The Advantages & Disadvantages of Wholesalers
Wholesalers can save you money and streamline your purchasing systems, but they’re not always the best fit for small and specialized businesses. Large scale distributors deal in volume and focus on moving large quantities of product at prices you can mark up, allowing you to earn a profit reselling to your own customers. But you may not need the quantities that a wholesale distributor provides, and the products they offer may not be tailored to your specific audience. A strong small business purchasing strategy reaps the advantages of wholesale pricing when appropriate while filling gaps in demand by dealing directly with small independent producers.
The term “wholesale” refers to the link in the supply chain that provides retail businesses with products created by other businesses. A nation-wide distributor is a wholesaler, but a small bakery that distributes its handmade confections to coffee shops and groceries is a wholesaler as well, because it sells its products to retail stores rather than directly to end users. Small, independent wholesalers tend to make and sell specialized products that retail businesses aren’t equipped to make themselves, such as the bakery that provides pastries to coffee shops that may not have space for their own industrial ovens. Large wholesalers typically distribute an array of products from multiple manufacturers, and they deal in larger volumes offered at low prices.
Large wholesalers aren’t hard to find. Because they occupy such a large share of the market, their names will come up quickly in an internet search. If you’re interested in purchasing a specific product from a wholesaler, check the manufacturer’s website for a list of distributors or email and ask which companies wholesale their offerings in your area. Once you get in touch with the wholesaler, you’ll still need to ask questions to determine whether it’s a good fit. Consider delivery minimums, distribution schedules and whether they sell in quantities that make sense for your business.
Working with a large wholesaler will usually get you lower prices than buying retail or purchasing smaller quantities directly from a manufacturer. But you may end up with more inventory than you can use in a reasonable time frame, tying up capital that you could be using for more urgent expenses such as rent and payroll, and cluttering up valuable storage space. In addition, customer demand tends to fluctuate so you may find yourself with a supply of shirts or canned chili rapidly approaching its sell by date that your customers no longer want.
As online shopping has evolved, small businesses now find themselves with online wholesale options as well. Online companies such as Alibaba and Amazon source from global marketplaces and offer an even wider array of products than a large brick and mortar wholesaler. However, unlike a wholesaler that specializes in the types of products that you sell retail, it may be difficult to sort through thousands of options to find the right ones for your company.