One of the main advantages of transitioning your business to wholesale is that wholesale offers high-volume sales to other businesses that market your products to their customers. But there are many factors to consider in contemplating whether to switch or to supplement with wholesale sales.
Should I Switch to Wholesale Sales?
The first instinct of many e-commerce retailers right now is to move products out the door fast, considering that e-commerce sales are skyrocketing.
Wholesale e-commerce is a type of e-commerce in which products are sold in bulk via the internet. This business model is more focused on providing B2B services without direct cooperation with consumers.
The main functions of wholesalers are
- Purchasing products from manufacturers in the required quantity.
- Organizing proper storage conditions.
- Delivering products to retailers on time.
It may seem that wholesale is an outdated trading channel, but digital technologies and the internet have taken trade to a new level. Modern wholesalers, like retailers, are interested in finding new customers, expanding their business and using effective promotion channels. The only difference is that they are interested in working with retailers, which makes it possible to sell products in large quantities with lower shipping costs.
"Wholesale makes more sense for e-commerce retailers because they can sell their products and increase the visibility without having to invest in their own online store," says Nishank Khanna of Clarify Capital. "It's essentially an efficient and timely way for retailers to share a piece of the e-commerce real estate and reap benefits from the surge in online sales."
Switching to wholesale allows retailers to tap into a new and vast global pool of customers, providing much-needed security through diversification to a larger specialised audience.
"If you're primarily retail, you are reliant on your own setup and channels to be effective for sales," says Abir Syed, CPA and digital marketing consultant at UpCounting. He advises that, "If you switch to wholesale, you can diversify through a client base that is large, specific and niche. A client base that you provide better benefits to, and more global in nature."
How Can I Transition From Retail to Wholesale?
How you transition from retail to wholesale will depend on the specifics of your business. If you source small quantities of relatively expensive products, for example, it won't be easy to shift to the volume of sales necessary for wholesaling.
"In general terms, you'll need a large quantity of inventory, and the ability to acquire inventory at a low enough price to make the economics of being a wholesaler work," says Syed. "You'll also need a thorough distribution process," he adds.
Besides having a large inventory and a distribution process in place, there are other elements you need to consider.
- Bank and foreign currencies. You'll need a business account that can receive many currencies, especially the G7 ones which are commonly used around the world.
- Low transaction fees. Because wholesale margins are thinner, you need to capture all the percentage you can get, and that means you must not be paying high transaction fees to receive or send currencies.
- Dedicated sales and marketing. You'll need a dedicated sales or business development person since wholesalers focus on B2B sales, in contrast to the B2C marketing retailers depend on.
- Real value proposition. Your product must have a real benefit to the buyer, either in terms of pricing, quality or any intangible or tangible reason. You must be very clear why the buyer will buy from you and not someone else.
- Wholesale pricing. Wholesale pricing is based on volume discounts, making up for lower margin percentages with higher volume and lower costs than are associated with retail.
- B2B marketing collateral. B2B buyers want to see their purchasing options laid out via a product catalog, line sheet, or one-page sell sheet.
Plan Out Your Business Transition to Wholesale Sales
Shifting from retail to wholesale is not something you should take lightly, as it will represent a large change in how you operate and who your customers are.
We advise that transitioning businesses follow a three-part plan:
- Do niche market posititoning exercise to know your product's value proposition, so as to identify what kind of buyers should buy from you.
- Implement financial management systems internally to enact a different way of operating, build out a sales team, and start acquiring customers ahead of the transition.
- Focus on your unique global client base is especially important because geo-political risks are diminishing the ability to plan for the future effectively, and hence making sure that there is a stable global client base makes you goto bed at night knowing that regardless of what happens, this group will consistently need your product or services.