A wholesale business purchases products from manufacturers in bulk at a discounted price and sells them to retailers. A wholesaler also provides discounts to retailers on buying in bulk.
Increasing competition, new market disruptors, and the adoption of new technology have brought some challenges to the wholesale industry. A lower profit margin signals that you have an inefficient workflow resulting from not considering the present challenges in the wholesale business. But what are those biggest wholesale challenges?
In this guideline, you will know about some wholesale distribution challenges and how to prepare for them, and some hidden dangers down the road.
A product has to go through a lot of processes from manufacturers to the end consumers. Wholesale distribution is an important part that keeps these processes transparent and efficient. In the ever-changing marketplace, wholesalers are facing increasingly complex challenges. Here are the top 7 challenges in the wholesale business –
One of the top challenges a wholesaler has to deal with is inventory management. It is an unending cycle that starts from acquiring products to storing and selling them to retailers in bulk.
Two extreme sides of the supply chain of most businesses are shortage and overabundance of products. Shortage of any product fails to meet the customer demand and is a reason to risk your customer base.
Overstocking increases the maintenance cost. In fact, this will be a recurring cost if the inventory stays for a long period in the warehouse. To prevent this problem from occurring follow the below instructions –
A wholesaler acts as a middleman between a manufacturer and the retailers. Wholesalers do not manufacture the products themselves. But while transporting the products from the storage to the retailers, a wholesaler is to ensure the quality of the products is preserved.
Some environmental facts might damage the quality of the products. For example – if you are delivering any dairy products, ensure that heat does not damage your products.
To ensure that quality products are delivered to the retailers, follow the below points –
In most cases, retailers blame the wholesaler if they get defective products. So, as a wholesaler, ensure you do not lose your reputation for any faulty product delivery.
Wholesale business owners sometimes fail to measure the profitability of a product. There are some costs that may not be easily visible. For example – the manpower cost to move any inventory around, storage cost, delivery, and transportation cost. So, track these hidden costs to find the exact profitability of products.
To avoid poor visibility of the product’s profitability, compare the manufacturing cost and selling price of goods accurately. Include all other costs like manpower, delivery or shipping, and other hidden costs along with the manufacturing cost while measuring it with the selling price. Identify the profitability on the basis of brands or categories of products. For example – under brand “A” there might be various products. Now, measure the total profitability of brand “A” which requires the individual profit calculation of each product under brand “A”.
One of the common problems that wholesalers face is property damage. Property damage might occur due to the following reasons –
These unexpected occurrences can damage the wholesaler’s stock in a matter of moments. To avoid property damage make an insurance plan and an emergency preparation plan.
For many business owners, the imbalance of the supply of goods according to necessity has been a constant issue. In the supply chain process, a wholesaler receives an order from the client and places the order with the supplier. Then the supplier confirms a delivery date. The wholesaler receives the goods from the supplier and delivers them to the customers.
But the process gets complex when a customer requires a set of products immediately but the wholesaler is unable to deliver them in time. This happens when the supplier needs a lead time to deliver products to the wholesaler. So, this mismatch leads to overstocking or a shortage of products.
How can a wholesaler get rid of this challenge of distribution?
Due to several market factors, the wholesale industry is undergoing a massive change. Many modern wholesale businesses are overcoming these challenges with enterprise technology while some distributors are found to be laggards in the adoption of new technology.
To survive in the competitive wholesale industry, you have to adapt to new technologies. Adapting to these technologies might require a bit of investment, but it will obviously help to build a higher profit margin for your business. Suppose you have an online wholesale store on the Shopify platform. A wholesale or bulk order app can easily solve your order process. Here are a few more technologies for wholesale distributors –
Every business wants faster growth. One of the biggest challenges in the wholesale business is the slower growth due to not having enough relationships and business expansion.
What should you do to improve your wholesale business growth?
Time, resources, and an easy ordering process are the key to running a successful wholesale business. To stand out from the competition, you must find a smarter way to face the current challenges in the wholesale business.
Know which goods are making more profits and which items are not. Make an effective strategy for less profitable products to make them more profitable.