Chances are, whenever you’ve bought a product online, it wasn’t actually made or even sourced by the shop you purchased from. Businesses everywhere use wholesale distribution sources to purchase their products in bulk at a discounted rate and, in turn, sell them to you for a profit. Product supply chains contain multiple “middlemen” between the manufacturer and the consumer, and these middlemen are often wholesale distributors.
What is a wholesale distributor?
Simply put, a wholesale distributor is a person or company that purchases products in bulk quantities directly from the manufacturer and then redistributes those products, usually to retailers.
So what’s the difference between a manufacturer, a wholesale distributor and a retailer? All three are part of a supply chain and interact in different ways:
- A manufacturer actually makes the products they sell and often lacks the time or resources to put those products on shelves themselves.
- Wholesale distributors purchase directly from a manufacturer in bulk at a low price, then distribute those products to the next link in the chain, usually a retailer.
- The retailer sells directly to the customer.
Each link in the chain sells the product for a slightly higher price than the last.
How does wholesale distribution work?
In basic terms, the wholesale distributor is a middleman between the manufacturer, who produces the products, and the retailer, who ultimately sells those products to customers. Wholesalers who deal in dropshipping will ship items directly to a customer, as dictated by a dropshipping seller.
Some distributors are directly linked to a manufacturer under the same company, while others are simply partnered with the manufacturers. Private wholesale distributors must maintain a keen sense of both the products available to them and current market trends.
Wholesale distribution begins with the idea of purchasing high-demand products at a low price. This low price is usually achieved by high purchasing volume. By purchasing in bulk, wholesale distributors are able to get a lower price from manufacturers, who are often not equipped to handle marketing and other aspects of retail sales.
In turn, wholesale distributors sell their goods, again in bulk (albeit likely smaller quantities), to retailers for a slightly higher price and keep the difference as profit. Wholesale distributors commonly work in industries such as furniture, electronics, office equipment, clothing and groceries.
Who uses wholesale distributors?
At one time, wholesale distributors were used almost exclusively by retailers who needed to purchase products in bulk to fill the shelves of their stores. Retailers seek out wholesale distributors to provide them with bulk quantities of what they need, and have their orders shipped to them to keep in stock, whether it’s for a brick and mortar shop or a distribution warehouse for an online store. This business model is still going strong today, but a wholesale distributor’s role has expanded, especially in the digital age.
Some wholesalers have stepped into the limelight and sell directly to consumers themselves. The customers enjoy the extra savings enjoyed from purchasing directly from a wholesaler, and distributors in turn are able to raise prices slightly higher and still maintain a profit. Stores such as Costco follow this model.
As mentioned above, dropshipping has become another popular way to utilize the low prices offered by wholesalers. Dropshippers usually operate online, and much like retailers, they partner with wholesalers to get good deals on items.
Unlike retailers, however, dropshippers do not purchase the items in bulk, nor do they keep any stock of the items they sell. Instead, when a customer places an order, the dropshipper sends the order to the wholesale distributor. The distributor then processes the order and ships directly to the customer.
If you’re interested in selling online, chances are you’ll need to locate a wholesale distributor to provide you with the products you wish to sell. Your first step to making money online is to find the right distributor for your business.
12 ways to find wholesale distributors
Here’s how to find wholesalers for your ecommerce business.
- Search engines such as Google are a good start if you’re just beginning to search for wholesale distributors. You can search directly for products or categories of products you’d like to find. However, your search results will not be vetted for reliable wholesalers, leaving you to do the homework yourself for each find.
- Online wholesale directories such as SaleHoo offer fully vetted lists of wholesale distributors, so you know you’re getting only the most reliable sources. These lists can be targeted to a specific industry or even a specific product you want.
- Check out local trade shows targeted to your industry. At these shows you’ll be able to find and meet with wholesalers in your area. Trade shows allow you to form more personal relationships with wholesale distributors, so you can get to know them and learn if they’re trustworthy with fewer risks.
- Online forums such as Wholesale forum and Warrior forum are places you can find lists of wholesale distributors. Joining and interacting on these forums will allow you to build potential business relationships, get feedback from other sellers and possibly connect with wholesalers directly, but be warned that these lists and suggestions won’t be vetted.
- Popular online marketplaces such as AliExpress and Amazon connect wholesale distributors from all over the world with dropshippers and other online retailers. When dealing with wholesalers found through marketplaces, it’s a good idea to try a sample order to test for quality before you start buying in bulk or sending in dropship orders.
- If you are searching for a wholesale distributor for a specific product or brand, try reading the product label to find the distributor, or contacting the manufacturer directly. Chances are, they’ll happily direct you to their official distributor or a list of distributors they do business with.
- Check local directories, business listings, wholesale malls and newspaper ads for information about local wholesale distributors. Finding local distributors will allow you to more easily vet and build relationships with your wholesalers.
- Search for wholesale publications and trade magazines that cover your industry. These publications will contain vetted lists of wholesalers who will have what you need.
- If marketing is one of your strengths, you can always try buying directly from your competitors and reselling products at a slightly higher price.
- Some manufacturers will have agents and sales representatives who will happily direct you to a wholesale distributor for their products.
- Ask your friends or business contacts if they can connect you with a reliable wholesale distributor. Chances are, your network won’t let you down when it comes to helping you find reliable and trustworthy suppliers!
- Cut out the middleman entirely and source your products directly from the manufacturers. This ensures you are getting the lowest price possible, and you’ll always know where your products are coming from so you can ensure the highest quality.
How to contact wholesale distributors
Once you’ve found your wholesale distributor, it’s time to make that first contact and gather more information about doing business with them. There are several things you’ll want to include in your list of questions while you vet your list of potential wholesalers.
What are the prerequisites to buy wholesale?
- Requirements will vary by company, but some areas will have laws that say who can or can’t buy wholesale from a distributor. You may need to have a Tax ID.
- Does the wholesaler have a minimum required order? If so, this wholesaler might not be right for dropshippers or small businesses.
- What payment methods does the wholesale distributor accept? Make sure you’re able to pay!
Other important information to find out before doing business with a wholesaler:
- What are the distributor’s terms for receiving payment?
- What shipping options do they offer? What sort of shipping timelines do they have?
- What are their return policies? What’s done in the event of damaged or missing items?
- How are price changes handled? Will prices be guaranteed for any amount of time? Will you be notified of any future price changes?
- Will they notify you when a product is being discontinued or going out of stock? How often does this happen?
- How does your wholesale distributor handle customer service? What sort of reputation do they have?
Risks of wholesale distributors
Wholesalers are often the sole link between the manufacturer and the retailer or customer. At times, this can form a risky bottleneck. It makes your business more sensitive to outside factors such as:
- Fuel and transportation costs
- Product availability
- Rollercoaster product trends
- Limited storage space
A disruption in the flow of goods can lead to sudden price changes, forcing wholesalers and at times even retailers to operate at a loss in order to stay afloat.
There are a few steps you can take to minimize the risks of dealing with wholesale distributors. Firstly, always vet and review them before making a deal. Secondly, pay attention to sales trends and anticipate the ebb and flow of product availability and popularity.
Consulting online directories such as SaleHoo will allow you to find pre-vetted lists of distributors and even check on sales trends for products. That way, you can avoid the risks of dealing with a shady distributor or trying to sell a product no one wants.
Finding the right wholesale distributor can help your business in a big way by helping you get the products your customers want with the quality and timeliness they expect. If you take the time to locate and build a relationship with a qualified distributor, your customers will thank you!
How was your experience finding wholesale distributors? Tell us your thoughts in the comment section below