7 Important Things To Know Before Starting A Wholesale Business | A Beginner’s Guide (2023)

Starting a whole business is a brilliant idea whether you are quitting your boring 9 to 5 job or looking for some opportunity to earn extra cash. But, to get started, it is important to know the right approach along with sufficient knowledge and preparation.

The online wholesale marketplace is intensely competitive as the number of wholesalers is growing every day! It’s because buying items in bulk at a lower price and then selling them to individual retailers at reasonable prices leave a wholesaler with lucrative profits.

Wholesale businesses also have a great potential to become big and established in their industry by operating through a streamlined distribution flow.

Starting a wholesale business is undeniably intimidating if you are a beginner! From understanding your market to knowing how to source the products, setting prices to deciding the storage place, there are many things to consider. We’ll help you know those vital things here.

In this all-inclusive beginners’ guide, we have talked about every vital thing that you should know if you are looking forward to starting a wholesale business in 2023. Read it on.

[ez-toc]

What Is A Wholesale Business?

A wholesale business is a business that purchases products in bulk quantities from manufacturers or core distributors at lower prices and resells them in smaller quantities to individuals or retail shops while making substantial profits. When purchased wholesale, the price per unit is comparatively much lower than when it is sold in a single quantity. That’s how wholesale business works and earns profits.

To put it simply, wholesalers are middlemen between product manufacturers and retailers. They make products easily available to retailers by sourcing from the manufacturers. They hence support retail businesses in their operations. Retailers run their stores from various locations while the manufacturing unit is located in one place. The wholesalers procure the products through their streamlined workflow and make them easily available to retailers.

For small businesses looking to venture into the wholesale business, it’s crucial to understand the intricacies involved. As a business entity, business owners must carefully consider their product offerings and determine the product lines they wish to carry. Developing a solid business plan and conducting financial planning is essential to ensure success. Securing a wholesale license and identifying the right warehouse space are critical steps. Building relationships with manufacturers, wholesalers, and suppliers is vital to acquire inventory. Seeking guidance from a business attorney can provide legal insights. Effective marketing efforts can attract potential customers and wholesale buyers. With proper inventory management and a growing customer base, businesses can thrive. Obtaining an employer identification number (EIN) is also necessary for operational compliance.

You can start a wholesale business of any product or a product niche. Some of the best profitable ideas for wholesale businesses are clothes, furniture and decor, jewelry, grocery, snacks, healthcare items, baby products, electronic items, mobiles and mobile accessories, and kitchen items.

So, are you looking to start a wholesale business? In this beginner’s guide for wholesale business, we will explore the wholesale business model and how it differs from retail businesses. Wholesale business involves selling products in larger quantities to retailers, rather than directly to end customers. Wholesale distribution companies play a crucial role in connecting manufacturers and wholesalers with retailers. By buying in bulk quantities, retailers can enjoy lower prices and higher profit margins. It’s essential to identify your target market and product niche, conduct thorough market research, and build relationships with reliable suppliers. Quality products, competitive pricing, and excellent customer service are vital for success in the wholesale industry. Whether you choose to establish a physical store or an online store, offering a wide range of products and catering to the needs of your potential customers is key in the long run. Keep in mind the legal requirements and regulations associated with running a wholesale business, as well as managing inventory and logistics efficiently. With time, dedication, and careful planning, your wholesale business can thrive in the competitive market.

How Does Wholesale Businesses Work?

Running your wholesale business will never be easy if you do not understand how it works! Wholesaling includes a lot of tasks, such as wholesale marketing, warehousing, price control, and transportation.

If you’re new to the wholesale business, navigating the world of product distribution can seem overwhelming. However, with the right knowledge and strategy, you can establish a successful wholesale business. The first step is to determine your product niche and the target market you want to serve. Identify a specific product category that aligns with the latest trends and meets the needs of your customers. Once you have your niche, develop a solid business plan that outlines your wholesale business model, including how you will source goods from suppliers and manufacturers, and how you will sell them to wholesale buyers and retailers. Consider whether you will focus on selling large quantities at a higher price or smaller quantities at a lower price, depending on your target market and profit margins. Creating an online store will allow you to reach a wider range of customers and showcase your quality products. Utilize social media platforms to promote your wholesale business, engage with customers, and attract wholesale buyers. Building strong relationships with distributors, wholesalers, and retailers is crucial for securing bulk orders and maintaining a steady flow of sales. Always prioritize excellent customer service to build trust and loyalty among your wholesale buyers and end customers. By providing prompt and attentive support, addressing inquiries and concerns, and delivering orders in a timely manner, you can establish strong relationships with both your wholesale buyers and the retail businesses they serve. Don’t forget to explore wholesale marketplaces that can connect you with a larger volume of potential buyers. With dedication, research, and a strategic approach, your wholesale business has the potential to thrive in the competitive market.

The distribution of wholesale products from manufacturers or distributors to retailers and end customers is a multi-step procedure. The wholesalers first look for the trending best things to sell online or offline, find the manufacturer or distributor, purchase them, promote their wholesale business, and sell the products to other retailers.

With competition getting tough in the wholesale segment, most wholesalers look for the most popular products that will sell excellently in the market. Also, they find their products or product niche after identifying the market scenario and the latest trends. Also, they compare deals offered by different manufacturers to purchase their products from the ones that offer the lowest prices.

To better understand how wholesale works, here’s an example:

A wholesaler runs a business of cheese and delivers them to restaurants and cafes in locations that are near its storage unit. It sources and stocks the cheese from a reliable local producer. The seller predicts the average daily demand of each restaurant and café. Based on that market demand, the seller places bulk orders to the local producer and buys them at a reasonable price.

To accommodate their daily or weekly customers’ demands, the restaurants and cafeterias contact the wholesaler and ask them to deliver a specific number of crates. So, the seller gets the distribution and sells the cheese at a price higher than the purchase price.

The restaurants and cafes then use the cheese to make sandwiches, burgers, etc. and offer the end products to customers at a much higher price to keep their share of profits. As a result, wholesaler works with a network of restaurants and cafes and charges a price for selling their products that would result in profits. This also means the wholesaler needs to have great price control. They need to set a price that would cover their warehouse expenses, costs of marketing, storage, and distribution while allowing them to make profits.

Workflow Of A Wholesale Business: How Products Reach The End Customers?

As a wholesaler, you can either buy a product from the manufacturer to sell it to retailers or you can sell it directly to the customers, which makes you a reseller. While the former process makes you a distributor, the latter makes you a reseller.

The wholesale business workflow is based on the traditional business model of the B2B segment. It is quite like the typical product supply chain where the products flow from raw material suppliers to producers, distributors/wholesalers, and then to retailers. The end customers finally get the products from the retailers.

So, you have got an idea of the wholesale workflow. Here are the steps involved in the wholesale workflow.

1. The manufacturer sells the products to wholesale buyers in large quantities.

2. The buyers or wholesalers store them and prepare for selling i.e., set up their online store and promote their business.

3. After analyzing the customer needs, market trends, and competition, the wholesalers set prices of the products that will be appealing to the retailers as well as profitable to them!

4. The wholesalers grow their network of retailers and seek to build trusted relationships with them.

5. On getting orders, the wholesalers supply the products to the retailers in desired quantities and make them available to the end customers.

7 Things To Consider Before Starting A Wholesale Business

Before starting a wholesale business, there are quite a several things to consider, including the target market and preferences of your customers i.e., retail businesses. You cannot just simply start buying things in bulk and selling them. The wholesale business model works in a pretty formal way and that’s why there are rules and legal requirements to meet too. Here’s everything discussed for you.

1. Market Scenario

Before anything, you need to know about your market and how it works to make the most of your wholesale business. Understanding your market scenario helps to anticipate how your products are going to perform and the profit you can make.

To analyze the market well, you also need to do proper research about your competition. Identify the key competitors, the scale of their respective businesses, price rates, quality of services, where they are selling, and promotion tactics. Once you learn what others are doing in your market, you can decide to offer something out-of-the-box to your target retailers. You can charge a competitive price, offer discounts, or go creative with your promotions.

Also, do not miss out on studying the latest trends in your market to get a clue of what always goes hit with your retailers or purchasers. This is a must for wholesalers seeking to find success in the retail clothing segment and electronics. Wholesale fashion trends are continuously evolving, and so does the same for electronics. Needless to say, a wholesaler that fails to keep up with the trends and update the products is sure to be overshadowed by others. Whether it’s the floral printed apparel or baggy cargoes, everything that emerged as a trend, sold terrifically in the wholesale marketplace. Because customers are simply lured by them and buy them anyhow!

The more you know about your market, the better it is! Once you have grasped every dynamic of your market, it becomes easier to target your customers and aim for maximum benefits.

2. Decide your suppliers wisely

Who will be supplying you with the products matters! So, when you are about to start your wholesale business, deciding who will be your suppliers is a critical step. They are mainly the manufacturers, and you got to decide who will be ideal for your business depending on their location, prices, distribution process, and so on! However, choosing a supplier or suppliers isn’t plain sailing when there are many manufacturers out there.

Choosing the manufacturer or supplier out of the lot is a multi-step process. You need to find suppliers that offer not only quality products but also competitive prices. They should also promise to provide good customer service and must be able to deliver your products on time.

To decide on your supplier, the first step is to research potential suppliers near you. Read their customer reviews, ask for references, or check their reputation with other businesses they have worked with! You can also attend trade shows, business fairs, or networking events to connect with suppliers in your specific industry. Choosing your wholesaler supplier or suppliers wisely is necessary to ensure that you have reliable partners who are capable of meeting your demand and customer needs and helping you grow your business.

Having suppliers who offer high-quality products at competitive pricing allows you to make considerable profits! When they have an agile delivery process and are willing to work with you on custom orders, you can promise better to your customers. For instance, you decide to offer a flashy jacket that has become a trend after it was worn by a star/artist at a popular global event. So, the supplier should agree to meet such on-demand requirements of your business and help you gain more reputation as a progressive wholesaler. However, if you’re considering selling on Etsy, you may wonder, “Is selling on Etsy worth it?” So you might want to weigh the pros and cons, and carefully evaluate whether selling on Etsy aligns with your business goals and if the potential benefits outweigh the challenges.

Besides, there are so many terms to agree on with a supplier, including price, terms of payment, packaging, modes of shipping, inspection, warranties, conditions for delays, and so on. When choosing your wholesale business suppliers, make sure that you can negotiate better for each of these terms.

3. Storage requirements

Your wholesale business is all about having a good storage place or warehouse because you have tons of products to stock. So, a wholesale business plan leaves you with a pressing concern, that is, where you are going to hoard all your products.

The area of the storage place required entirely depends on your products. If you are a wholesaler of fashion accessories or jewelry, much less storage space is needed than what you need if you are a furniture wholesaler. Similarly, clothing will require a smaller space than grocery wholesale, which has to store an abundance of food items.

Thus, the key is to find the perfect storage no matter what you are selling! Depending on the nature of your products, decide the space you need and hunt for that in their preferred locations. When you just start your wholesale business and sell to a few retailers, you will need a small space. However, that is a temporary situation! You’ll start growing and scaling soon, and at some point time, you will need a greater inventory space. So, why not plan?

When you have decided the size required for your storage, the next thing for you to choose is the ‘location’. Keep in mind where your target customers (i.e. retailers) are located and whether it’s convenient to access all the general modes of communication. Also, make sure it is within a proximate distance from your place so that you can frequently travel there for the inspection, get updates on stock, or fetch fulfillment details.

Apart from the size and location, what matters for wholesale distribution companies is the resource capability of their storage place or warehouse. It should have a sufficient crew to handle the loading, packing, and dispatching of orders. Also, check if it has one or few security personnel to guard your stock and sufficient equipment for order management like forklift and stroller.

4. Setting fair prices

You don’t want to lose your potential customers by charging a price that is higher than what is offered by other sellers in the wholesale marketplace. So, pricing is a big decision to make!

When it comes to setting a price for your wholesale product, you need to act in a balanced way and set competitive prices for your products. Set a price that lets you earn enough profits after covering the supplier costs and your other wholesale expenses.

Making a fair decision regarding the pricing is necessary if you don’t want to lose any customers. Suppliers can affect your costs at all levels. For instance, they can charge a higher shipping cost because they feel the distance from your storage unit is more. However, that will add to the price of your products! Also, if your items are precious or delicate, they need special protective crates to deliver, which further surges the costs. Contrary to this, a supplier can give huge discounts to you when you are ordering frequently in bulk. Therefore, a supplier can affect your costs in many ways!

While offering a fair price, what you also need to take care of is the quality of the product. If you are offering a price as low as $12 for a t-shirt, you are not compromising on its quality. The fabric should not crush or warp after a few washes, and the colors should not fade. When the price is lower, you may get a lot of customers initially but only a few of them will turn into repeat customers.

To put it simply, you need to fix the prices of your products that are reasonable and also reflect the better quality of your products.

5. Shipping and payment conditions

If you have quite figured out how the stocks of your wholesale business will reach from suppliers to your warehouse/storage, the next challenge is to decide how the products will move out from there to the customers.

When it comes to shipping, there are several options to choose from in a wholesale business model, so you have to determine which option works best for you. You can choose one fulfillment service provider that will be responsible for delivering products to the customers no matter where they are located. In another way, you can choose multiple service providers, each responsible for delivering orders in a separate zone or district.

If you want to keep the costs of your wholesale business lower and raise your profit margin, then you can choose to hire a few personal delivery executives. They will be working monthly and will fulfill the orders as they come by.

What shipping procedure do you choose, the next thing you should decide is the payment mode for your customers, i.e., how they are going to pay. Most online businesses offer the two mandatory options i.e., cash-on-delivery and card payments. If you want to provide more convenience to the customers, you can integrate Netbanking or one-click payment through digital wallets or mobile payment services like Google Pay.

In a recent study on the eCommerce payment methods by Worldpay, it was found that nearly 50% of online buyers prefer digital wallets today, which are followed by credit card and debit card payments. While Buy Now Pay Later (BNPL) and Account to Account (A2A) options are also prevalent, only 2% of customers use Cash-On-Delivery (COD) option! Thus, choose your eCommerce payment options for your online wholesale marketplace smartly!

6. Customer service matters

Selling wholesale to retailers and not to individual customers does not mean that customer services can take a back seat. Those retailers aren’t just buying your products but they believe that you will deliver the products to them on time so that they can put the products for sale before others. Also, the products that you put for sale must stand up to the expectations of the retailers, who can buy them seamlessly through a preferred transaction mode.

As we say this, we mean that customer service must be a top priority for your wholesale business just like any other business. It is necessary to keep the retailers coming back to you for reordering! Good customer service in the wholesale market segment means you should be able to provide timely delivery, respond quickly to issues/queries of the retailers, let retailers track the orders, and send notifications for discounts and special arrivals. Also, fail-safe transactions and hassle-free management of the orders, from order placement to delivery will decide how smooth or flawless your customer service is.

Our experts when enquired about some of the wholesalers, confirmed that affording great customer services helped them achieve higher satisfaction of the retailers, retain them, and build loyalty in them. So, in the long run, it enabled them to acquire a vast customer base with happy and satisfied retailers.

Excellent customer service also differentiates your wholesale business from other businesses. It’s because, in the wholesale business i.e., the B2B segment, retailers don’t expect to get the kind of customer support that sellers in the B2C segment provide to their customers. So, they are always going to choose your wholesale business over any other when it has steadfast customer service.

7. Prerequisite steps to get started

When you are clear about the above significant concepts, the only thing left for you to consider is the steps to get started with your online wholesale store. You should know about each of the prerequisite steps required to kick-start your wholesale business.

• Decide a product category:

Based on your market research, decide what you want to sell in bulk. The product category or niche must be in demand, popular or trending, and easily available.

• Register your business:

This is a mandatory step for any new business, no matter what is its sector or industry. Decide a creative or appealing name for your business, and get it registered by fulfilling all the necessary paperwork.

• Hire your team members:

No matter how small you start your wholesale business, you will need one or a few members to help you run it as it scales and orders start flooding in. Get those members selected, from families, friends, or peer groups.

• Get your online shop ready:

Setting up your online shop is a crucial step for your wholesale business so that your customers can find your products easily with a simple search on the internet. Thankfully, it is easy when there are popular online marketplaces for selling wholesale to retailers such as Etsy, eBay, and Main Street Market & Gifts.

• Make promotions and kickstart your wholesale selling:

Through social media, SEO (Search Engine Optimization), or other popular modes of marketing, promote your business shop so that people can reach you easily.

Looks easy to get started? It’s truly super easy if you have comprehended all these necessary aspects and prerequisites of starting a wholesale business.

Factors That Can Make Your Wholesale Business An Instant Success

If you have grasped well the vital things to consider while getting your wholesale business started, our experts are here to offer some solutions to make your new business a huge success. There are many rewarding benefits of selling online in a wholesale business model and these points will make sure that you reap each of them while securing your business success. Find out how!

• Providing a wide range of products

The best way to beat the competition in the wholesale business market is to provide a wide range of products so that retailers can consider your shop as a one-stop destination!

For example, if you are a fashion wholesaler, confining your shop to selling only men’s or women’s clothing will not make you perform better than it would if you offered both men’s and women’s clothing. Adding up fashion accessories like shoes or bags to your collection of products will also include you in the wholesale accessory market. Naturally, that leaves you with more sales opportunities!

• Going with the trends

While deciding to start a wholesale business for sale, make sure that you go with the latest trends to ensure that your business is never overshadowed by the competition! This is true for all segments, starting from fashion to electronics, beauty/cosmetics to baby products, mobiles to mobile accessories.

Whether it’s due to technological evolution or change in customers’ preferences, products are always evolving. So, that makes it mandatory for every business to update or upgrade their product with every trend to stay relevant in the wholesale marketplace.

• Ensuring quality

If there’s one definite key to business success then it is ‘quality’! Offering higher-quality products ensures that every purchaser returns to your store for repeat orders. To deliver top quality, most wholesale businesses have stringent checks in their warehouse or storage units. Thus, anything unusual or defects found in the products will be taken care of before dispatching them.

• No minimums

Many wholesale businesses make the mistake of setting a minimum order requirement. It is quite common that a retail shop or company would place bulk orders at a time. But still, many sellers want to start slow by selling in fewer quantities.

Also, some want to get a few products as samples to test them in the market. If their customers like the products, they would order in bulk. Hence, if you don’t want to turn away any of the potential retailers, then don’t put any minimum order requirements.

• Offering discounts

While wholesale business truly means selling in bulk, you can attract more customers by putting amazing discounts. This especially works for fashion clothing, grocery, baby products, healthcare, and other items that people buy daily.

While retailers move with one motto i.e., to earn more profits, discounts are sure to lure them. They would wait for your offers and then rush to purchase. It will give you a competitive advantage over other sellers in your product segment.

• Ensuring quick delivery

Another key success point for wholesale businesses that we would like to mention is the quick delivery time. Don’t let your customers wait! Making them wait will create a negative impression of your business and they might search for other sellers that are ready to deliver faster.

Pros & Cons Of A Wholesale Business

While most wholesale business ideas are rewarding and will help you get excellent benefits in the long run, there are also some disadvantages of doing a wholesale business that you should be aware of.

Here take a look at the list of pros and cons of doing wholesale business for sale.

Pros:

Starting with any of the wholesale business ideas will provide the following benefits.

• Volumes of sales:

Wholesale is all about a large volume of sales. As an online wholesale merchant, you will be selling large quantities to several retailers. Once you have established a good relationship with them, they will be purchasing from you regularly and that’s why your revenue will grow fast with time.

• Others will be doing your marketing:

Your products will be sold to end customers by the retailers. Most of your marketing or brand awareness is done in that way. Even if you haven’t invested any effort and money in social media branding or search engine promotions, products will still reach the market and people will know about it.

• Full control over sales:

Any business whether it runs in a wholesale product market or a wholesale accessory market is capable of determining its sales volume. Depending on the demand situation or product stock, they can either set minimum orders or can choose to sell any quantities to the retailers.

• Easy opportunities:

When a few of the retailers are convinced with your products, it is easier to get other retailers and sell them too. It’s because satisfied retailers will spread the word about your business without even asking for it.

Cons:

There are also some potholes in the wholesale business model that you should be aware of.

• Higher capital requirement:

Capital is everything when you want to start a wholesale business and you need a lot of it to get adequate stocks of products, get a warehouse or storage facility, hire a crew, etc.

• Large quantity purchases:

Every wholesale business plan revolves around buying and selling huge product quantities. It means you need the resources and skills to manage the purchase, storage, and distribution of products in big quantities.

• Stiff competition in pricing:

With many sellers in the wholesale market segment, it is tough to set the eyes of the retailers on your business unless you offer competitive prices. In other words, you have to keep your prices lower to attract retailers and win in the marketplace!

• Inventory risks:

The market situation is always unpredictable and so the demand for products fluctuates! At a point in time, it may happen that your products don’t sell at all and you are left with a good amount of stocks in your warehouse. Products can perish or become outdated, making heavy losses for you! Needless to say, you have to be prepared for such capital losses.

Start Your Wholesale Business With Main Street Market & Gifts!

No room for doubt setting up a wholesale business needs cautious planning! But before that, you need a thorough understanding of the wholesale industry. It is vital to know your target market, research the suppliers, establish relationships with potential customers, set a solid pricing strategy, and many more.

So if you’re interested in starting a wholesale business, our beginner’s guide at Main Street Market n Gifts is the perfect resource for you. Learn how to run a wholesale business and kick start wholesale journey into the industry. You will get to know how to kick start your wholesale venture with a proper business plan as well. Our comprehensive guide helps you to establish a strong foundation. Whether you’re new to the wholesale market or looking to expand your existing business, our guide will provide you with essential knowledge and strategies to thrive in the industry. Get started on your wholesale for beginners journey with MS Market n Gifts.Thus, by properly emphasizing these seven crucial things that our experts mentioned, you can not only start your wholesale business effortlessly but also develop it into a thriving company in the wholesale market segment.

Whatever product you choose to sell, just remember to go with the trends and adapt to the changes in your competitive market. If you still have any confusion or don’t know how to get started with your wholesale business idea, Main Street Markets & Gifts is here for you! We are a prominent marketplace for shopping online that brings wholesale businesses and retailers into one place. Join our marketplace today and experience success with your wholesale business model.