The Things You Should Know About Wholesaling

In the world of business, wholesalers have played a very major role in the distribution process of products from manufacturers to retailers. But what are wholesalers? What does it do to help in easing the process of product distribution?

Key Roles of Wholesaling

Wholesaling is a B2B or business to business type of industry that works directly with other businesses. Wholesalers are responsible in overseeing the distribution process of products from its manufacturer to a retailer. This is mainly done by the wholesalers' list of trusted contacts that are willing to sell their products.

Wholesalers mainly get their profit by buying products from manufactures, repacking them, then sell it at a profit to retailers. Lets take for example a wholesale clothing business. Manufacturers would eventually want a fast way of distributing their stock on a wider basis. Wholesale clothing businesses could make this happen because of their connections with a number of retailers that are willing to do business with them.

This way, they can earn more by selling more. This business process that wholesalers undertake provided some advantages and benefits for both the manufacturer and the retailer.

Benefits from Wholesalers

Many establishments benefit greatly from wholesale businesses. Manufacturers benefit from a wholesaler because wholesale businesses open up new market possibilities for them. This is because of the wholesalers' list of retailers. Manufacturers can have their products purchased and made available for sale across a wide number of retail outlets.

More importantly, for a company offering a new product, convincing a few wholesalers to stock a new product may make it easier to gain traction in the market as the wholesaler can have power with the smaller retailers convincing them to stock the new product.

Retailers can also benefit from a wholesaler in terms of access to products. Wholesalers are in business to provide products and services to retailers who either cannot purchase directly from suppliers because their purchase quantities are too low to meet the supplier’s minimum order requirements or, if they purchase directly from suppliers, will pay higher prices compared to bigger retailers who obtain better pricing by purchasing in greater quantities.

Because wholesalers sell to a large number of different retailers, their order quantity can be easily supported by the wholesaler thus allowing them access to these products. In this way transacting through wholesalers is often the only way certain retailers can stay in business.

These are only some of the reasons why many choose a wholesale business rather than a retail. Though this kind of business is more profitable than retail, the business process itself requires more experience in maintaining and handling.

The Wholesaling Process

Being a B2B or Business to Business type, wholesaling greatly differs from a retailer. But there may be other similarities found between each. Wholesaling involves a distribution process similar to that of retailers in that customers may or may not visit the wholesalers' location.

Some wholesalers are considered as stationary and some are mobile. The stationary type of wholesalers are the most common of all. These kinds of wholesaler are more on the fixed facilities where product handling operations take place. This kind of wholesaling involves two kinds of operation, one is where customers visit the location itself, and the other is not.

A wholesaling business is customer accessible if customers are allowed to visit the location and buy their products on spot. This is good if the business doesn't support any shipping policies because the buyers are responsible for making their own arrangements to transport their purchases.

A wholesaling business is not customer accessible is the business doesn't allow customers to visit their location. These wholesalers do their business mainly on the phone or online where buyers could easily pick and choose what they want to buy, particularly the wholesale clothing businesses that took advantage on this. But this would require the wholesaler to provide shipping.

Non-Stationary wholesaler are those wholesale businesses that doesn't carry any inventory. These types of wholesalers are those that acts as agents instead of merchants. Some wholesalers do not have physical locations that store products. Instead, these operations rely on others, such as delivery companies, to ship products from one location to the buyer’s place of business.

The Comings and Goings of Wholesaling

Though the business itself promises success on the hands of an experienced business man or woman, there are still some factors that impedes a wholesaler to reach its success in the industry. One of its most dire problems is Disintermediation.

In economics, disintermediation is the removal of intermediaries in a supply chain, or “Cutting out the middleman”. Because of the revolution of the internet for businesses, some manufacturers have come to use this technology to do their business. By this, retailers can easily get their stocks straight from the manufacturer without added costs.

Other problems faced by wholesalers is the location of the business, costs of transportation, new technologies, and offering non-product assistance.

Location of the business is important, especially for those wholesalers that are only starting out. Setting up a business too far away from buyers and manufacturers may lead them to costly and expensive shipping.

Cost of transportation works in tandem with the location of the business. Too far away from the manufacturer and retailers could cause a lot of expenses in shipping and transportation. This may become a big problem especially that the cost of shipment will be passed down to the retailers.

New technologies may help wholesalers with their business processes, but these also added some strain on some wholesalers. New technologies, such as radio frequency identification tags (RFID) placed on shipped products allow wholesalers to maintain tighter control over their distribution activities. But gaining the benefits associated with these new distribution technologies can be expensive in terms of acquiring and learning to use.

Selling products to retailers, particularly those newly released products, may require some training on how the product should be used. These value-added services may involve employee training, promotional support, and assistance in managing their operations. Communication with customers is very important. Which added a new expense for the wholesaler.