In wholesale distributorship, the business owner buys merchandise from manufacturer to sell at a profit just like a retailer. There are two differences. One, you will be selling goods to retailers and other wholesalers, and not to end users. In other words, the dynamics is entirely business to business. There are exceptions. Some wholesalers like BJ’s Warehouse offer membership clubs that allow consumers to buy items at wholesale prices for their own use. The typical wholesale consumers are contractors, construction firms, institutions, and commercial users.

Another difference is you only sell products in large quantities or in bulk. The retailer, on the other hand, sells to consumers in smaller quantities.

According to the Entrepreneur, an online business magazine, combined annual wholesale distributor sales in US since 2009 is $3.2 trillion. With good negotiation skills and excellent salesmanship, you can tap into this lucrative market.

Wholesale Pricing

To make a profit in a wholesale business, you need to make sure you get the product at a low price. You then sell it at a higher price that is still attractive to your costumer. However, many startups are confused as to how much profit margin they should strive for. Here are two factors to consider:

1. Production costs. This includes actual cost of product, taxes, licenses, insurance, transportation cost, etc.
2. Labor costs. Factor in employee wages, labor taxes, and other labor-related costs.

Total the production and labor costs to find your break-even price for each item. This is your minimum selling price for the item. While this price already covers your operating expenses, it won’t give you any profit.

To determine the right profit margin, begin by doing how much price your competitors are offering. If your break-even point for an MP3 player is $10.00 and your competitors are selling the same product for $14, then you may go for this range and earn approximately 71% profit margin.

Wholesale Inventory

Wholesalers need to ensure they have enough stock whenever customers come calling. Otherwise, you lose sales. Keeping and managing an inventory is essential to business. Not only does it let you keep track of what you have and what needs to be replenished, it also lets you know what products are popular and what doesn’t sell much.

Wholesale Packaging

Packaging plays an important role in consumer behavior. Quality matters, but consumers are more like to try a product that comes in attractive packaging. If your retailer makes good profits from selling your products, it will mean repeat sales for you. Invest in good packaging and enjoy a profitable business for the long run.