansion to your business.
Make sure you have everything you need to get started with Square, whether that’s the appropriate marketing tools to get your name out there, or a reliable platform from which to build your wholesale brand.
