Volume, volume, volume. For most any startup, the switch from direct-to-consumer to selling wholesale is an opportunity for great expansion. But going wholesale can be an intimidating leap. The wholesale mentality is all about scaling operations rather than batching them.
For small business owners, expansion can feel overwhelming. You must develop entirely new means of production, marketing, and distribution to meet the demands of a broader network. That said, the opportunity for growth and brand recognizability can increase when a company switches to wholesale. Here’s what you need to know:
Selling wholesale is the process of selling a company’s products in large quantities to a third-party retailer or distributor, typically at a discounted price. That third-party company will then turn around and sell those products to customers. While the company is still able to sell its products directly to customers, this shift in distribution has a massive impact on the way that companies operate and distribute their products.
For most consumer brands, there are two types of wholesale: brick-and-mortar and online.
Wholesale by way of brick-and-mortar is the process of selling products to a third-party who then sells them in person on your behalf. An easy example is a department store. Say you run a skincare company. If you sell high volumes of your product to a department store and they put it on their shelves, you’re doing brick-and-mortar wholesale.
Oftentimes brick-and-mortar wholesale involves the use of additional distributors. These are companies who buy your product first and then sell it to the retailer.
Platforms like Amazon, eBay, and Wayfair are considered online wholesalers. This is because companies sell their products to these sites to be hosted on them and distributed directly to consumers. Companies like Amazon offer various ways to distribute and send products directly to consumers, but for all intents and purposes, they are wholesalers. A customer visits Amazon to buy another brand’s products.
“Wholesale” isn’t the most glamorous of words. It evokes ideas of large shipping boxes, dusty warehouses, and impersonal sales. Especially for small businesses who pride themselves on high-quality, hand-crafted products, wholesale can feel like a far (and expensive!) reach. As businesses grow, they need strong profit margins on every sale; the idea of sacrificing part of your revenue in order to pay a wholesaler might feel wayward.
However, there are many benefits to going wholesale that can make up for potential shortcomings. Here are a few:
When you sell your product in a store or on an online retail platform, much of the marketing is handled by the wholesaler themselves. Department stores, for example, will offer promotions and advertising to get foot traffic into the mall on your behalf. This can greatly increase your sales without upping your marketing spend.
When you sell direct-to-consumer, you are single-handedly responsible for each sale.
Selling wholesale means your product gets swept into the stream of other brands — and that can be a very good thing. When a consumer visits Amazon, for example, they’re able to compare the benefits of your product directly to competing products. You are able to access other brands’ audiences, and potentially convert customers.
Especially for online platforms, using a wholesaler provides the opportunity to enter a new market that you couldn’t have done alone. Many startups leverage wholesalers to expand domestically or internationally for the first time. It’s less risky and less expensive to try out new regions with a wholesaler than it would be to go it alone.
When a third-party retailer buys your products, they will likely do so in large quantities, or in bulk. Larger orders means more revenue for the company. This creates a system in which the company generally makes much larger amounts of money on a regular basis and has a higher production output. Even if the per-product price is lower than selling directly to the customer, the increased volume can make up for any potentially lost product margins.
Selling wholesale can actually be a simple process to begin. Although doing so does require a good grasp of logistics and distribution, online platforms like Amazon and eBay make it easy.
Amazon provides a large number of tools to sellers and wholesalers through its Amazon FBA program. This is a tool that Amazon provides, allowing all orders to be Fulfilled by Amazon once the products themselves are sent to Amazon warehouses. FBA does have a cost, but the amount of convenience it gives to a company will often make up for added expenses. All the companies need to do is ship the products to Amazon.
Selling in department stores and brick-and-mortar shops can be a tad more difficult because they tend to require more distribution partners. However, they are still viable and useful options when it comes to selling wholesale. Choosing the right distributor is a good first step to selling in brick-and-mortar stores.
Distributors will often reach out directly to try to purchase inventory at wholesale prices so that they can sell in stores. Selling to one of these wholesale purchasers is a fairly simple process, but it’s important to choose partners carefully. Also, you need to choose your minimum opening order: This is the lowest quantity that you’re willing to sell at wholesale prices to ensure you’re making a profit. Once you determine this, you can start testing with wholesalers.
Selling wholesale is a big step for a growing business, and it has the potential of scaling your company up quickly. Settle offers the cash flow management systems that can accommodate quick growth so you can spend more time focusing on your expansion.
From centralized tracking to flexible bill pay management, Settle’s technology streamlines your finances. Settle also offers global access bill payment, which means as you expand into international markets (through wholesalers, possibly), your partners will get paid on time and without hidden fees. Moreover, we offer receivables factoring so retailers themselves can get cash flow moving quickly in their direction too.