Wholesale distribution- How it works

The whole premise of a wholesale business is based on buying low and selling high. For this, one needs a background in sales and a keen eye for popular merchandise.


Pretty much anyone can start a wholesale distribution business. It matters not whether you are a white collared professional or a manager in a big firm or just someone bored of being at home while the kids are at school. You need to remember that you will trade goods for a profit.


Let us see how the supply chain works. The manufacturer produces goods and the retailer sells them to the end user. For example garments are made in a garment factory and are sold to the end user in a shop in the mall. However in between there are a few key operators. These operators are called wholesale distributors and these distributors move the goods from the manufacturer to their warehouses and then from there to the retailers who in turn sell them to the end users.


The wholesale distribution trade includes establishments that sell products to retailers, merchants, contractors and/or industrial, institutional and commercial users. The goods range from durable goods like furniture, office equipment, industrial supplies and other goods that can be used repeatedly to non-durable goods like printing and writing paper, groceries, chemicals and periodicals.


Just like a retailer, the wholesale distributor buys goods to sell at a profit. However he works in a business-to-business realm. He buys from the manufacturer or from another wholesaler and sells the goods to a retailer or to another wholesale distributor and not to the general public. There are however some exceptions to this like Sams Club or Costco, which are wholesalers selling to the final consumer. But the traditional wholesale distributor is still the one who buys from the source and sells to a reseller.
So what does it take to start a wholesale distribution business? This field of wholesale distribution is a game in buying and selling and hence requires good negotiation skills, a nose for sniffing out the next item in your particular category. The idea is to buy the product at a low price, then make a profit by tacking on an amount that still makes the deal attractive to your customer. While sales skills are important, in addition to sales skills, the owner of a wholesale distribution company will also need the operational skills necessary for the functioning of a company.


The way you set up your business depends on the type of product you choose. More often than not, wholesale businesses depend on the cost of real estate in the area, since you will need large amounts of storage space.


While the wholesale distribution business looks very lucrative, remember it comes with some pitfalls that you will need to watch out for. The main thing to look out for is consolidation. Mergers and acquisitions tend to reduce the number of companies in the sector and thus only the large companies control the distribution of the market.


As you see, with good business acumen, most of us can run a successful wholesale distribution business.

Leave a Reply

Your email address will not be published. Required fields are marked *