How to start a wholesale business for beginner?

Dealing in larger quantities or purchasing products in bulk directly from the manufacturer or distributor refers to wholesale.

Updated: December 8, 2024

How to start a wholesale business for beginner?
Starting a wholesale business is a great option for a business graduate looking to start his own business, a white-collar professional, or someone bored with their current job.

What is a Wholesale Business?


Wholesale involves buying and selling products in large quantities, often directly from manufacturers or distributors, at a lower cost per unit. A wholesale business focuses on bulk transactions, supplying products to retailers or other businesses rather than directly to end consumers.

Typically, manufacturers produce goods that are sold to distributors at a set company rate. These distributors then supply wholesalers with bulk quantities at a discounted price. Wholesalers, in turn, sell to retailers or outlets, who finally make the products available to end consumers. This layered system allows each participant to achieve a profit margin.

Running a wholesale business enables selling products at a lower price per unit, thanks to bulk sales. This model can be highly profitable if managed effectively, as wholesale operations generally involve lower handling and operational costs compared to retail businesses.


Functions of a Wholesale Business:


The functions of a wholesale business involves:

Buying:

You will be able to sell products for a lower price per unit when you run a wholesale business, since you are selling in bulk. Wholesale businesses can be very profitable if done properly as they don't have to spend too much on handling and other costs involved.

Warehousing and packaging:

A wholesaler buys products in bulk. So, large space is required to store the products until the demand is created in the market. You may need to sub-categorized the items into smaller packages in your warehouse in order to organize it properly.

Transportation:

You may need to provide transportation as well when you run a wholesale business. Products are delivered to retail stores and outlets by transportation.

Types of Wholesalers:


Different types of wholesalers include:

1. Merchant Wholesaler

Merchant wholesalers are the most common type of wholesalers. They deal in various products and take ownership of the merchandise they handle. They purchase goods in bulk, store them, and resell them to retailers or other businesses.

Agents and Brokers:
Agents and brokers act as intermediaries in the wholesaling process. They facilitate sales between merchant wholesalers and retailers without taking possession of the goods. Their role is to connect buyers and sellers, earning a commission for each successful transaction. Unlike merchant wholesalers, they do not own or store the products.

2. Specialty Wholesaler

Specialty wholesalers focus on specific types of products or industries. While they may purchase items from multiple producers, they specialize in a particular category, such as electronics, pharmaceuticals, or organic foods. This specialization helps them build expertise and cater to niche markets.

3. Online Wholesaler

Online wholesalers operate on digital B2B platforms, selling products in bulk at discounted rates. They streamline the purchasing process, allowing retailers to browse, order, and receive goods efficiently. Online wholesaling is becoming increasingly popular due to the convenience of digital marketplaces.

4. Dropshipping Wholesaler

Dropshipping wholesalers ship products directly to consumers on behalf of retailers. These wholesalers often operate through online platforms and sign agreements with retailers to fulfill orders seamlessly. Dropshipping eliminates the need for retailers to hold inventory, offering a low-risk model for businesses.

These various types of wholesalers cater to different needs within the supply chain, enabling a wide range of businesses to thrive.


Steps to Start a Wholesale Business:


The key steps to start a wholesale business include:

Choose the type of wholesale:

You need to first choose the type of wholesale for the small business you want to start. Make sure to research and find the right type of wholesaling as wholesaler purchases products in bulk at a lower price.

Identify the market:

You need to do proper research and identify your target market before starting wholesale business. Identifying your target industry, manufacturers, suppliers, and retailers is the first step to become a wholesaler. Identifying your competitors, their products, the scale of business, rates, quality of services, and every aspect involved is critical part of your research.

You need to study the dynamics of your target wholesale market and all aspects to learn more about it once it is identified. You must have a strong grasp of what you are aiming at.

Select a location for your office and warehouse:

You need to consider a few things at this particular point when you starting your wholesale business. You should select a location that is cheap, practical, and beneficial to you for your office and warehouse. Your office and warehouse should situated within close proximity so that you can visit them often without spending too much time and money. Make sure that the rent of your office and warehouse don't outgrow your profits.

Find your suppliers:

Find suppliers who are willing to appoint you as their wholesale dealer once you have identified your target market. The requirement of some manufacturers is to meet sales targets by wholesalers. This aspect should be considered when choosing your supplier.

Talk to the distributor if a company isn't willing to appoint new wholesalers, and you may get a dealership.  You can either buy products from distributors and sell to retailers at a low cost or work on a profit division basis.

Go online:

Going online is an excellent decision if you are going to start a wholesale business as a majority of business buyers are found online and transactions are made online. B2B trading platforms not only offer a substantial buyer base but also essential services and training for beginner who who does not have any eCommerce experience. Both end consumers and retailers can get attracted by going online. Retailers will come to you instead of you going after them.

Create a return policy:

Customer care is an important aspect of wholesaling business. Make sure you have a return policy as some retailers may not be able to sell your products and would want to return products. Always look at the return policy of your supplier and manufacturers first to create a comprehensive return policy and then, create your return policy accordingly.

Get intuitive and efficient inventory software:

Having an inventory software will help you keep track of your inventory in your house, and you will be able to determine the demand and supply relation of your business.

Important Considerations When Starting a Wholesale Business:


Analyze Industry Competition

Understanding your industry’s competition is a critical step when starting a wholesale business. Research your competitors to identify their target customers, unique selling points (USPs), and service quality. This insight will help you position your business effectively in the market.

Set Minimum Order Quantities (MOQs) and Pricing

Determine your pricing and MOQs based on industry benchmarks and your operational costs. Initially, prioritize building strong market relationships and long-term partnerships over maximizing profits. Establishing trust and credibility is crucial for sustained growth.

Evaluate Business Viability

Conduct a thorough assessment of your business’s viability. This includes analyzing the purchase price of products, shipping costs, desired profit margins, and all other expenses. Proper research ensures your business plan is realistic and financially sustainable.

Hire Experienced Staff

Running a wholesale business requires skilled and knowledgeable staff. Hire individuals with prior experience in the wholesale industry, as their expertise can streamline operations and contribute to your business's success. A reliable team is essential for efficient management and growth.