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Wholesaling

Wholesalers act as middlemen between manufacturers and retailers. Typically wholesalers buy products in quantity from manufacturers and sell the items to retailers who in turn sell the items one at a time or in small quantities to the consumer. Often the wholesaler maintains a warehouse or distribution point to receive products from manufacturers, maintain an inventory, then take orders and ship the products to the retail outlets or stores. In a way both the wholesaler and the retailer are extensions of the manufacturing process. In return for providing this service to the manufacturer, the wholesaler adds a markup to the manufacturer's price before selling the product to the retailer, who in turn marks up the product a second time before selling it to the consumer. In return for receiving exclusive territorial distribution rights, both the wholesaler and retailer usually agree to allow the manufacturer to set the minimum retail price.

Established wholesalers will spend most of their time tracking shipments and managing orders. Those entering the business will be concentrating on lining up manufacturers to represent and selling retail outlets on the benefits of stocking and retailing the manufacturer's products.

The key trends impacting this business today are the internet and off-shore manufacturing. The internet is a key trend, because it provides an opportunity for many manufacturers to cut out the wholesaler, sell directly to the public via froogle.com, ebay.com or amazon.com, or via the manufacturers website. At the same time, the transition of manufacturing to Asia, especially China, has resulted in severing established wholesaling distribution channels and the creation of new channels. Thus creating new wholesaling opportunities for new players.

It is the nimble wholesaler who will succeed in this rapidly changing environment.

The keys to success

In addition to expert knowledge about his wholesale inventory of products, the successful wholesaler has to add value by providing exceptional delivery service, often at no additional charge to the retailer. The successful wholesaler will also know as much or more about running the retailer's business than the retailer himself. When this is the case the wholesaler is in a position to offer valuable advice about how the retailer can cut cost, and increase sales and profits.

Resources:

Wholesaling Tutorial - An excellent explanation of the issues relating to wholesaler marketing.

American Marketing Association - Great resource for articles and best practices on wholesaler and retailer marketing.

A few who do it well:

Barbara Towery - Dallas, Texas. Manufacturer's representative for children's clothing lines.

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