Wholesalers play an interesting and important role in the marketplace. The wholesaler business model is evolving to meet the demands of eCommerce, nimble online startups and Fulfillment by Amazon. Ultimately, a wholesaler sources and stocks bulk goods and sells them to retailers at a low price.
The wholesaler business model is close to the manufacturer in the supply chain. They can source inventory directly from a manufacturer and buy in bulk or from a distributor who deals with the manufacturer. Ultimately, the wholesaler is trying to source valued products in bulk and at a very low price. They warehouse these products and have a catalog for retailers to purchase products and sell them to their customer base. The wholesaler does not deal directly with the public customer. They deal directly with licensed retailers.
Retailers use wholesalers to easily source products at a low price. They can set margins and markups for the end consumer and quickly access inventory to stock stores. Working directly with manufacturers adds a time consuming element to the retail process and wholesalers ultimately handle this while storing inventory so it can reach the market quickly. Retailers using wholesale services are typically selling other brand products. A brand that manufacturers or sources its own products will not use wholesalers, but they may distribute to wholesalers to get inventory in the marketplace.
Most wholesalers buy in bulk and still have minimum order requirements for brick and mortar and online retailers alike. The fast paced world of eCommerce has driven the wholesale model to accept dropshippers with potential fulfillment services. A dropship business will use the wholesale catalog to display inventory on a website. The digital retailer sells the inventory to their customer base and the wholesaler will ship from their warehouse to the customer directly. The wholesaler will use the retailers shipping labels and branding to make it look the product came directly from their brand. In some scenarios, a separate logistics company will handle the fulfillment while the wholesaler focuses on sourcing inventory.