There are many levels in a supply chain. Before a product ever hits the store shelves, it goes through various points of contact. One such contact is by the wholesalers. Instead of handling end customers, wholesalers sell products to other businesses, which then sell to end customers.
According to the Wholesale Global Market Report by Business Research Company, the wholesale market is expected to exceed over 50 trillion dollars in 2024 and grow till 2030. That goes to show how lucrative and competitive the market truly is. But is it hard to get into the wholesale market?
The market might seem very competitive and intimidating to enter, but it is easier than you think. In this guide, I will show you how easy it is to start a small wholesale business independently. You can start it from scratch, all from the comfort of your home. All it takes is the proper knowledge I want to impart so you can start your wholesale business.
How To Start A Small Wholesale Business For Success: A Comprehensive 8-Step Guide
Starting your wholesale business from scratch can seem like a huge challenge. But it doesn’t have to be so. Here is a comprehensive guide on how to start a small wholesale business and make it succeed in the future:
- Selecting Wholesale Items To Sell
- Finding Your Wholesale Business Supplier
- Setting Up Your Storage Location
- Getting Your Wholesale License And Permits
- Planning Your Wholesale Pricing Strategy
- Starting Your Wholesale Website
- Marketing Your Wholesale Products In Different Channels
- Expanding With Experienced Team Members
Step#1 Selecting Wholesale Items To Sell
The path to wholesale business success starts by selecting the right product to include in your wholesale business. Every product has a price, and you can start a wholesale company in any product niche. But without proper product research, you could have a failing wholesale business before you even started it.
Product selection requires many considerations. To have your small wholesale business grow and expand in the future, you need to consider the demand and popularity of the product. Retailers want to sell products quickly to reduce inventory management costs. So, popular will have more demand and sell faster than other products.
While sales velocity is essential, your business needs to be able to profit from sales. That is why profit margins are vital for your small wholesale business to succeed in the future. The lower the cost, the higher your profit margins will be. But you cannot sell low-quality, low-cost products and expect to succeed. There is a small profit margin from wholesale sales. So, the right product will help you succeed in your wholesale business.
As a wholesaler, you will need to think about the product size and dimension itself. Wholesale businesses have to sell in large bulk, so you must consider how you will store your products. T-shirts are easy to store, so the wholesale business of T-shirts is trendy. So keep that in mind when you make your product selection.
There are also external factors, such as seasonal trends, that you need to account for in your wholesale business. If you are wholesaling air conditioning units, you might expect large sales in the summer but little to no sales in winter. That is why seasonality and seasonal demand are essential when selecting your product.
All these different factors are responsible for your wholesale business’s success. Initially, your business will be small. But it will expand when you have the best products to buy in bulk and sell for your wholesale business.
Step#2 Finding Your Wholesale Business Supplier
Once you have found the product that you will sell in your wholesale business, the next thing to do is find a wholesale business supplier. Keeping clients will become problematic without a consistent supply of products that you can resell.
Wholesale business is mainly business-to-business (B2B) centric, meaning your company will have to interact with other businesses instead of individuals. B2B relationships are usually long-term, and supplier and vendor relationships are crucial for wholesale business success.
Here, having multiple suppliers helps you find the right product for your business and is a backup for a supply chain disruption for your leading supplier. Then you also need to worry about quality. The better quality you provide for other businesses, the better your B2B relationships will be. Find a supplier who gives fair rates and quality products.
When you approach these suppliers for the product, ask about their minimum order quantity (MOQ) and about samples. Samples are a great way to verify the quality of the product, while MOQs will help when purchasing the product. Learn more about your supplier to get better products for your business.
Step#3 Setting Up Your Storage Location
Once you are satisfied with the quality of your product, you can go into the next step of buying the product. However, wholesale deals are in large quantities, so you need to ensure you have the proper storage location.
Starting as a small wholesale business has its advantages. You can source the products locally and store them at your home. This cuts the additional storage costs, such as renting warehouses. While this might be good as an initial storage location, you must consider upgrading storage.
First, you must find a storage location where the products can be kept safe and secured. This also means that the products cannot be damaged during storage. If you want to go into grocery wholesale, the temperature can determine how long you can keep products in storage.
Along with storage, you need to get your hands on storage solutions. This includes inventory management software, so you have all product information on hand to keep track of your product more efficiently.
Step#4 Getting Your Wholesale License And Permits
For a wholesale business, you need to get licenses and permits. This proves that you are practicing business legally and avoiding fines. You need many such trade licenses, varying depending on where you set up your business. Here are the ones that you need:
- Business License: This is an essential requirement for any business operation. To get a business license, you need to approach a specific local government office that approves business licenses.
- Sales Tax Permit: If you’re selling tangible goods, you’ll likely need a sales tax permit from your government’s Department of Revenue or Taxation to collect sales tax from customers. The name might change depending on where you want to start the business. For example, some states in the US call it a resale permit.
- Employer Identification Number (EIN): This is probably essential to legitimize your business. EIN is needed to hire employees, and it will be helpful to have it early on so you can expand your business with new hires in the future. Some countries require a fee to obtain an EIN, while other states and countries offer EIN for free.
- Zoning Permit: A zoning permit ensures your business activities align with local land use regulations. For example, if you were to handle shipping products by yourself. So, contact your local authorities to determine whether you need a zoning permit for your wholesale business.
- Trade Name Registration: Your business’s name makes you stand out. It is your brandable identity. If you’re operating under a name other than your own, you may need to register your trade name (a “doing business as” or DBA) with your state or county.
- Specialized Permits: Depending on the nature of your wholesale business, you may need specialized permits. For example, if you’re dealing with food products, you may need health permits; if you’re dealing with hazardous materials, you may need environmental licenses.
- Import/Export License: If you’re involved in importing or exporting goods, you may need special permits or licenses from the relevant government agencies, such as U.S. Customs and Border Protection.
- Insurance: While not a license or permit, you must have the necessary insurance coverage for your business, such as general liability insurance, product liability insurance, and possibly commercial property insurance.
You won’t need all of them, but having these licenses and permits helps business operations run smoothly.
Step#5 Planning Your Wholesale Pricing Strategy
Once you are set up on the legal side of your business, it is time to set up the pricing strategies for your wholesale business. Pricing in wholesale is more complicated than you would initially think. This is because you are selling to other companies who are then selling directly to customers. So, you will have to set the pricing strategy so that both you and your customers profit from product sales.
To help maintain a healthy profit for both your wholesale business and your retailer customer, you can place an MSRP on your product. MSRP, or the manufacturer’s suggested retail price, helps to keep the market competitive so there are no illegal pricing practices from retailers. It is up to you how you want to set up an MSRP for your customers, but it is always best to help maintain healthy profit margins for customers.
Another way that you can solidify your pricing strategy is through MOQs. MOQs help set a minimum quantity that your customers have to buy. Additionally, MOQs help increase sales so profit margins are maintained while helping manage your inventory. Your customers buy a minimum amount so you can earn a profit, and they can earn a profit from selling them.
Along with MOQs, you can offer various discounts to customers. Volume discounts encourage customers to buy a certain amount to get a discount on purchasing your wholesale product.
Additionally, you could also look into dropshipping your product. The dropshipping model is the best way for a small business to get products to its customers. You handle the business side of things while your suppliers send the products to your customers for you. It reduces inventory holding costs and increases your profit margins.
The pricing strategy is also where you can set up how your business will handle payments. These can be paid when the products are ordered, delayed payments up to certain days after receiving products, or paid only after orders have been fulfilled.
However, you want to set up your pricing and ensure the strategy is fair for your customers and your business’s growth.
Step#6 Starting Your Wholesale Website
With everything set up, you can sell your products at wholesale prices. However, one thing that you should consider for your small wholesale business is to start selling online first. Here, you need to set up an eCommerce website like on Shopify. While there might be a need to get Shopify Plus for all the benefits of wholesaling, you can easily do wholesale business on Shopify without a Shopify Plus account.
Wholesaling as a small business might not seem viable initially, but that is soon changing because of the increasing number of online customers. Digital Commerce 360 reports how over 50% of customers want to buy wholesale online. Building your website helps you reach this new B2B customer base.
Your website should have an ‘About Us’ page to show customers your goals and business structure. You should also have pages outlining return policies and how to contact your business if customers want extra information.
Last but not least, your website should also have a product listing of all available products that you want to sell to your customers. Set up your website for easy navigation and fast load times so customers can browse your product catalog easily.
Step#7 Marketing Your Wholesale Products In Different Channels
Once your website has all the product listings, you must reach the customer base through marketing. Marketing your eCommerce website and wholesale business allows you to differentiate your business from the competition.
First, you should market your business so that more customers know about your brand. As a wholesale business, attending trade shows can open your business to new customers looking for new suppliers.
Joining online marketplaces also allows new customers to find your business. Marketplaces like Faire, Orderchamp, and Go Wholesale give your business access to a broad customer base online.
There are other ways that you can market your business as well. Giving discount deals for new customers or referral codes effectively attracts new customers to your business. Bundle deals and loyalty programs can be effective marketing strategies in the future as you grow a solid customer base for your business.
Step#8 Expanding With Experienced Team Members For The Future
Wholesale businesses are challenging to enter because they have a small customer base that other firms are trying to obtain as clients. This is where having experienced team members is vital to success in the wholesale market. It becomes easier to navigate the ups and downs of a market when experienced team members are there to help.
So, where would experience help most for your wholesale business? Customer success managers and executives will help with customer acquisition and retention. A quality assurance manager and inventory analysts will also help improve your product quality and inventory management. And finally, your business needs team members who can handle growth and plan for the future of your business.
Is Wholesale Business Profitable?
Many people wonder if the wholesale business is profitable or not. Wholesalers are part of the supply chain where retailers hold the most significant profit margins. However, the wholesale business is more profitable than people believe.
Firstly, wholesale businesses get to buy directly from manufacturers in large volumes. This means wholesalers get significant discounts for bulk buying. Some wholesalers specialize in one product type, which many retailers buy from. In addition, there are niches like real estate wholesalers and wholesalers who broker deals between other wholesalers.
All these different types of wholesalers are integral parts of the supply chain. Profitability depends heavily on the market scope and demand for the product that you are selling. This is why the first step in selecting a wholesale product is essential. The right niche or product selection sets your wholesale business up for success because of how the market will perform in the future. That is why you should thoroughly research the market and competition to make your wholesale business grow and succeed.
Improving The Shopping Experience On Your Wholesale Shopify Website With A Mix & Match Bundle App
The focus on wholesale is primarily on the product. Yet the customer experience helps keep your customers loyal to your business. The newer generation of buyers is more focused on this customer experience and wants it to be as effective and efficient as possible.
On Shopify, you can use the Shopify app store to install third-party applications to enhance the customer experience. For a wholesale business, a mix-and-match bundle app with an MOQ feature is just what you need to help improve the customer experience. Here is an example of this:
With this on the product page, the store can sell multiple product variants on one product page. Customers can choose which variant they want by selecting the swatches and then deciding how many. However, the picture shows the ‘Add to Cart’ and ‘Checkout’ buttons are greyed out. This is because are 19 units chosen when this particular product only allows 18.
An app like this improves customer experience in your wholesale eCommerce business. First, it helps display all product variants on one page so customers can browse the options more. The mix-and-match style allows customers to make their own choices, which helps personalize their shopping experience. It increases engagement and makes it more likely customers will purchase the product.
Second is the app’s maximum order quantity (MOQ) feature. Usually, Shopify does not have an MOQ feature. But the app helps set an MOQ restriction. Customers get to buy the exact amount you want them to buy. The customer cannot add the product to the cart without fulfilling the MOQ conditions. Once fulfilled, the customer can add all the different variants to the cart with one click. This reduces customer errors when ordering and improves their overall experience, making shopping more accessible.
Finally, the app helps get by Shopify’s variant limitations and options. Shopify does not allow more than 100 variants per product, with only 3 options. But with the app, all of that is bypassed so that you get to have a customized display of all variants shown to the customer.
With just one application like this, you can improve the shopping experience for your customers and help improve sales on your eCommerce wholesale business.
Bottom Line
Starting a wholesale business can be intimidating. It is all about starting small and then expanding in the future. The most essential step in wholesaling is choosing the product for your business to sell. Hopefully, this guide has taught you how to start a small wholesale business from home.
