Wholesale trade is a necessary link in the trade of any goods. In essence, wholesale is an intermediary between a manufacturer and a retailer.
The task of retailers is to sell goods directly to customers. Wholesale deals with the resale of goods from the manufacturer, distributing products in smaller lots among retailers.
Wholesale trade can be very profitable, or it can barely reach the level of profitability.
A lot depends on the scale of wholesale trade, the entrepreneurial spirit of the organizer, and the level of markup.
Types of wholesale trade
The wholesale business idea can be implemented in various ways. A wholesaler can be a dealer, an official representative of the manufacturer, facilitating his work in selling products.
1. Official representative
This is the most profitable option for wholesale trade, since it allows you to set your own assessment of the goods, not depend on other suppliers of the trade chain, and respond in a timely manner to changes in production.
Large manufacturers, as a rule, create wholesale dealer companies themselves in order to separate production and sales of products and increase sales efficiency.
The dealer option for implementing the wholesale business idea in practice can rarely be applied by a novice entrepreneur, since this niche is usually occupied.
2. «Sales Department» for the manufacturer
Therefore, entrepreneurs often use the option of cooperation with several small manufacturers that do not have their own sales companies. In this case, the wholesaler takes over the functions of the manufacturer’s sales department and deals with logistics, earning some money from the margin.
Features of the «sales department»: pros and cons
The disadvantage of this wholesale trade option is the need to own or rent a warehouse for finished products, since manufacturers, as a rule, tend to transfer their products for sale as quickly as possible.
The risks are that there may be a gap in time between the receipt of finished products from the manufacturer and the conclusion of contracts with retailers. In this case, there is an overstocking of the warehouse and sales are difficult.
However, the advantages of such wholesale trade are the possibility of establishing a favorable margin on goods and obtaining conditions for deferred payment from the manufacturer.
3. Intermediary — wholesale distributor
Another wholesale option is to purchase large quantities of goods from a larger wholesale supplier and then resell and deliver to retailers, that is, becoming a wholesale distributor.
This option is more realistic for use by novice entrepreneurs.
However, in order to obtain an acceptable level of profit, it is necessary to have transport for the delivery of goods and, preferably, to have a wholesale warehouse for the formation of consignments of goods. With this wholesale option, the money goes to the account of the wholesaler, the consignment of goods falls into the warehouse, and the retailer does not see who the goods are actually purchased from.
The main risks of a distributor
This is important because there is a danger of a direct contract between the retailer and the main supplier. This option of wholesale trade gives a fairly good experience in the field of organizing transportation and concluding contracts.
Logistics schemes can be very different:
1. From suppliers, goods can be delivered to the warehouse of the wholesaler, accounted for, and then batches are formed from the incoming goods for delivery by the retailer.
2. It is possible to work according to a simplified scheme, when the formation of a batch of goods is carried out by a wholesaler, and the goods themselves are delivered by transport companies from the warehouses of the supplier.
True, in this case, the name of the real supplier of the products may appear in the waybills, and there are risks of concluding direct contracts.
3. An even simpler option for wholesale trade, in terms of financing, is a simple mediation between wholesalers and retail stores.
In this case, the intermediary takes over the work of coordinating the assortment, forming a batch of goods, and delivering the goods to the retailer. In this case, as a rule, the intermediary does not set a wholesale margin for the goods, but receives a certain commission for his services.
This wholesale trade option does not require working capital, however, it carries a lot of risks, since the intermediary can always be excluded from the chain of wholesale trade business processes.
Wholesale trade: where to make efforts?
In order to choose the right option for implementing a wholesale business idea, it is necessary to study the goods market well, conduct marketing research , narrow down specialization as much as possible, without trying to cover a wide range of goods offered.
Specialization and marketing research allow you to be well versed in the range of goods, wholesale and retail prices, depending on demand, set the optimal estimate to obtain maximum profitability.
Organization of wholesale trade can be a very profitable and promising business. But this is possible only if certain experience has been gained, there is knowledge in the field of logistics, and legal issues are carefully considered when concluding contracts.