Running A Business

Starting A Wholesale Business: A Beginner’s Guide

Apr 21, 2023 • 10+ min read
Large warehouse filled with boxes on shelves
Table of Contents

      Wholesale businesses have been a staple of the supply chain for a long time and for good reason. They have provided retailers everywhere with a consistent flow of the goods we buy on a daily basis, and they remain an essential part of the economy today. 

      If you’re thinking of starting a wholesale business, there are a few important decisions and steps you’ll have to make to get started. In this article, we’ll go over how to start a wholesale business, how to select your products and how to sell them, and what legal requirements you may be subject to.

      Choosing Your Business Model

      Choosing Your Business Model

      When starting a wholesale business, you have a few different business models to consider. The model you choose will depend on your goals, resources, and target market. For instance, you may wish to conduct your business as an e-commerce wholesaler or to focus on a brick-and-mortar storefront. But whether you’re solely online or operating as a traditional vendor, here are three common wholesale business models to consider:

      1. Distribution Model

      In the distribution model, you purchase products from manufacturers and resell them to retailers. This model typically involves a large product line, with a focus on volume sales. Distributors often have a sales team and a warehouse to store products.

      2. Broker Model

      In the broker model (aka agent model), you will act as an intermediary between manufacturers and retailers. You won’t directly purchase products, but rather you will earn a commission on sales made to retailers. This model requires less capital, but you’ll need to build relationships with manufacturers and retailers to be successful.

      3. Import/Export Model

      In the import/export model, you can source a wide variety of unique products from overseas manufacturers and sell them in your home market. This model may require knowledge of international trade, as well as local import/export regulations and procedures.

      Creating Your Business Plan

      Creating Your Business Plan

      Once you’ve chosen your business model, the next step is to create a business plan. Your business plan will outline your goals, strategies, and financial projections. Here are some elements to include in your business plan:

      1. Executive Summary

      Your executive summary will provide an overview of your business, including your mission statement, products, and target market.

      2. Market Analysis

      A market analysis should describe your target market and your competitors. You’ll need to research your industry and identify trends and opportunities.

      3. Products and Services

      Make sure to include details on your product line and how you plan to differentiate yourself from competitors.

      4. Marketing and Sales

      Outline your intended marketing and sales strategies, including how you plan to reach your target market and generate consistent sales.

      5. Financial Projections

      Finally, include your projected revenue, expenses, and profits. You’ll want to create a detailed financial forecast for at least the first three years of your business to manage expectations, set goals, and understand your business’ viability.

      Selecting Your Wholesale Product

      Selecting Your Wholesale Product

      Selecting the right product is crucial to the success of your wholesale business. You’ll need to consider factors such as demand, competition, and profit margins. Here are some steps to follow when selecting your wholesale product:

      1. Research Your Market

      Identify products that are in high demand, but experience low competition. Use online tools, such as Google Trends or AMZScout, to determine search volume and popularity. Make sure you are aware of items that have a seasonal demand like summer swimwear. Seasonal products sell better during their respective time of year, allowing you to charge higher prices and increase your profit margins.

      Here are some of the most popular and highest margin items wholesale vendors are currently selling:

      • Clothing and apparel
      • Luxury and designer items
      • Jewelry
      • Electronics
      • Beauty and self-care products
      • Pet supplies

      It is not uncommon for these items to have profit margins anywhere between 50% and 78%, depending on the wholesaler. 

      2. Determine Profit Margins

      Calculate the profit margins for each product you’re sourcing. Consider the cost of goods sold (COGS), shipping, and other expenses.

      3. Choose Your Niche

      Choose a product niche that aligns with your interests and expertise. This will help you stay motivated and passionate about your business.

      Where To Find Your Product

      Where To Find Your Product

      Once you’ve selected your product, you’ll need to find manufacturers and suppliers. Here are some ways to find the right manufacturer or supplier for your business:

      1. Trade Shows

      Attend trade shows to meet manufacturers and suppliers in person. This is an excellent opportunity to network and become aware of the newest products.

      2. Online Directories

      Use online directories, such as Alibaba or WholesaleCentral, to find manufacturers and suppliers. These directories allow you to search by product type and location.

      3. Referrals

      Ask for referrals from other wholesalers or industry professionals. This will help you find the most reliable manufacturers and suppliers.

      Selling Products

      Selling Products

      When selling products wholesale, setting minimum order quantities (MOQs) is a common practice. MOQs are the smallest quantity of a product that a supplier is willing to ship in a single order. They ensure that the costs of production and shipping are covered and help wholesalers manage their inventory and operate at a profit. Here are some tips for setting MOQs:

      1. Consider Your Profit Margin

      Set MOQs that ensure you’re making a profit. Consider your cost of goods sold, shipping, and other expenses when setting MOQs.

      2. Consult With Your Suppliers

      Ask your suppliers what their minimum order requirements are. This can help you set your MOQs and negotiate better pricing.

      3. Consider Customer Demand

      Consider the demand for your products when setting MOQs. If a product is in high demand, you may be able to set higher MOQs.

      About the author
      Samuel Good

      Samuel Good has more than five years of managerial and startup experience through his role as co-owner and chief operating officer of Healthy Growth Vending, a business he sold in 2021. Samuel now writes SEO content, with a history in crafting B2B and B2C subject matter that focuses on small businesses and entrepreneurship. Samuel’s educational background includes a BMgmt from Dalhousie University and a certificate in Strategic Copywriting from the University of Toronto.

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