Understanding the Wholesale Business

Understanding the Wholesale Business.

Most experts feel a sales background is necessary to succeed in the wholesale distribution business. The ‘people’s skills’ that an outside salesperson who hits the streets or picks up the phone and goes on a cold-calling spree to search for new customers has are considered important for this. However, some experts argue that an individual should possess a varied job background in order to be able to handle a wholesale business efficiently.

But that’s not all. You will also need operational skills as the owner of a new wholesale distribution company, to run it efficiently. For example, the ability to handle the activities that go on behind the scenes, like warehouse organization and setup, customer service, shipping and receiving goods etc. Finance and business management skills and experience are an added advantage. Of course, you may hire employees to handle these functions, if the budget allows.

The Role of a Distributor

Full service wholesalers are typically either wholesale merchants or industrial distributors. They provide a full set of services, such as carrying stock, using a sales force, offering credit, making deliveries and providing management assistance. Wholesale merchants sell mostly to retailers. Industrial distributors are merchant wholesalers that sell to producers rather than to retailers.

As you probably know, manufacturers produce products and retailers sell them to end users. In between, however, there are a few key operators-also known as distributors-that serve to move the product from manufacturer to market. A can of motor oil, for example, is manufactured and packaged, then sold to automobile owners through retail outlets and/or repair shops. Retail distributors, are the kind that sell directly to consumers, who are also the end users. The others category is merchant wholesale distributors, who buy products from the manufacturer or other source, then move them from their warehouses to companies that either use them in their own operations or want to resell the products to end users.

Types of Operations

Wholesale trade includes establishments that sell products to retailers, merchants, contractors and/or industrial, institutional and commercial users. Three types of operations can perform the functions of wholesale trade:

  • Wholesale distributors;
  • manufacturers’ sales branches and offices; and
  • agents, brokers and commission agents.

Wholesale distribution firms, which sell both durable goods (furniture, office equipment, industrial supplies and other goods that can be used repeatedly) and nondurable goods (printing and writing paper, groceries, chemicals and periodicals), don’t sell to ultimate household consumers.

Scope of Work

A wholesale firm is an independent firm that engages primarily in wholesaling by actively negotiating the sale or purchase of products or behalf of other firms but that does not take little to the products being distributed. They know each manufacturer’s product line and use their wide contact to sell the products.

Put simply, as the owner of a wholesale distributorship, you will be buying goods to sell at a profit, much like a retailer would, except that you’ll be working in a business-to-business realm by selling to retail companies and other wholesale firms like your own, and not to the buying public. As a wholesale distributor, you will probably run an independently owned and operated firm that buys and sells products of which you have taken ownership.

This is, however, somewhat of a traditional definition. Generally, such operations are run from one or more warehouses where inventory goods are received and later shipped to customers. Certain companies, for example, have been blurring the lines by selling directly to the consumers at wholesale prices for some time now, using warehouse membership clubs. However, the traditional wholesale distributor is still the one who buys “from the source” and sells to a reseller.

Getting Noticed

As a wholesaler, it is important that you make your presence known in the market. Advertising your business has never been easier. As discussed in my article Quick Business Development Tips, one of the best things about the internet is that the size of your company does not really matter. If you are starting small, it is very important to get a website r your business. Once you have a website for your company, advertise as many products as you want on it. Just make sure you contact a good company to create and manage the website. Contact HyperEffects for all your website related requirements. Our professionals are trained to help small business owners understand ways to get noticed in today’s business environment. We also provide free business consultation to entrepreneurs and small-business owners.

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