If you are reading this article, you probably fall into one of these categories:
- You have your products ready and are looking to start a wholesale business selling to retailers.
- You have a business that is currently selling to consumers and is looking to expand to sell wholesale.
Whatever your reason for considering wholesale, this guide will help you understand the wholesale landscape along with what is required to successfully sell wholesale products to retailers. By the end of this guide, you will be well-equipped with actionable tips for starting a successful wholesale business.
Our nine-minute guide will cover the following topics which will help you get started on selling wholesale:
- Wholesale 101: What Is Selling Wholesale?
- Benefits of Selling Wholesale
- Top 7 Tips to Get Your Business Started on Selling Wholesale
Now, let us begin with the 1st section...
Wholesale 101: What Is Selling Wholesale
How does selling wholesale differ from selling to consumers? The fundamental difference is that you are dealing with a business rather than an individual. Decisions are made based on the amount of revenue your product can generate for the business rather than an individual’s personal interest or need for a product. Wholesale buyers are not seeking to use the product for the experience, but instead are focused on selling your products to their customers.
Wholesale opportunities will vary depending on the type of industry you operate in and the kind of products you sell. The basic definition of “wholesale” refers to the sales opportunity for you to sell your products in bulk, usually at a discounted price, to a retailer. These retailers will then resell your products to their customers.
Let us move on to the next section and take a quick look at how selling wholesale could be a boon for your business.
Benefits of Selling Wholesale: How Selling Wholesale Can Take Your Business To Greater Heights
Selling to businesses means larger, more consistent sales, and increased brand awareness. Let’s go into more detail on each of those benefits.
1. Selling Wholesale Means Selling In Bulk
In wholesale sales, since you are selling to businesses rather than individual consumers, a single order tends to be large. Instead of selling only a few items to end-customers like in B2C sales, you would sell your products in quantities many times that of B2C sales orders.
This means your sales revenue will often be in the hundreds and thousands of dollars for just a single order. Depending on the types of businesses you sell to and the products you are selling, your average order values could be much higher. These large orders will propel your revenue upwards, and revenue growth will jump with each additional customer.
2. Consistent Income Source
When selling direct to consumers, your sales figures can vary drastically due to constantly changing consumer preferences. Your business will always face uncertainty, not knowing when your B2C customers will move on to the next trend.
However, another beauty of selling wholesale is that businesses change their purchasing habits much less than consumers. If your wholesale buyers find out that your products are selling well in their store, they will continue to order from you. Thus, your company will be able to receive income on a more consistent basis. Large retailers may even work with you to improve your product and increase your turnover.
3. Increase in Brand Awareness
Getting shelf space at retailers helps lift your brand’s awareness with consumers. The more stores your products are being sold at, the more exposure your brand receives. Also, when retailers carry your products, you have the opportunity to offer in-store discounts or other promotions to reach new customers and deliver your product messaging.
The increased exposure and awareness of being in a few retailers drive consumer demand, which then has the cyclical effect of influencing other retailers to want to carry your products.
Selling wholesale products to retailers is a great place for a company to be. However, setting up a wholesale business, or changing a consumer-focused business to sell wholesale, is not easy.
To ease some of that difficulty, we spoke to hundreds of successful wholesale companies to learn how they first started. We have collected and boiled all those conversations down to seven essential tips that will help you build your wholesale business.
Top 7 Tips to Get Your Business Started on Selling Wholesale
Tip 1. How Do You Identify Which Retailers To Sell Your Product To
The first step to identify which retailers you should sell your product at is to conduct proper market research on your end-customer. Here are three key questions your research should seek to answer:
- Who are your target customers?
- What is their purchase journey like and what are their motivations?
- Where do they research and purchase?
After your market research has been conducted, you can start identifying prospective wholesale customers to target.
If you are looking to target online retailers, you should also understand:
- Who are their target customers?
- How do they acquire customers?
- How do they feature the products they sell online?
If you are looking to target wholesale customers who purchase for their brick and mortar stores, the best way is to head down to their store and walk around. As you browse through the store, here are some guiding questions to help you:
- Where do you envision your product to be located on the shelf?
- Where are your competitor products located?
- How much shelf space do you need?
- Does your product align with the image that the store is portraying?
With these questions addressed, you will have a better idea of which wholesale customers you can start targeting.
Tip 2. How Do Your Retailers Purchase?
Buying behavior differs across industry and customer types. For instance, when selling to a small boutique store, you might be dealing directly with the store owner. However, if you are dealing with a restaurant chain, you could be dealing with a dedicated buyer.
While dealing with the store owner can be relatively simple and straightforward, the same might not be said for the dedicated buyer. Since the dedicated buyer is purchasing on behalf of a few shops, he might have more demands. For example, he might place one batch of orders and expect that order to be delivered to multiple locations at different dates. Your business needs to be well-equipped to accommodate these types of asks.
Another point to take into account is the frequency in which your wholesale customers purchase. For instance, is your product seasonal? Do your customers only need your products during specific times of the year? For example, if you sell pumpkin pies, the demand will soar during special occasions such as Thanksgiving, but you can expect lower demand during the other times of the year.
A final point to take into account is your product’s shelf-life. If you are selling food products which have a short expiration date, you might have to handle smaller, more frequent orders. On the other hand, if your products have a long shelf life, your wholesale customers might not purchase from you on a regular basis. But when they do order from you, the very large purchase willl put extra demand on your production schedule.
Tip 3. What Is Your eCommerce Strategy?
These days, B2B buyers have many requirements when it comes to purchasing and they are increasingly venturing online. They seek independence during their purchasing process and expect an Amazon-like shopping experience.
A report by Microsoft states that 9 out of 10 customers worldwide expect businesses to provide customer self-service online portal for their products or services.
As a result, the traditional method of ordering by phone or email is quickly becoming irrelevant. Your wholesale business needs to be willing to embrace eCommerce to remain competitive. To keep up with the latest B2B eCommerce trends, there are several ways your business can provide this service to your customers. Here are the options you can consider:
- Selling on an online marketplace like Amazon and Alibaba
- Selling on a B2C eCommere platform configured for B2B
- Selling on a dedicated B2B eCommerce Portal
Each of these options has its pros and cons. You should investigate what your business requires and select your online sales channel according.
Tip 4. How Should I Price My Products For Wholesale?
This is probably the most critical question in your mind: What price should you set for your wholesale products?
A common rule of thumb is to set your wholesale price around 2.5 times of your production costs. However, you should take that with a grain of salt. It’s extremely important that you do the math and ensure your material, labor, and overhead costs are covered. You should also plan to account for external factors, such as shipping and shrink costs, when setting your final wholesale product price.
One effective way to justify your wholesale price to your wholesale buyers will be to have a suggested retail customer price.
For example, if it costs you $1 dollar to manufacture your product. You can sell your product to retailers at a wholesale price of $3 dollars and suggest they retail it to for $6 dollars. When you give a suggested customer retail price to your wholesale buyers, it will help them understand how they can profit from your product when they sell to their customers.
Also, keep in mind that, if your business also sells to consumers, you need to avoid undercutting your retail prices. To be clear, your wholesale price should be lower than your retail price. From a business perspective, this should be feasible, given the larger orders your retail buyers are making and the economies of scale you should be capturing.
Tip 5. How Do I Manage Different Customer Pricing and Discounts
One significant difference between B2C and B2B wholesale sales is the need to create different pricing lists for customers in wholesale.
In B2B wholesale sales, you deal with different types of customers. Your customers can range from small independents to large multi-nationals. The prices you offer to these customers should be different due to their different purchasing frequencies and volumes.
The easiest method to keep track of these different prices is by using pricing lists to keep track of prices and terms for each customer, or customer type. This helps to ensure you always provide your customers with the right pricing.
You might also be requested to offer quantity-based discounts depending on how much your customers orders. You would set up pricing tiers based on the total quantity, or total value, of goods ordered. For example:
- If a wholesaler buyer buys more than 100 units, they pay $9/unit.
- If a wholesale buyer buys more than 500 units, they pay $8/unit.
- If a wholesale buyer buys more than 1000 units, they pay $7/unit.
By offering up greater discounts for higher quantities, you will encourage wholesale buyers to place larger orders, as they can then enjoy increased savings per unit. Overall, this will help your business to generate more sales.
Another popular promotion is to offer perks for first time wholesale buyers. A benefit such as free shipping on a first order can incentivize a retail buyer to start purchasing from you.
Tip 6. What Is Minimum Order Quantity And Why Is It Important?
A minimum order quantity is the minimum quantity or total value of goods a customer needs to order from you to start purchasing from you.
The main objective of selling wholesale is to incentivize your customers to order in bulk. To achieve the selling volume necessary to witness an increase in revenue, a minimum order rule is often enforced.
While you might face criticism from certain retailers complaining that this rule is unfair when they don’t need that much quantity, this rule is important in justifying the discounted wholesale pricing you are providing for them in the first place.
Tip 7. What To Be Aware Of When Dealing With Taxes
One fundamental difference between selling wholesale and selling direct to consumers is that sales taxes are not collected on wholesale orders.
Sales tax is a retail point-of-purchase tax imposed by state and local governments that are paid by the purchaser for goods and services. As such, your wholesale customers will be implementing the sales tax when they sell to their customers.
Your business is not allowed to sell wholesale (and not charge sales tax) to anyone without a wholesale license. This wholesale license is essential as it would enable a retailer to purchase from a wholesaler without processing tax.
A good practice would be to obtain tax id documentation from your wholesale buyers before selling to them so that you will not run afoul of the law.
Selling wholesale might seem challenging, but by employing the right tactics, you can grow your business quickly.
If you are looking to sell wholesale online, Sweet’s B2B eCommerce portal is designed to help you manage your wholesale orders more efficiently.
With Sweet’s B2B eCommerce portal, your business can benefit from:
- Self-service order management,
- Customizable catalogs and price list for each unique customer,
- Accepting payments online.
Best of all, the process to set it up is quick and easy. No coding ability is required to use and manage the portal.
If you would like to find out if a B2B eCommerce Portal is the right fit for your wholesale business, request a free demo with us today!