Starting a retail or service business? Looking to form relationships with wholesale suppliers?
There are currently 300,000 companies in the U.S. wholesale distribution industry, so as you can imagine, finding and forming trusted relationships with wholesalers takes time and research.
Here are some tips for finding wholesalers, and best practices for entering into agreements with them.
1. The Wholesale Business
The wholesale industry is large and highly fragmented, with 50 of the largest distributors generating 25 percent of industry revenue. Wholesalers serve retailers and other service businesses through a variety of distribution channels and supply chains. At the top of the chain are manufacturers (including importers or exclusive distributors – who also sell to wholesalers). Next are wholesalers or regional distributors (who distribute the goods locally) and brokers/jobbers (who deliver goods to local small businesses such as independent produce stores).
2. It’s All About Volume
The wholesale business is volume-centric. The more you can buy, the lower wholesale prices become, and the higher your profits are as a result. So as a new small business, it’s unlikely that you’ll be able to negotiate relationships from a high-volume wholesaler, simply because your sales volume won’t yet support buying in any kind of bulk. Smaller wholesalers will sell and ship to small businesses, and as you move forward and your sales increase, you’ll be able to graduate up the supply chain to negotiate higher volumes and lower rates.
3. Researching and Finding Wholesalers
Finding wholesalers takes time, but there are a number of best practices you can use to help your research efforts:
Search the Internet –Search for wholesalers by product to help you pinpoint local suppliers (this will bring up nationwide suppliers), then add your zip code to the search so that your results are localized. You can also search YellowPages.com and online associations, trade directories, or wholesale directories such as Wholesale Central or Wholesale Network.
Trade Shows – Trade shows are great venues for finding wholesalers if you’ve got the budget and the time. Trade show directories such as TSNN and 10times can help you pinpoint events by industry and location.
Trade Magazines – Check out the ads and classifieds for wholesalers in your industry.
Ask Around – It might not be appropriate to ask your competitors where they source their inventory from, but ask around if you are out of town attending a local business networking event (Chamber of Commerce, Small Business Development Center, etc.).
Talk to Brand Manufacturers - Brand manufacturers sometimes sell wholesale, but usually only in high volume. However, they might be able to refer you to wholesalers or distributors that will sell to small businesses.
4. The Wholesale Agreement
Now that you’ve found your supplier, do your due diligence. Ask about volume discounts, return policies, and order processing time. Before you sign any contract, be prepared to negotiate pricing terms, minimum order quantities, delivery schedules, etc. Add these agreements to the terms, and consider having an attorney review it before signing.
Don’t forget to ask for references and do your own research. The Better Business Bureau is a useful resource for a quick background check for complaints.