Wholesale businesses buy and sell a variety of goods from or to other wholesale and retail businesses for a profit. The difference between a wholesaler and a retailer is that the wholesaler does not sell goods to the buying public. Since 2009, United States wholesale distributor sales were approximately $3.2 trillion per year. Therefore, this business model has the potential to be highly lucrative for entrepreneurs seeking to break into the market.
Items you will need
- Wholesale Inventory
- Start-up Capital
- Storage Space or "Drop-Ship" Agreements
- Delivery Method
Create a preliminary plan. Before you can become a wholesale distributor, you must decide which goods you will be distributing. This decision will dictate how much start-up capital you will need, whether you will need a warehouse, and, if so, how large it will need to be. Wholesalers handle all types of goods including food items, clothing, paper and furniture. Chances are that most items in your home passed through the hands of a wholesale distributor at some point. Not all wholesale distributors build their business from scratch. There are many opportunities, especially in a down economy, to buy out a wholesale business and continue on where they left off. Advantages to this approach are previously formed relationships with retailers (customers) and suppliers, space and equipment, and in some cases, inventory. The obvious downsides are the costs involved with buying out an entire business operation and the question of whether the specific business is economically viable.
Acquire inventory. For a wholesale business, this can be accomplished in one of two ways: 1) by purchasing inventory from a manufacturer or another wholesaler and storing it at your home or storage facility, or 2) acting as a broker who facilitates the sale and delivery of goods but does not take actual possession of the goods. Manufacturers can be found, quite literally, around the world. If you have a specific product in mind the manufacturer's name and address will be printed on the product. All you would need to do is contact the manufacturer and request a purchase contract for the amount of goods that you intend to purchase. If you intend to act as a wholesale broker you will be acting, essentially, as a salesman for another company. You would need to set up a "drop-ship" arrangement with a manufacturer or another wholesaler to have orders shipped directly from their storage facility to your customers. These arrangements may be convenient for a new wholesale company, but will likely eat into your profit margin over time.
Arrange for product shipment. Unlike retailers, most wholesalers sell goods in large quantities. Regardless of whether you have a product storage facility on site or act as a broker, you will need a reliable method of delivering large shipments to your customers. This may involve purchasing or renting a delivery truck or using a service such as UPS or FedEx. Purchasing or renting your own delivery vehicle would most likely be the more cost effective option, especially over time.
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