The supply chain can seem very complex. Many moving parts in it might feel overwhelming to even think about. But when you break them down, it is much easier to understand how each of the individual chains works together in cohesion.
The supply chain comprises three essential ingredients: the manufacturers, distributors, wholesalers, and retailers. This article will be about wholesalers and the wholesale industry.
I will try to cover all the questions that you might have about the wholesaling business: how it works, the advantages and challenges in the supply chain, what are the best products to buy and sell, and how to set up a wholesale business online with ease.
So, what is a wholesaling business? Let’s find out!
What Is Wholesaling Business?
The wholesaling business involves purchasing large quantities from manufacturers or distributors and then selling them in smaller quantities to retailers or other companies. In short, they act as the link in the supply chain between manufacturers and retailers. After that, retailers sell the products to the end customers in the supply chain.
So, how do wholesalers profit from such a business model? See, wholesalers buy in very large quantities. Manufacturers that produce the goods can afford to sell to wholesalers at lower prices per unit because of this bulk buying. However, retailers don’t buy in the exact quantities as wholesalers. As a result of such economies of scale, wholesalers can sell the product to retailers at a slightly higher price. The difference between these prices is how wholesalers make a profit.
If you think about it, retailers and wholesalers are not that different from each other. Both businesses buy in bulk to resell for profit. However, it is the scale at which they do business. Wholesale buys in enormous quantities that a retailer cannot match. The customer base is also different, as retail is primarily a B2C (business-to-customer) while wholesaling is B2B (business-to-business).
Not just that, wholesalers do many other essential jobs behind the scenes. They can help market products for retailers or suppliers, manage inventory, and even be dropshipping wholesalers. All these additional services allow the wholesaling business model to be a profitable business.
Wholesale Business Online: The Future Of Wholesaling Business
The wholesaling business provides a great scope as a business idea. But it is in e-commerce where wholesaling is fast becoming the future. Statista recorded that over 30 percent of wholesale sales come from online businesses. But why is that?
Market Trends Favoring Online Wholesaling Business
More and more wholesale businesses are moving online because the market is slowly favoring it. B2B consumer behavior is moving towards favoring wholesale business online. Viewing and ordering products online is much easier than seeing physical catalogs. This accessibility makes life easier for B2B buyers.
With such rapid technological advancements in the past few years, viewing products online has also become more manageable. Mobile application view is improving, and we are just on the cusp of viewing shopping on a virtual reality system. This will make shopping online more convenient and immersive at the same time. AI product recommendations are also increasing the visibility of products to more and more buyers, helping wholesale businesses online grow and expand.
Finally, globalization is connecting wholesalers to customers all over the world. It opens up the market even further when your business goes international. Thanks to online wholesalers, this is now possible. It is easier than ever to set up an e-commerce wholesale business.
Challenges Faced In Wholesale Business Online
However, a wholesale business is not without its challenges. The e-commerce business makes it much easier to start a wholesale company, but it also means more competition than ever. An added layer exists for adapting to this complex business environment, as you must remain competitive online and offline.
There are also regulations that you have to maintain when you turn from a local to a global wholesale business online. There are cross-border transactions, juggling between different currencies, and preserving international shipping and trade regulations so it matches the law from where you are doing business.
This goes further as data security and privacy issues are at an all-time high. Consumers are becoming increasingly concerned about how their data is handled. Now, put this into the context of businesses, and you have to be extremely careful when handling data for businesses. In isolation, these problems are manageable. But putting them together makes it very challenging to do a wholesaling business online.
What Wholesale Business Is Best? – 5 Best Wholesale Business Examples
Knowing the best product categories will help give you a competitive advantage if you want to brave the wholesale business online. Here are some of the best wholesale business examples for your online wholesale business that you can try out:
Examining successful examples across various industries is crucial when exploring the best wholesale business opportunities. Each example showcases why it’s a prime candidate for a wholesale business:
Example#1 Fashion Wholesale Business
The fashion industry is one of the largest industries in the world. B2C e-commerce sales reached nearly 800 trillion dollars in 2023. A wholesaler will look at this statistic and know immediately that there is a significant demand for fashion products from retailers, which wholesalers can satisfy.
Clothing offers a diverse range of apparel options for retailers. T-shirts, dresses, hoodies, jackets, and many more are on offer. Wholesalers can also diversify their product options for retailers, providing them with various customers.
And fashion is not limited to just clothes either. Some wholesalers can specialize in jewelry, handbags, and sunglasses, all available for fashion wholesalers. Trendy products have high selling points, and it is easy to switch between trends. All these points combined make the fashion wholesaling business a lucrative business to participate in.
Example#2 Electronics Wholesale Business
Electronics are not far away from the fashion industry in e-commerce. There is always a growing demand for gadgets such as smartphones, smartwatches, and other electronic products. Even wholesale appliance businesses are successful because they supply essential home appliances, including kitchen gadgets, home entertainment systems, and smart home devices. These products address the needs of homeowners and tech enthusiasts, making them a lucrative market for wholesalers.
However, end customers usually go for brand products because of their authenticity. However, brands typically have a limited number of accessories for said devices. That is where electronics wholesale can profit because there are many low-cost third-party accessories wholesale businesses can offer for retailers. This allows the electronics wholesale business to sit amongst the best products to wholesale.
Example#3 Food and Beverage Wholesale Business
The food and beverages are a necessity for everyone and many retail stores provide it. This is where wholesalers can take advantage of their bulk buying power to buy bulk ingredients and supply them to bakeries, shops, and restaurants. By providing quality ingredients in large quantities, wholesalers enable their clients to maintain consistent product quality and meet the demands of their customers.
That is not all. There is also a large market for snack products. Wholesale snack businesses thrive due to the popularity of snack products among consumers. By offering a variety of snacks, including chips, nuts, and confectionery items, wholesalers cater to retailers in the food and convenience store sectors, tapping into a profitable market niche.
Example#4 Home Goods Wholesale Business
A house is not a home without the things that make it up and that is where home goods have a viable marketplace in the e-commerce wholesale industry. There is a significant demand for furniture, from sofas and beds to tables and chairs. Wholesalers can offer high-quality furniture for retailers to resell to their customers.
Home decor is also another niche that wholesalers can target. Specializing in one home decor item like wall wholesale wall art can be a great business opportunity for wholesalers. Home goods allow this specialization and cater to a single niche because of how deep the product selection can be. Home goods are excellent for wholesalers if a wholesaler is good at procurement and fulfillment.
Example#5 Beauty And Skincare Wholesale Business
Beauty and skincare is another industry where there is constant demand. It is also a significant market because there are repeat purchases, which builds customer retention. This is a signal for wholesalers that retailers will need a constant supply of cosmetics and skincare products.
Just like home goods, there are also specialization opportunities. For example, wholesalers can only sell one type of product, like moisturizers. Or, they can diversify their product range because of the many complimentary products in the beauty industry. Cleansers, moisturizers, and lotions all go hand-in-hand for beauty and skincare, giving wholesalers many options to buy in bulk for resale on their e-commerce website.
How To Start Online Wholesale Business In 6 Steps
Starting an online wholesale business requires careful planning and execution. Here are the essential steps to launch your venture successfully:
Step#1 Conduct Market Research
The first thing you need to do is identify a niche market with high demand and low competition.
Analyze your target audience’s preferences, purchasing behavior, and pain points. This will help you identify who the customers are and how you can solve their problems through your services.
Research competitors to understand their offerings, pricing strategies, and customer engagement tactics, and you will be good to go. I already gave examples of what you can sell, but you should aim for products you are familiar with to help make selling them more straightforward. You should also send out cold emails and reach potential customers to gauge the market demand. That way, when you reach the product procurement stage, you have a list of potential buyers you can readily market to.
Step#2 Create A Business Plan
A business plan has all the objectives and goals that you want to achieve through your business. It is not necessary, but it helps a lot in the long run when you know what you want to achieve.
Your business plan should include:
- Your business model, including your value proposition, revenue streams, and target market segments.
- Your sourcing strategy, detailing how you will acquire products from manufacturers or distributors.
- A marketing plan to promote your business and attract customers, including branding, advertising, and customer acquisition channels.
Step#3 Fulfill Legal Requirements
Next up is fulfilling the legal requirements for a wholesale business. Register your business entity and obtain any necessary permits or licenses to operate legally.
This includes:
- Business License
- Tax ID number
- Sales tax permit
- Commercial invoices
- Purchase orders
- Bill of lading
- Insurance documents
These requirements will be different from country to country, even in different regions of the country as well. Make sure to find out the legal requirements for your area so that you can do business legally. You could also consider trademarking your brand name and logo to protect your intellectual property rights and establish yourself as a legitimate business.
Step#4 Finding a Suitable Location For Your Inventory
Before you get the products shipped to you, you will need appropriate storage facilities. Different products require different storage conditions. For example, food and beverages will need exceptional storage conditions to last as long as possible. These are perishable goods and will not last without suitable storage.
As such, ensure you have a proper inventory management system for when you get the products. As a wholesaler, when you purchase products in large bulk, make sure not to underestimate the importance of having a proper inventory management system in place. It will also help if you find a storage location that you can quickly increase for B2B storage expansion in the future when you have more clients.
Step#5 Find Reliable Suppliers
Next up is finding reliable suppliers for your products. They will be the heart of your business by supplying the products you need. In this step, you want to:
- Research and vet potential suppliers based on product quality, pricing, reliability, and reputation.
- Ask for samples to test out the products that you will be buying in bulk.
- Negotiate terms and agreements with suppliers, including pricing, payment terms, and delivery schedules. This can also include a buy-now-pay-later term so you don’t incur high investment costs.
Step#5 Set Up an E-commerce Website With The Right Apps
Choose an e-commerce platform or marketplace to host your online wholesale store. For example, Shopify is a great place to start your online wholesale business because of the ease of setting up your store.
Customize your website to reflect your brand identity and optimize user experience for wholesale buyers. On Shopify, you have access to the app store, where you can integrate a third-party bulk ordering app for your business. Here is an example of a wholesale apparel e-commerce using a bulk order app to help boost sales and improve the shopping experience:
Here, you can see multiple size variants for the T-shirt, which range from 4XL. Your customers can choose each quantity for their products. The variants’ prices can also be set according to what you want. This allows you to mix and match variants of different price ranges together to create a personalized bulk-order product bundle for your clients. The customer can choose the variants they want to buy for their stores and you can give them all the selection of variants on one product page.
But you will notice two points of interest: the grayed-out add-to-cart button and the message at the bottom. A minimum order quantity or MOQ restriction is placed on this product. The customer cannot add their products to the cart unless this restriction condition is fulfilled.
A wholesale minimum order quantity is valuable for all wholesalers. However, Shopify has no native option to set MOQ restrictions on multiple variants. Once the limitation is fulfilled, the add-to-cart button can be clicked. This button adds all the variant quantities selected to the cart in one click, so customers don’t have to add the amounts of different variants individually.
That is why an app like this makes the shopping experience much more accessible for B2B customers looking to order in bulk. Decision-makers will appreciate the ease of shopping and reordering from your store, ensuring you have a loyal customer. The restriction gives you more control over your profit margins by selling the minimum quantity needed to make a profit. It is a win-win situation for both your clients and your wholesale business.
If you sell multiple variants like this, such an app is perfect for your e-commerce wholesale business.
Step#6 Start Marketing For Website Promotion
Once the website is set up and you are ready to launch your wholesale e-commerce website, it is now time for outreach through marketing. For this, you need to develop a comprehensive marketing strategy to attract wholesale buyers to your online store.
Utilize digital marketing channels, such as social media, email marketing, and content marketing to reach your target audience. Remember, even offline marketing like in-person meetings and calls to have a better connection with your clients. With the proper marketing, you will start to get clients for your wholesaling business and can begin to start selling your products.
Step#7 Follow Up On Client After Sales
Even after you have sold you have confirmed your first sale, it does not mean that you stop connecting with your clients. After-sale services are great to keep your customers happy with your product and services. Follow up on your sales by connecting with the client and asking them about the products and where you can improve on your services. This helps to foster a strong business relationship with your clients which can establish a loyal customer base for your wholesale business online.
How Do I Find Wholesalers For My Business?
Maybe you are a retailer or another wholesaler trying to find reliable wholesale products for your business. In that case, here are places where you can find wholesalers for your e-commerce business:
- Trade Shows and Expos: Attend industry-specific trade shows and expos where wholesalers exhibit their products. This allows you to network with potential suppliers and assess the quality of their offerings firsthand.
- Online Directories and Marketplaces: Online marketplaces and directories provide the perfect place for your business to connect with wholesalers. Platforms like Alibaba, ThomasNet, and Wholesale Central have extensive lists of wholesalers across various industries to contact the right wholesaler for your business.
- Networking: Network with industry professionals, fellow entrepreneurs, and subject-matter experts in the industry to seek recommendations and referrals for reputable wholesalers. Building relationships within your industry can lead to valuable connections and partnerships.
- Direct Outreach: Sometimes, the best way is the direct way. Reach out directly to manufacturers, distributors, and brands that produce the products you’re interested in selling. Express your interest in becoming a partner and inquire about their wholesale pricing and terms.
- Industry Publications and Forums: Stay informed about industry trends and developments by subscribing to industry publications and participating in online forums and communities. These platforms often feature discussions and recommendations related to sourcing wholesalers.
Even if you are a wholesaler, these places can be a great way to connect with other wholesaling businesses in your industry. They can provide insight into the industry and showcase new products at trade fairs which can inspire your business’s expansion plans.
Bottom Line
Wholesaling is all about buying and selling products in bulk. It is a bit different from the retail business, but it is a business with profit in mind. With this article, I hope that I have answered your questions about what is a wholesaling business so that you can take your online wholesale business to the next level.
