Wholesale is an activity where a manufacturer sells goods in bulk at a cheaper or discounted price to the retailers. Retailers or shopkeepers then repackage and resell the products in smaller quantities to their customers at higher prices.
Buying in large quantities enables the options for a wholesaler to provide a discount to the retailers as well. The prices retailers fix for the products in the next phase for their customers reveal the overall cost of the business. In supply chain management, wholesale is only a single step. The entire process includes –
Some wholesalers work independently, and others work with more than one manufacturer sometimes. So it can be complicated to create a complete and clear guideline or categorize the wholesale business environment.
According to most supply chain experts, wholesalers fall into three different categories. As a startup business, you may not have to deal with all three types of wholesalers, but with time, when the business expands, you might have to.
Let’s get to know all three of them:
It is the most common wholesale type amongst the three. Merchant wholesalers operate as individuals or businesses and work directly with suppliers or manufacturers. They do not manufacture the products themselves.
Merchant wholesalers purchase products from the suppliers in large quantities, import and safely store the products in the inventory. They have in-depth knowledge regarding the product and the market, which helps them deal with brick-and-mortar or online retailers. They know exactly when and to whom they should sell their products.
In the next phase, they sell the products in smaller quantities at a slightly higher price which ensures their target profit margin.
A broker or agent works on behalf of the manufacturers that struggle to sell their products. These people are mostly middlemen or intermediaries between wholesalers or direct retailers and manufacturers.
A broker, agent, or commission merchant negotiates a profitable deal between two parties. They get paid a commission or percentage of the sale by the supplier and sometimes from both parties.
The demand for some products is found high in the market. Instead of relying on wholesale businesses, these manufacturers are large enough to hire people as sales representatives or teams that actively represent them to their target market.
It means a manufacturer will approach wholesalers or retailers through their sales force and offer the products directly and make the deals. Deals are usually tailored depending on individual sales cases.
Wholesale in a business is just one step in the entire supply chain management (SCM). The supply chain includes raw materials suppliers, manufacturers responsible for finished products, retailers, and end-users or consumers. Wholesaler works as a bridge between manufacturers and retailers to end-users.
Wholesalers purchase products from manufacturers and sell them to retailers. Retailers then sell the products to the consumers at a cost high enough to generate profits to cover the cost to continue business further.
Bulk quantities or wholesale are often used interchangeably in businesses, but they are not the same. They both have different definitions.
Buying products in bulk or wholesale are often offered to anyone, no matter if they are retail or wholesale businesses. The most important thing is – buying products in large quantities in the process. For instance – one can buy 200 t-shirts at a time, even if it is for a one-time purchase.
Some people do not want to go to the pain of setting up a wholesale account. Instead, they prefer buying bulk quantities. But you must keep in mind that selling in bulks depends on the seller’s definition most of the time.
A seller can set up a product with a fixed minimum or maximum quantity and call it bulk. Read more about how you can apply minimum/maximum quantity for your Shopify store.
Also, bulk quantity depends on the types of products you want to purchase. For example – a seller can set up a minimum of 10 or a maximum of 100 units of a product one can buy from him. So, you should enquire about the bulk quantity fixed to do business with that particular seller and whether your needs qualify for the special pricing or not.
When buying in bulk, you might find a seller selling a case lot or lot at a set price. The case lot can be piled up with different products or a certain product in a variety of sizes and colors. For example, many t-shirts of different designs, colors, and sizes can be sold in a case lot. It is usually in an overstock situation or sometimes in closeout sales.
When it comes to wholesale pricing, you will need to set up a wholesale account with the seller to continue the business. After establishing a trade relationship with the seller or manufacturer, usually you purchase products significantly in large quantities from them.
In wholesale, your purchase quantity exceeds the purchased quantity of the regular bulk buyers. Make sure to set up the minimum or maximum purchase quantity in agreement with your supplier.
A wholesale setup with a manufacturer or supplier will require you to provide proof of the legitimacy of your business. You have to provide your VAT registration number or business license as well as proof of previous or ongoing trades with other businesses.
For instance – you own a B2B/wholesale store on the Shopify platform. Shopify offers countless applications on their platform that help merchants enable wholesale or bulk orders for their wholesale customers.
Amongst many, an application like MultiVariants – Bulk Order, helps you sell your products to your wholesale customers easily. Through a super simple installation process, you activate wholesale or bulk order options in your store. The best thing about MultiVariants is that it comes along with a free plan alongside standard and professional packages.
You sell products in wholesale or bulk or with multiple variants through your online store. MultiVariants makes the entire process easier for your customers. It offers:
Subscription option that will help your customers subscribe to those products to get their order every week or month automatically.
After going through an in-depth discussion, now you know what wholesale or bulk order is, how it can be a great way to find deals in your favor, and there’s a big resale market for it as well. With the right supplier as a wholesaler or a retailer with the right wholesaler, you can smoothly grow and run your business and hit your target profit margin.