Benefits of Creating a Wholesale Channel | Should You?

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wholesale channel

Business is doing well and now you’re contemplating the idea of wholesaling, which will require you to open a wholesale channel within your business in conjunction with running your retail division.

In this article, we’ll have a look at what wholesaling is and how it can benefit your existing retail business.

What is wholesaling?

Selling your products in bulk to another store, usually at a lower price, who then sells them to their clients is known as wholesaling.

It’s vital to remember that setting up a wholesale channel for your company still permits you to sell to end-users.

Large brick-and-mortar stores, such as Costco is a great example of a store that sells in bulk to direct consumers. Costco doesn’t require you to have a business to be able to purchase from them, however you will have to buy bulk quantities compared to shopping at your local supermarkets or other smaller retailers where items are individually sold.

Here are three reasons why establishing a wholesale channel can be beneficial to your company.

wholesale channel

1. Increase sales without spending more money on marketing

To grow as a direct-to-consumer business, you’ll need to devote a significant portion of your revenue to marketing.

After all, there is usually a cost associated with gaining a new customer.

By selling your products wholesale, you can delegate the cost of customer acquisition to another company, allowing you to reinvest your time and money in other aspects of your company.

2. Leverage other brands’ audiences to sell your product

Building a loyal audience of followers and consumers, like getting new customers, is not an easy task. You may leverage the company’s goodwill to get your product into the hands of consumers by forming a wholesale collaboration with an established brand that has already earned a name for itself in your area.

Retailers and stockists of your products will likely implement their own marketing and advertising for their store, which means increase brand awareness of your brand.

3. Risk-free entry into new markets

Expanding your business to a new country or region comes with a slew of costs, such as storage and logistics, as well as having to start from scratch marketing to a population that has never heard of you. Finding another retailer in a new market who already has a presence and supply chain might assist lessen the risk of international expansion by lowering your startup expenses.

Coming up with a wholesale pricing strategy

Pricing strategies are one of the most important, if not the most important, aspects of running a successful wholesale business. You get to keep whatever profit margin you choose for yourself when selling straight to the customers on your own website or in your own retail store, which can be anywhere from 50% and up.

Businesses often give merchants a 50% discount off their standard retail price when they buy wholesale. The significant discount is intended to allow merchants to sell your product wholesale to their customers while maintaining a profit margin. Here’s an example of a good pricing strategy: a wholesale company would keep a 50% profit margin on wholesale purchases and a 75% profit margin on direct-to-consumer orders.

As a result, to build a successful wholesale business, you’ll need to be able to offer wholesale customers a significant discount on your retail pricing. Small businesses may face a variety of risks as a result of this, including the possibility of losing money.

Fortunately, there are techniques to price your goods for wholesale to reduce the chance of losing money. One option is to provide a discount based on the number of purchase orders placed. Retailers will be motivated to place larger purchases as a result, resulting in a higher margin on the resale of your product. Many wholesalers even require merchants to purchase minimum order quantities (MOQs) to carry their products.

When you decide to wholesale your product and have it sold in a variety of locations, you may have challenges with competing retailers undercutting each other on price.

One way to work around this is to separate your products between retailers that are located near each other. Meaning you sell certain products to one store and others to the other store. This strategy does provide you with an additional workload to maintain and keep track of who has what.

The other option you could implement is to put an RRP (Recommended Retail Price) on your products. Wholesalers cannot legally enforce this, but you can use it as a guide to encourage your stockists to sell at similar prices.

Frequently asked questions about wholesale businesses

online wholesale

What should I sell in bulk online?

You can sell a wide range of wholesale products. The best product is determined by who you want to sell to and the suppliers with whom you have or may develop rapport with. Travel accessories, gadgets, skincare, health & wellness items, clothing & accessories, and hobby & craft kits are all examples of popular wholesale products.

Is it possible to sell wholesale on Shopify?

Yes, you can sell your products to other businesses using Shopify. You have the option of creating a password-protected storefront for your customers or offering volume discounts for select products you want to sell wholesale.

What is the best way to start a wholesale business?

Like any business, wholesaling requires careful planning to increase the probability of success.

  1. Decide on what you want to sell.
  2. If you are a maker e.g. candles – determine if you’re able to supply larger quantities.
  3. Work out your wholesale pricing.
  4. Develop a wholesale channel within your business, this may include offering wholesale purchases online.
  5. Advertise your wholesale products and approach suitable retailers and stockists.

How much should I charge for my goods at wholesale?

Aim for a profit margin of at least 50% on wholesale. Double your cost of products sold as a starting point (COGS). Compare these figures to those of your competitors to see if clients will be willing to pay that amount. You can do this by checking the standard retail price for similar products and use the retail price to estimate the wholesale price when you subtract 50%.

Need help calculating your wholesale prices? Click here to learn more about wholesale pricing strategies; we have an entire article to help you determine the right prices for your wholesale products.