Finding the best wholesalers for your niche is a key factor in growing a successful retail or wholesale business. To identify the best wholesalers, consider the following: Research Niche ...
28Nov
Wholesaler
A wholesaler is a company or individual which buys products in large quantities from a manufacturer then sells them to retailers such as shops or other businesses. They make their money by buying in bulk at a much lower wholesale price, then adding on profit before selling the products on.
What is wholesaling?
Wholesale companies are primarily B2B businesses that purchase goods in bulk from manufacturers and sell them on to retailers. The retailers in turn then sell these goods to the consumer, building in an additional profit margin into the retail price to cover both the wholesale cost of the goods and the various operating expenses that make up their Cost of Goods Sold (COGS). Although most wholesalers sell to other businesses (predominantly retailers), there are some who also sell their goods directly to consumers.
Because wholesale businesses have relatively tiny profit margins compared to retailers, they typically sell goods in very large volumes with retailers purchasing hundreds or even thousands of units when they order. Margins may vary significantly depending on the type of products being sold, which is why some wholesale trade businesses specialise in a particular product or range.
Wholesaler vs. distributor
There are many similarities between the two but they also have distinct functions.
Distributors are more closely aligned with manufacturers – they work with them to increase visibility of their products. They then find a wholesale business who will resell the products to retailers or they will sometimes sell directly to retailers themselves.
More often than not it’s the responsibility of the distributor to store the manufacturer’s products alleviating them of the burden of storage. A distributor may also be involved with customer services, honouring warranties as well as sales and marketing activities on behalf of the manufacturer.
A wholesale company however, buys many items in bulk and sells them to other businesses. They might purchase goods directly from manufacturers or they might use several distributors. Manufacturers might typically enter into a contract with a distributor to get their products to market. There aren’t usually contractual arrangements between those in the wholesale trade and the producer as this enables them to buy competing products from different manufacturers.
