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5 Easy Steps on How to Start a Wholesale Distributorship Business
So you wanted to learn how to start a wholesale distributorship business? Well firstly, you should know that the wholesale distributorship industry has become a famous trend in the world of business, now this you know. Today, total U.S. wholesale distributor sales are approximately $3.2 trillion. Since 1987, wholesale distributors’ share of U.S. private industry gross domestic product or GDP has remained steady at 7 percent, with segments ranging from grocery and food-service distributors to wholesale clothing, furniture and home furnishings wholesalers.
Now, some have said that putting up another wholesale distributorship business is a waste of time because of the huge number of competitors all around us. But whenever I hear this talk of discouragement, I always just think of a phrase I learned when I was still in preschool, “There’s always room for Jello”. So whenever they say that there isn’t much room for another wholesale distributorship business, that there’s just too many, I just think of that phrase and add a little twist in it.
The Life as the Wholesale Distributor
Now all of us know perfectly that manufacturers are responsible in “manufacturing” the products which the retailer sells them to the end user. So where does the wholesale distributor fit in this process? Well let’s take for example a t-shirt, which the manufacturer manufactured then packed, then sold to clothing retail stores, which in turn sells it to customers or to the consumers. But between the processes where the t-shirt is being delivered to the retailers, is where you, the distributor, come in, to move the product from manufacturer to market.
Different distributors work differently from one another. Some distributors work much like the retailers, selling their goods directly to the consumers or the end users. Others are known as merchant wholesale distributors; they buy products from the manufacturer or other source, then move them from their warehouses to companies that either want to resell the products to end users or use them in their own operations.
Wholesale trade includes establishments that sell products to retailers, merchants, contractors and/or industrial, institutional and commercial users. Now there are three types of operations that can perform a Wholesale trade which are the wholesale distributor (that’s you); manufacturers’ sales branches and offices; and agents, brokers and commission agents.
As a wholesale distributor, you will be in charge of running an independently owned and operated firm that buys and sells products of which you have taken ownership. Mainly, these operations are run from one or more warehouses where inventory goods are received and later shipped to customers.
Confusing? Well to put simply, as the owner of a wholesale distributorship, you will be buying goods to sell at a profit, much like any retailer would do. The only difference between the a wholesale distributor from a retailer is 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 or the end user.
Steps in Starting a Wholesale Business
Now that you know what life you’ll be experiencing when getting into the world of wholesale distributorship, let’s talk now about the steps that you must take before starting your wholesale distributorship business.
Step 1: Choose the Industry that Really Suits You
The title of the first step says it all; you should choose an industry that really suits you. Let’s say you like clothes, then a wholesale clothing business is perfect for you, or if you are into wines then a wine wholesaler is the appropriate wholesale distributorship for you. It’s very important that the industry you chose is what you really like. It’s hard to make a shift of primary industry when you’re already in it.
Now if you can’t decide on what industry to choose from, here’s a small thought: Every year, U.S. retail cash registers and online merchants ring up about $3.6 trillion in sales. About a quarter of that comes from general merchandise, apparel and furniture sales or GAF. To measure how large the scope of GAF, try to imagine every consumer item sold from foods to building tools, and then remove the cars, building materials and food. The rest, including computers, clothing, sports equipment and other items, fall into the GAF total.
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. So having a talent for choosing the hottest trends in clothes and starting a wholesale clothing business isn’t bad at all.
But there are still some problems that you’ll face once you open that door, one of which is consolidation. For wholesale distributorship starters such as you, consolidation is rampant in this industry. Some sectors are contracting more quickly than others. 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, this you must take into mind. As distribution has evolved from a local to a regional to a national business, the national companies can’t, or sometimes don’t wanted to, cost-effectively service certain types of customers. Often, small customers get left behind or are just not profitable enough for the large distributors to serve. So this is where you should be targeting to stay clear out of site of those big wholesale distributors.
Learn how to manage and maintain a wholesale clothing business with what Seven Wholesale can provide with their collection of highly maintained and updated collection of clothing lines.
Step 2: Choose Your Suppliers Very Wisely
Suppliers are very important in your line of business. One of the initial steps that wholesalers take before venturing through this line of business is defining a customer base or the vendors and locating reliable sources of product or the supplier. We’ll talk about the customers later on.
The process of the product getting to the consumers a chain which is a set of resources and processes that begins with the sourcing of raw material and extends through the delivery of items to the final consumer. You position in this supply chain will involve matching up the manufacturer and customer by obtaining quality products at a reasonable price and then selling them to the companies that need them.
In selecting the right supplier for your wholesale distributorship business, you will have to get in touch with manufacturers who will be willing to appoint you as a wholesaler for their products. Many companies will have sales targets for you to meet – so think carefully before deciding on any one.
But in some cases, you will have to get in touch with the company’s distributors if they are not willing to supply directly to you. In this case, there will be a division in profit margins, so you will have to factor in these calculations before you can proceed in dealing with them.
Now if you supplier is the manufacturer itself, then its necessary for you to check out the policies of different manufacturers, including how they plan to handle any goods returned back to them due to defects or for any other reason. You will also need to check their after-sales service policies. It is best to steer clear of any manufacturers that you cannot get a clear answer from, or end up with a lot of inventory that you just can’t sell.
Check out what Seven Wholesale and its collection of wholesale clothing can provide you with your urban and fashion clothing needs.
Step 3: Find an Appropriate Location for your Shop and Warehouse
In setting up your warehouse or your shop, your needs will depend greatly on what type of product you chose to specialize on. If you chose a wholesale clothing business, you could run it in your own home and store your stocks on you own basement. But lack of space would eventually hamper your success. If you’re running a distribution company from home, then you’re much more of a broker than a distributor because a broker simply facilitates the transfer of products, whereas a distributor takes title and legal ownership of the products.
Wholesale distribution companies, like a wholesale clothing business, frequently starts in areas where land is not too expensive and where buying or renting warehouse space is affordable, but close enough where the action is. Let’s take for example your starting a wholesale clothing business, its better if your shop or your warehouse is located in a place where a mall or many clothing shops are in close proximity. This makes it a lot easier for them to get your stocks and for you to deliver you stocks.
Step 4: Identify Your Potential Customers
Now as I told you earlier on, about defining a customer base or the vendors and locating reliable sources of product or the supplier, here we’ll talk about your potential customers. Because every company relies on a pool of customers to sell its products and/or services to, the next logical step in the startup process involves defining exactly who will be included in that pool.
As a wholesale distributor, your choice of customers includes:
· Retail Businesses
o This includes establishments like grocery stores, clothing store, independent retail stores, large department stores and power retailers
· Retail distributors
o This includes the distributors who sell to those retailers that you may find impenetrable on your own.
o Retail distributors can be a big help. For example, if you can’t “get in” at a power retailer like Wal-Mart, you may be able to sell to one of its distributors.
· Exporters
o These are companies that collect United States-manufactured goods and ship them overseas.
· Other Wholesale Distributors
o It’s always best to buy from the source, but that isn’t always possible, due to exclusive contracts and issues like one-time needs. For this reason, wholesale distributors often find themselves selling to other distributors.
o An example of these is you buying your stock to other wholesale distributor such as the Seven Wholesale.
Step 5: Make use of Technologies Available Today
You should purchase a simple inventory control software package, which will help you keep track of your products, even if they are in more than one warehouse. This will help you in giving proper quotes and delivery schedules to your customers, thus helping you to earn more money by rotating your products in an efficient manner.
Most distributors rely on specialized software packages that tackle such functions as inventory control, shipping and receiving, accounting, client management, and bar-coding. And while not every distributor has adopted the high-tech way of doing business, those who have are reaping the rewards of their investments.
Technology has helped increase productivity while cutting down on the amount of time spent on repetitive activities, such as entering addresses used to create mailing labels for catalogs and individual orders. It’s imperative that any new distributor realize from day one that technology will make their lives much, much easier. So it is very important that when you enter a new day and age, you should always check for tools that can help you ease out on problems that you could encounter in your wholesale distributorship business.
If you would like to try your hands on a wholesale clothing business and wants a suitable and stable supplier that can supply you with everything you need. Then why not try and visit Seven Wholesale at www.sevenwholesale.comto learn more of its collection of wholesale clothing.
About the Author
How (where?) do I register a company that allows me to issue equity to a Chinese national?
I am going into business with a friend who is a Chinese national. Both of us are resident in China. My goal is to register a company abroad (not in China) and then offer him equity in that foreign entity. When it becomes neccisary, we will use that foreign company to establish a wholy owned foreign enterprise in China. It has to be equity that he can act upon, such as selling it if he chooses. How can I do this? Where should I register? Hong Kong? Caribean? Delaware?
You can register with your state and say that you will be doing business abroad.
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