How Do I Start a Wholesale Selling Business?
💡 Quick Answer: Starting a wholesale selling business isn’t difficult if you follow the right steps. You’ll need to:
- Choose the right products
- Create a business plan
- Secure financing
- Find reliable suppliers
- Market your products
- Run smooth operations and logistics
- Abide by laws and regulations
With so many retailers and eCommerce stores, there’s never been a better time to start a wholesale business.
Instead of making a few bucks per sale, imagine making thousands of dollars from a single customer order. Sound too good to be true? Well, millions of businesses are actually doing this each day.
You could literally sell hundreds of products in one go.
And that’s exactly what you can achieve by starting a wholesale selling business.
Spend more time enjoying the financial freedom you get running a thriving business - not chasing sales and dealing with customer service queries.
And it’s easy to launch a profitable wholesale business with the right tools and strategies.
That’s exactly what we’re going to reveal in this guide.
We’ll cover every aspect you need to know to sell wholesale products online, with tips on everything from product sourcing and marketing to logistics and financing.
Are you ready to become the next wholesale seller success story?
Let’s get started.
What Is Wholesaling?
Wholesaling is a business-to-business (B2B) transaction in which a company buys products in bulk from manufacturers or other suppliers and resells them to other businesses.
Wholesalers typically purchase products at a lower cost than retailers and then mark up the price to make a profit. Some operate locally, while others have a national or international reach selling wholesale.
In the US, the wholesale industry is booming!
In November 2022, total wholesaler sales amounted to $693.72 billion - an increase of over $55 billion year-on-year:
So what’s it like to run a business in this fast-growing industry?
Well, running a wholesale business can be challenging but rewarding.
You’ll have a variety of tasks and responsibilities that need to be managed daily. For example, inventory management and financial planning are vital, while customer service, procurement, and marketing are all still important.
Wholesalers also deal in larger quantities of goods. So if you’re operating out of your spare room or garage, you might find storage becomes an issue.
But the rewards can be huge. Wholesalers can make larger profits from a single customer order…
…And dealing with fewer customers can mean you get more free time to enjoy the money you earn.
Pros & Cons of a Wholesale Business
Like any business model, there are pros and cons to running a wholesale business.
Let’s quickly review the key considerations to see if this business model suits you.
✅ Pro: Bulk Sales
Wholesale transactions typically involve large quantities of products. This can lead to higher profit margins and more predictable revenue streams.
✅ Pro: Lower Marketing Costs
Wholesale businesses often rely on word-of-mouth and customer relationships to generate sales, which can be less costly than traditional marketing and advertising methods.
✅ Pro: Lower Purchasing Costs
You can achieve economies of scale by buying products in large quantities. This can help reduce the cost of goods sold and increase profit margins.
❌ Con: Lower Profit Margins
While bulk sales can lead to higher profit margins, wholesale businesses often operate on lower margins than retailers. This is due to the need to price products competitively and maintain customer relationships.
❌ Con: Dependence on Fewer Customers
Businesses that rely heavily on a few key customers may be vulnerable to fluctuations in demand, pricing, or supply. This can affect sales, profit margins, and overall business performance.
❌ Con: Supply Chain Challenges
Managing inventory, shipping, and logistics can be challenging for wholesalers, particularly as they scale their businesses and work with multiple suppliers and customers.
How to Start a Wholesale Selling Business
That’s the basics out of the way.
Hopefully, now you’ve got a good idea if this business model is right for you.
In the sections below, you’ll find tips covering every angle of how to start selling wholesale.
There’s a lot of information we need to cover.
So bookmark this page, and you can refer back to it as you progress through the steps and build your new business from the ground up.
1. Market Research & Product Selection
Market research and product selection are critical to building a successful wholesale business.
By conducting market research, you can determine what products are in demand, what people are willing to pay for them, and who your competitors are.
These are the building blocks for a profitable and sustainable business.
First up, you need to identify your target market.
Start by identifying the specific group of customers you want to serve. Determine who your customers will be, their needs, and what products they currently use or look for.
Consider demographics, geographic location, and consumer needs or pain points.
You can use customer surveys, focus groups, and online research to understand your target market’s preferences, purchasing behavior, and opinions on existing products.
Based on your research, create detailed profiles of your ideal customers, including their age, gender, income, education level, buying behavior, and interests.
Even though you’ll be selling to retail stores, it’s important to know who the end user of your products.
If you need some help creating buyer personas, HubSpot has a great free ‘Make My Persona’ tool you can use:
Along with your end customers, you’ll need to identify the types of retailers and businesses that will buy and sell your products. These can include:
- Retail businesses
- Retail distributors
- Other wholesalers
You can use Google to find stores that sell your competitor’s offerings and other products in your niche.
Competitor research is also a vital part of market research. For example, identify what products your competitors are selling and their unique selling points.
This can involve analyzing their websites, social media accounts, and customer reviews.
It’s also important to stay updated with the latest industry trends, changes in consumer behavior, and market demand for different products. Industry publications, trade shows, and online resources can help you determine the level of demand for your products.
Tools like Google Trends are great for determining the interest in products and niches over time. Simply enter the product or topic, and you’ll be able to see whether interest is growing or decreasing over time.
It’s essential to continuously conduct market research and analyze customer feedback as you grow your wholesale online store. This will help you ensure your product offerings remain relevant and profitable.
If you need some help finding the right products to sell, you can use our free wholesale items to sell tool and see what we have listed in the SaleHoo Directory.
You can also get some inspiration from the resources below:
- 30 of the Best Low Cost, High Profit Products
- How to Choose Wholesale Products for Dropshipping
- Top 15 Profitable Products to Sell Wholesale Online (High Margins)
2. Business Planning
The next step is planning. That starts with creating a business plan.
A business plan serves as a roadmap. It outlines your goals, strategies, and financial projections. It should include an executive summary, market analysis, marketing strategy, operations plan, and financial plan.
We’ll cover the financial side of starting a wholesale business in the next section of the guide.
If you need help creating a business plan, the US Small Business Administration has a useful guide on its website to walk you through the process.
You’ll also need to choose a business structure.
Several business structures exist, including sole proprietorship, partnership, LLC, and corporation. Each has advantages and disadvantages, so you’ll need to choose the one that best suits your needs.
The US Chamber of Commerce has a great breakdown of the different types of business structures and their pros and cons. You can use the guide to help you determine which structure is the right fit for your wholesale store.
Depending on your location, you may also need to register your business with your state’s Secretary of State.
This will involve choosing a business name, filing articles of incorporation or organization, and obtaining a tax ID number.
In some cases, you may need to obtain the necessary permits and licenses to operate. We’ll cover the legal side of starting a wholesale business later in the guide.
If you don’t know your startup costs and ongoing expenses, you might as well be flying blindfolded.
You need to know how much money you’ll need to get started and your break-even point.
Starting a wholesale business can be expensive, so it’s essential to determine your startup costs upfront. This includes office space, equipment, inventory, marketing materials, and legal or administrative fees. Moreover, if you plan to form your business as an LLC, for example a Texas LLC or a LLC in California, or any other US state, the LLC formation cost would add up to your startup cost.
You don’t want to get halfway through the process and realize you’re already over your head financially.
And let’s not forget about ongoing expenses - these are the costs you’ll incur monthly to keep the business running.
This includes rent, utilities, salaries, insurance, and other operating expenses. If you’re not keeping track of these expenses, you could easily find yourself in a cash flow crunch.
If you’re unsure where to begin, Monday has a handy startup budget template you can download and use.
Next, you need to identify potential sources of funding.
You can use personal savings, loans from friends and family, bank loans, and grants to get your wholesale business off the ground. Explore your options and choose the one that best suits your needs.
It’s also important to create a budget and financial projections.
A budget is a plan for allocating your funds and managing your expenses. Financial projections are estimates of your future revenue and expenses.
This will help you get a clear understanding of your business’s financial situation. Then, you can make informed decisions about how to allocate your resources.
When creating a budget and financial projections, consider the following:
Revenue projections: Estimate how much revenue you will generate each month based on your sales projections.
Cost of goods sold (COGS): Estimate how much it will cost you to purchase and ship your products to customers.
Operating expenses: Estimate your ongoing expenses, such as rent, utilities, payroll, and insurance.
Gross profit margin: Calculate your gross profit margin, which is the difference between your revenue and COGS.
Net profit margin: Calculate your net profit margin, which is the difference between your revenue and expenses.
This may not be the most exciting part of starting a wholesale business. But determining your startup costs and ongoing expenses is crucial.
Estimating these costs as accurately as possible helps ensure you have enough funds to cover your expenses and stay afloat until your business becomes profitable.
Your future self will thank you for taking the time to get this right.
4. Establishing Supplier Relationships
Finding wholesale suppliers can be a bit daunting at first, but it’s not as hard as it may first seem.
You can start with a Google search.
Yep, it’s that simple.
Type in the product you’re looking for and add “wholesale suppliers” or “bulk suppliers” to the search query. This should give you a list of potential suppliers to check out.
Manufacturers and distributors often rely on networking, referrals, and word of mouth to find new customers. As a result, many companies do not have a substantial presence in search rankings.
Want to know more about wholesale distributors? Read our explainer guide to find out more.
The best option for most entrepreneurs is to use online directories and wholesale marketplaces.
For example, SaleHoo is a top directory with more than 8,000 suppliers. You can access suppliers in the United States, the United Kingdom, China, Canada, Australia, and more.
Every supplier is vetted, so you don’t have to worry about wasting time with scammers or low-quality suppliers.
If you want to import goods from abroad, make sure you check out our Guide to Importing Wholesale to learn how to make things run smoothly.
You can also attend trade shows to find potential suppliers.
Once you’ve identified potential suppliers, it’s important to negotiate pricing and terms that work for both parties.
This may include minimum order quantities, the manufacturer’s suggested retail price, payment terms, and delivery schedules. Be clear about your needs and expectations, and ask for references and samples if possible.
Discover how to negotiate and place orders with manufacturers and distributors in our guide, How to Order From a Wholesale Supplier.
You may need to work with multiple suppliers to ensure a consistent supply of products. Establishing backup suppliers can also help you keep your customers happy in case of unforeseen disruptions to your supply chain.
5. Marketing & Sales
With some great products and reliable suppliers lined up, it’s time to focus on marketing and sales.
First, you need to think about branding.
You want to make sure that your brand stands out from the crowd. What better way to do that than with a catchy and unique name?
Think outside the box and come up with a name that’s memorable and reflects the personality of your business.
If you need some help brainstorming, Shopify has a useful Business Name Generator tool you can use to develop some ideas.
Now, let’s move on to your value proposition.
What makes your wholesale business different from the rest? Why should people choose you over your competitors?
This is where you get to show off your personality and make your mark.
To develop a strong brand and value proposition, consider your target market, unique selling proposition, and overall mission and values.
Amazon is an excellent example of a strong value proposition:
“Our mission is to continually raise the bar of the customer experience by using the internet and technology to help consumers find, discover, and buy anything, and empower businesses and content creators to maximize their success. We aim to be Earth’s most customer-centric company.”
It clearly communicates what Amazon does and why they do it. It’s customer-focused, technology-driven, and ambitious in its goals.
Next, you’ll need to focus on customer acquisition.
In today’s digital age, having a website and social media presence is essential for building a wholesale business.
Your online wholesale storefront should be easy to navigate, visually appealing, and provide detailed product information.
Using Shopify is one of the easiest ways to create a launch a wholesale business website. There are a bunch of themes to choose from, and the editor is super-easy to use.
You’ll also need a strong sales network to build your customer base.
This may involve attending trade shows, networking with other businesses in your industry, and reaching out to potential customers through email marketing or other outreach efforts.
Be sure to follow up with leads and provide exceptional customer service to build strong relationships with your customers.
You can also offer incentives to encourage referrals. For example, reward customers that refer new business to you with discounts as a thank you.
To help you make your first wholesale sale, we’ve included resources containing the best places to sell wholesale online below:
- The 23 Best Online Wholesale Marketplaces for Selling to Retailers (Most Profitable)
- 16 Best Wholesale Dropshipping Suppliers Directories in 2023
6. Operations & Logistics
It’s time to dig deeper into the processes that keep your wholesale company running smoothly, starting with inventory and fulfillment.
Managing inventory and fulfillment is all about keeping track of what you have and need and making sure your customers get what they want in a timely and efficient manner.
The key to successful inventory management is organization.
Shopify has a bunch of inventory management apps you can quickly install on your wholesale store and use in your warehouse.
Don’t wait until you run out of a product to order more.
Stay ahead of the game by monitoring your inventory levels regularly and anticipating demand. Use sales data to identify which products sell well and which need a little extra push.
You should also create a shipping and logistics plan that details costs, delivery times, and product packaging.
The first step is to choose the right carrier. Look for a vendor that can accommodate your needs and budget and has a reputation for reliable service.
Make sure your products are packed securely to avoid damage during transit, and set realistic shipping times. This will help you avoid disappointed customers and negative reviews.
You can keep your customers in the loop by providing tracking information for their shipments.
Now, onto orders and payments.
First things first, make sure you have a clear system for receiving orders.
Whether via your website, phone, email, or carrier pigeon, make sure it’s straightforward for your customers to submit their orders.
Once you receive an order, process it as quickly as possible. Nobody likes to wait for their precious goods to arrive.
Have a streamlined system to get those orders out the door and on their way to your customers.
You’ll also need an efficient payment process.
Consider offering a variety of payment options, from credit cards to PayPal to good old-fashioned checks. This will give your customers flexibility and ensure you get paid on time.
Finally, don’t forget to follow up with your customers after their order has been delivered.
Send a friendly message to make sure they’re happy with their purchase and thank them for their business. It’s a great way to build customer loyalty and ensure that they come back for more.
7. Legal & Regulatory Compliance
This isn’t the most exciting part of your wholesale selling career, but it’s one of the most important.
Wholesale businesses must comply with a variety of regulations at the local, state, and federal levels.
You can’t comply with regulations if you don’t know what they are. So the first step is to take some time to research the specific regulations that apply to your business.
This may include regulations related to product safety, labor and employment, and environmental protection.
Make a list of all the regulations you must comply with and a plan for staying on top of them.
You’ll also need to understand tax requirements and reporting.
Like any business, your wholesale company will be subject to a variety of taxes, including sales tax, income tax, and employment tax.
It’s important to understand the tax requirements and reporting obligations to avoid penalties and other legal issues. If you don’t already, consider working with a tax professional to ensure compliance with all tax requirements.
Alongside tax, you should also think about intellectual property and liability risks.
Your intellectual property sets your business apart from the competition, so make sure you’re taking steps to protect it. This might mean filing for patents or trademarks or simply being vigilant about who you share your ideas with.
No one likes to think about liability risks, but they’re a fact of life when running a business.
Make sure you have adequate insurance coverage and take steps to minimize risks, such as implementing safety protocols or warning labels.
We’ve covered the main aspects of starting a wholesale business. But launching a new company is a major step for even a seasoned entrepreneur.
Make sure you check out our How to Sell Wholesale Online Step-by-Step Guide for more insights and expert tips. You’ll also find 5 free wholesale suppliers at the end of the guide.
That’s why we’ve also included the following FAQ section. Keep reading to get your questions answered.
A wholesale business sells goods in large quantities to retailers. They typically purchase goods directly from manufacturers or wholesale distributors. In contrast, a retail business is a type of business that sells goods or merchandise directly to consumers in smaller quantities.
In general, wholesalers source products from various sources to ensure that they can offer their customers a wide range of products. They often build relationships with manufacturers, distributors, and importers to secure reliable sources of products.
Wholesalers can source products from online marketplaces and wholesale directories such as SaleHoo for international suppliers and Alibaba for Chinese-only suppliers. These marketplaces allow wholesalers to connect with manufacturers and distributors worldwide.
Wholesale pricing is based on a bunch of factors, including the cost of the products, profit margin, market demand, and competition. Wholesalers may offer discounts to customers who purchase products in large quantities. This encourages customers to buy more products and helps the wholesaler move inventory quickly.
Wholesalers establish relationships with suppliers by networking, attending trade shows, and conducting research. In addition, wholesalers can use online resources to research suppliers and their products. For example, online directories, industry forums, and social media platforms can provide valuable information about suppliers.
The most effective marketing strategies for a wholesale business depend on the specific products they sell and the target audience. For example, referral programs are an excellent way to expand an existing customer base. At the same time, trade shows and industry events are good ways to meet potential customers face-to-face.
It’s also important to build a website that showcases your products and use tactics like email marketing and social media to retain existing customers.
Inventory management is a crucial aspect of wholesale business operations. It ensures that the right products are available when customers need them, minimizes the risk of stockouts, and reduces waste and spoilage. Managing inventory levels effectively can also help businesses optimize cash flow by holding enough stock to meet customer demands without tying up too much capital.
It depends on the nature of the wholesaling business and the products they are handling. Many wholesalers rely on third-party logistics (3PL) providers to handle shipping and logistics needs. These companies manage supply chain operations, including transportation, warehousing, and distribution.
The legal requirements for starting a wholesale business depend on your location and the type of products you plan to sell. In some cases, you must register your business with the appropriate government agencies in your jurisdiction.
You may also need to register with your state or local government for a sales tax permit. This will allow you to collect and remit sales tax on all your wholesale sales transactions.
The capital needed to start a wholesale business can range from a few thousand dollars to hundreds of thousands for a more extensive operation. The type of products you plan to sell, the size of your operation, and the location of your business all impact startup costs.
Finding your target market as a wholesale business will help you identify the most profitable customer segments to target. Analyzing your competition is one of the most effective ways to identify your target market. Review their customer base, marketing strategies, and pricing to find gaps in the market that you can fill or underserved customer segments that you can target.
A wholesaler is a business that purchases goods in bulk and then resells them to retailers or other companies. A distributor is a business that works directly with manufacturers to distribute its products to retailers or wholesalers. Distributors often have exclusive agreements with manufacturers to sell their products in a specific geographic region or market segment.
Expanding your customer base as a wholesale business is critical to achieving long-term growth. Having a strong online presence is essential for attracting new customers. You can also attend industry trade shows to network and promote your wholesale products. Providing excellent customer service is also key to retaining and attracting new customers.
It depends on the laws and regulations in your specific location and the policies of the company you want to buy from. In many cases, manufacturers and distributors may require a business license or tax ID number to purchase items at wholesale prices. It’s always best to check with the company you want to buy from to understand their policies and requirements.
Yes, a business can be both a wholesaler and a retailer. For example, many companies sell products in bulk to wholesale buyers while selling the same products in smaller quantities to retail customers. This allows wholesale store owners to diversify their customer base and increase revenue streams.
Build a Thriving Wholesale Business in 2023
The wholesale industry is booming. There’s no better time to get involved.
But you’ll need reliable suppliers to get your business off the ground.
That’s where SaleHoo can help.
The SaleHoo Directory is the best place for beginners and experienced wholesalers to find winning products and trustworthy suppliers from around the globe.
You can find millions of products from over 8,000 vetted suppliers.
If you have any questions about eCommerce or how to sell wholesale online, don’t hesitate to get in touch with our 24/7 live chat support team.