Tips to Set Up Your Wholesale Business.
Everyone wants to be successful, and there’s nothing quite like starting your own business to enrich your life personally and financially. Sometimes, however, the road from start to finish is a bumpy one. Business involves decision-making. Decision making means the process of selecting one out of two or more alternative courses of action. The question of choice arises because the basic resources such as capital, land, labour and management are limited and can be employed in alternative uses.
When it comes to setting your own wholesale business, you will have different needs depending upon the type of product you choose to specialize in. Below are some important points to remember.
- A wholesale business for some products can literally and conceivably be run successfully from the basement of your house, but storage needs would eventually hamper the company’s success.
- You’re much more of a broker than a distributor, if you’re running a distribution company from home.
- The basic difference here is that a broker simply facilitates the transfer of products while a distributor takes title and legal ownership of the products. However, the advent of internet has brought some very interesting alternatives to becoming a distributor who can also physical possess the product.
- Areas where land is not too expensive and where buying or renting warehouse space is affordable, are good wholesale distribution companies.
- On the other hand, downtown shopping areas, are generally not for wholesale distributors, and not too many of them are in these areas, but off the beaten path.
- Exceptions being, for example, if you’re serving building or electrical contractors, you’ll need to choose a location near them in order to be accessible as they go about their jobs.
Upon opening the doors of your wholesale distribution business, you will certainly find yourself in good company. Here are some important statistics of the business.
- Wholesale distribution contributes 7% to the value of the nation’s private industry GDP, and most distribution channels are still highly fragmented and comprise many small, privately held companies.
- To date, there are approximately 300,000 distributors in the United States, representing $3.2 trillion in annual revenues.
- Research shows that there are only 2,000 distributors in the United States with revenues greater than $100 million.
- Every year, U.S. retail cash registers and online merchants ring up about $3.6 trillion in sales, and of that, about a quarter comes from general merchandise, apparel and furniture sales (GAF).
- To measure the scope of GAF, try to imagine every consumer item sold, then remove the cars, building materials and food. The rest, including computers, clothing, sports equipment and other items, fall into the GAF total.
- This is a positive for wholesale distributors, who rely heavily on retailers as customers.
- Such goods come directly from manufacturers or through wholesalers and brokers.
- Then they are sold in department, high-volume and specialty stores-all of which will make up your client base once you open the doors of your wholesale distribution firm.
All this is good news for the start-up entrepreneur looking to launch a wholesale distribution company. However, below are a few dangers that you should be aware of.
- For starters, consolidation is rampant in this industry.
- Some sectors are contracting more quickly than others.
- For example, since 1975, mergers and acquisitions have reduced the number of U.S. companies in that sector from 200 to about 50.
- Pharmaceutical wholesaling has consolidated more than just about any other sector.
- The largest four companies control more than 80% of the distribution market.
- To combat the consolidation trend, many independent distributors are turning to the specialty market.
- Many entrepreneurs are finding success by picking up the golden crumbs that are left on the table by the national companies.
- As distribution has evolved from a local to a regional to a national business, the national companies have not been able to cost-effectively service certain types of customers.
- Often, small customers get left behind or are just not profitable for the large distributors to serve.
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