WHOLESALE AND DISTRIBUTION
There are many types of customers and many ways of getting your products to them. These “channels” are for the most part representatives, brokers or distributors. The majority of your sales will be done by distributors.
The two most basic forms of distribution or channels; the ones that sell to the “end user” and the ones that sell to use by other businesses. Those that sell consumer products are much greater in number and are often where many people begin their wholesale business. Those that sell consumer products act as a go between for retailers and the manufacturers of the products. In the industrial wholesale business, you would act as the intermediary for manufacturers and industry service providers.
Consumer goods wholesalers might work with products such as apparel, jewelry, beauty products, shoes, and electronics. Things like groceries and paper products are also considered to be smaller goods that do not fall into an industrial category. These are generally the products that you find in stores and online. A customer would be able to simply go to the retailers that you are selling these items to, and then purchase the items. You would also see these kinds of products on Internet auction sites – such as eBay.
Industrial or “business to business” goods are larger profit items, but also require more effort on the wholesaler’s part. Products could be raw materials, chemicals, production or manufacturing equipment, etc. Things like machinery and equipment would also fall into this arena as well. You could also establish a motor vehicle parts business or work with petroleum products. Likewise, you could also sell lumber and other construction necessities. These items tend to be larger in quantity as well as size, requiring the wholesaler to have a larger storage space as well as equipment to move them from their warehouse to the retailer.
While the industrial goods wholesale business requires more effort, it will also reap a larger profit. However, it can be confusing when you are first establishing yourself as a wholesaler. With such large and complicated items, you may not feel as confident at pricing the products or even relating information to the retailers. If you are just starting a business you could start with nitch products that are more difficult to find, that way you are not competing in price and inventory will not be an issue. And once you begin to make a profit from your initial business, then you can move into the larger goods.
If you already have a background in larger goods, you may find that dealing with retailers that want to purchase these kinds of goods is an easier task than most. This type of sales is usually called “solution sales” because for larger, more expensive goods you need knowhow for implementation or training.
No matter what kind of products you sell or what kind of channel you target you always have to learn and know all distribution and sales channels. Once you learn about the general types of distributors you have to learn about specific sales channels. Channels such as convenience stores, supermarkets, beverage distributors, cash and carry, OEM’s, etc.
You might also want to consider setting up your warehouse in one of the southwestern states in the U.S. as this will allow you to be accessible more easily from Mexico or South America – where manufacturing is expected to skyrocket in the next few years. This will not only be more efficient, but it can also cut down your distribution costs.
To start off right, you will want to create a system that will allow you to monitor the progress of your products from the manufacturer all the way to the customers. This can be called an order flow system. To build an effective strategy in these areas, you will want to coordinate product movement within the warehouse as well as the movements into the warehouse. This can be achieved through the use of computer systems that monitor package label numbers.
You will also want to establish a working system of moving the products from the trucks into your warehouse – without damaging anything along the way. Try to envision how the shipments will come in to determine where you will need to set up inventory lists for double checking the incoming products as well as areas for products to be packed and sent to customers.
And since money is truly everything in business, you will want to establish yourself as a competitive wholesaler by offering something that your competitors do not: easy payment terms for buyers. By allowing your customers the ability to extend their payments or have higher credit limits, you will show how your services might be the better choice for their needs.