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Wholesaling is the act of selling your products in bulk to another retailer, usually at a discount, who then sells the product to their customers at a higher price. It's important to note that creating a wholesale channel for your business still allows you to sell your product to the end consumer. As a wholesaler, you can sell to both consumers and other retailers. The first examples of wholesale businesses that might come to mind are probably large brick-and-mortar department stores, like Walmart or Target.
One of the myths about wholesale ecommerce is that you need loads of cash to get started. While you do need some startup money to break into the wholesale market, there are ways to scale your growth. For example, reorganize your existing space to make room for your bulk products rather than renting a new storage space right off the bat. However, in more recent years, wholesale has experienced a revolution of its own due to online selling sites like Amazon, Wish, and Wayfair.
While ecommerce enables direct-to-consumer brands to thrive by lowering the barrier to setting up shop, wholesale still offers consumers a convenient shopping experience where they can find everything they need in one place. This newer version of wholesaling, which often takes place in online marketplaces or through smaller boutiques, has advantages that are attracting direct-to-consumer brands too. Here are three reasons why opening up a wholesale channel might benefit your business.
As a direct-to-consumer brand, a large amount of your budget needs to be allocated to marketing in order to grow. For every new customer acquired, there is often a cost, after all. In truth, B2B ecommerce is experiencing massive growth and drives much higher revenue than B2C ecommerce.
By selling your products wholesale, you can let another business shoulder the cost of customer acquisition and reinvest your time and money in other areas of your business. Just as acquiring new customers costs money, building a loyal audience of fans and customers is not an easy feat. By creating a wholesale partnership with an established brand that has already made a name for itself within your niche, you can leverage the company's goodwill to get your product into the hands of consumers.
Expanding your business to a new country or territory comes with a series of associated costs, like warehousing and logistics.
Finding another retailer with an existing presence and supply chain in a new market can help reduce the risk of international expansion by cutting your setup costs. Ultimately, a wholesale business model benefits both the retailer and the wholesaler by creating efficiencies. The retailer gets a new, often complementary, product to sell, without investing in research and development, and the wholesaler saves money on marketing by gaining direct access to an existing customer base.
Pricing strategies are one of, if not the most, crucial components to creating a successful wholesale business. The steep discount is to allow retailers to wholesale your product to their customers, while still retaining some profit margin as well.
This can sometimes pose various risks for small businesses, including not being profitable. Luckily, there are ways you can price your product for wholesale to mitigate the risk of not being profitable.
One way is to offer a discount based on purchase order quantities. This way, retailers will be encouraged to place larger orders to get a better margin upon resale of your product. Many wholesale businesses even set minimum order quantities MOQs that retailers must buy in order to carry their product. When you decide to wholesale your product and have it carried by multiple different stores, you can sometimes run into issues with competing retailers undercutting each other when it comes to price.
This is why creating an MSRP is an important element of your wholesale pricing strategy. An MSRP is often part of a contract that a business will give to a retailer that wants to sell their products. It guarantees that the retailer will stick to the suggested retail price so that the product pricing will be the same wherever it is found in stores or online.
Usually, the MSRP is found alongside individual products on a wholesale storefront, or on a sales sheet or product brochure sent to prospective retailers who wish to carry your product.
One thing to consider when setting up an MSRP agreement is whether or not you want to allow discounting around holidays like Black Friday and Cyber Monday or specify certain times you might want to discount the product on your own website to customers. As the wholesale supplier, you get to set the rules that your retailers have to comply with, but maintaining a fair balance with pricing is essential to making your retailers successful. If your retailers are able to make a profit selling your product, they will continue to come back and place larger orders.
When it comes to how to sell online , you first need to consider whether you want to create a pure wholesale business or offer a wholesale option in addition to selling directly to consumers through your own store. There are multiple ways you can approach this and what you choose will ultimately depend on your context. For this installment, we address a question about the pros and cons of selling products on a retail basis, versus wholesale.
The question comes from Jan Hansen, co-owner of Jewels by Jan , a producer of handcrafted gifts that the company sells to retail consumers on its own website and, also, drop ships — on a wholesale basis — to resellers. For the answer, we turn to Shirley Tan. She is a consultant to ecommerce merchants, and the founder and past owner of American Bridal, a leading provider of bridal gifts and accessories.
Jan Hansen: We offer our handcrafted products at retail prices on our website. We also drop ship them for other websites that sell our products for us. 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:. 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.
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.
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. 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! 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. Our nine-minute guide will cover the following topics which will help you get started on selling wholesale: Wholesale What Is Selling Wholesale? Wholesale What Is Selling Wholesale How does selling wholesale differ from selling to consumers?
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. Consistent Income Source When selling direct to consumers, your sales figures can vary drastically due to constantly changing consumer preferences. 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? If you are looking to target online retailers , you should also understand: Who are their target customers? You can take control over your consignment sales by only agreeing to terms you're happy with.
Store owners may or may not be willing to negotiate, but you never know unless you ask. Your requests can include how your product will be displayed, payment frequency, sales splits, and more. You may also want to address what happens in case of theft or damage, any additional fees involved in the process, and inventory management. You should also try and find consignment pop-ups. These opportunities could help draw attention to your brand and products and usually experience higher-traffic than the traditional store.
That means quicker profit turnaround and an increased customer base. Wholesale means selling your product in bulk to a distributor at a discount. The distributor is your middle man. You sell to them, then they sell to the consumer. For many businesses looking for scalability, wholesale is a very appealing option.
Here are some of the biggest benefits to selling wholesale. Your risk is low. Consignment and wholesale have opposite risk profiles. The pressure is on the distributor to sell to the consumer and make their money back plus profit.
Your branding shines. Wholesale distributors buy your product as-is, including the branding. That means big brand exposure with minimal-to-no marketing expenditures for you. In reality, you're using someone else's marketing budget to get your name out there.
You're dealing in bulk. It takes less time to sell your product all at once than one-at-a-time. It's also faster to make large batches than smaller ones and you'll likely save on your production costs when doing so. Since each order essentially includes marketing, delivery, and more in the purchase cost, you may experience bigger and more consistent paychecks.
Wholesale selling is not for everyone. You will want to keep the following in mind when making your decision. Your profit rate is lower. This might be a turn off for some, however, the guarantee of selling your entire stock generally offsets the lower profit potential.
You have a lot of legwork. There are more barriers to entry with wholesale than there are with consignment. You have to do your research on preferred distributors, their existing product lines, and how you play into their goals. You'll likely need a presentation to pitch your product and to build relationships with their sales reps and buying teams.
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