As a business owner, it’s normal to want to get the product you’ve created to your target market in the most efficient way - which is why many choose to do so through wholesale markets. There are many advantages of wholesale distribution and knowing the ins and outs can help your business grow.
Learn the advantages of wholesale distribution. By becoming a wholesaler, your business will have access to a number of various outlets, allowing you to reach a much larger customer base over time. A larger audience will be able to access what you have to offer, and this can allow you to grow your business much faster. Interest for your product will rise, and you may become attractive to retailers who can see there’s an audience out there for what you are selling. These retailers will more than likely want to stock your product.
If you make the decision to go for wholesale distribution of your products, one of the biggest benefits is predictable profit margins. The first thing you need to do though is to calculate your product’s wholesale cost. You can do this a number of ways - some simply multiply the cost of goods by two, and this ensures that your profit margin is at least 50%.
Start by determining your material costs when producing each unit of product. You should also calculate the cost of labor, i.e. how much it cost you to pay somebody to assemble the product. Then, indirect costs will need to be taken into account. These relate to expenses that go towards running the business (overheads), not those that are directly involved in producing the products. Retailers will often mark up your product by a minimum of 100%. Look into typical markups in your industry for the same product type.
Below is a quick guide on coming up with your wholesale price:
Once you have your wholesale price figured out, your profit margins are going to be easier to predict as you distribute your products to various retailers.
You’ll find several ways in wholesale distribution for goods to get from the wholesaler to end user. One of the advantages of wholesale distribution is lower end cost to consumers.
Wholesale distribution can be far easier providing you do your research. You still need to know who your target customer is, where they shop, and the stores that are looking to stock competitive products. You should also have a good idea of the region you’re looking to sell in first.
By physically visiting the stores you might consider stocking your product in, you can get a better idea and envision your products actually stocked on the shelves.
In a boutique, it’s likely you’ll be dealing directly with the store owner. However, with a chain of stores, you will likely be working with a dedicated buyer. You’ll need to be prepared to accommodate different schedules depending on who you’re working with.
Creating wholesale partnerships with established brands in your niche can leverage your product/brand and get you into the hands and homes of appropriate consumers.
Another great advantage of wholesale distribution is the increased demand for goods. As you will be maximizing the number of people who see your product by supplying various retailers, you will steadily grow and strengthen your brand and product. You will have the demand of the retailers audience’s combined, rather than relying on your own singular audience.
Distributing your products effectively means finding the right wholesale distributor. This takes time. The right partnership will mean getting your product on appropriate shelves, and likely a number of exciting opportunities and leads. Preparing for distribution success is key. If you’re not ready, you will put your business at risk and will not get the desired results.
One of the best ways to look at this situation is seeing your distributor as a business partner. You must be able to work together in harmony and stay on the same page. A distributor may agree to buy your product, but that doesn't mean they are right for you. Networking at trade shows and seeking out referrals can help. Can they recommend someone in your target demographic? Get all the information you can and evaluate your options.
If you've already launched your wholesale business and are looking for ways to improve it, read our article How Can I Improve my Wholesale Business?
Rely on our expertise in the entire supply chain process and take advantage of wholesale distribution and our insight on product distribution strategy.
R+L Global Logistics has the consulting and logistics services you need to launch a wholesale distribution business and more.