Understanding how the retail industry works is essential to running a successful wholesale business. Before items show up on retail shelves, they are produced by manufacturers. The manufacturers sell the products to wholesale distributors. According to Entrepreneur.com, there are three main types of wholesale businesses: wholesale distributors, manufacturers' sales branches and agents. Wholesale businesses buy the goods directly from the manufacturer or other wholesale companies. These goods are then sold to retail distributors or, as is becoming more common, the public through membership clubs such as Costco, Sam's Club and BJ's Warehouse.
Prepare a business plan. According to Bpplans.com, a business plan is essential to starting a successful business and writing your own is recommended. Download a free template and insert your business's details. Your business name, goals, aim, expected sales, expenses and investment needed should all go into your business plan.
Approach investors and banks for start-up capital. If you have your own money, this step can be skipped. Investors exchange cash for a percentage share of your future profits. Be careful when giving away future percentages. Only take as much investment money as you need. Banks may offer a business loan that you must pay back with interest, but they do not take a share of the business.
Buy or rent premises. As a wholesaler, you will need to decide if you are going to stock fresh items such as food or long-lasting items such as furniture. Once you have decided what you will stock, find a premise that suits your needs. Wholesalers can have a small shop with large storage, relying on catalogue sales, whereas some have large shops in which potential distributors can browse the items.
Contact manufacturers of products you wish to stock. Products are cheapest when bought directly from the manufacturer. The downside to buying from a manufacturer is that it will often insist on a minimum order. If you cannot afford that, buying from another wholesaler is an option.
Decide your markup. The markup is the amount you will add onto the wholesale item's price. This creates your profit. Be sure to include your expenses and taxes when pricing an item. To get an idea of a suitable price, contact other wholesalers and find out what they are charging for the same product. Pretend to be a customer interested in purchasing the item. Check online; many wholesalers have websites with their prices.
Advertise. If you do not advertise your wholesale business, retail distributors will not know where to come for their products. Contact stores and businesses that stock the items you are selling. Building a personal relationship with store owners can help sway them from competitors.
Monitor your inventory levels. The longer something sits on the shelf, the more money it is costing you. If an item is not selling quickly, consider ordering less next time or drop the product altogether. Listen to your customer’s requests and always be on the lookout for new products to sell wholesale.
Running a wholesale business takes organization, sales skills and a lot of time. Be prepared to put in the work.
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