In business, the distribution channel includes a few critical elements – the manufacturer, wholesaler, distributor and retailers. Also known as third party logistics companies, wholesale distributors have a specialized expertise in distribution within an industry. When manufactures and retailers do not have the capacity to connect to each other, the wholesale/distributor opportunity is highly profitable. In this post, we will show entrepreneurs how to start a wholesale distributor business successfully.
Gain Knowledge In An Industry
To start a distribution business, you must first pick an industry to serve. You might choose an industry where you already have extensive knowledge. This could be in the food, beverages, electronics or clothing industries. It can also be specialized products like screen printed transfers too. Or, you can research an industry to find new opportunity and learn about. In order to be competitive as a wholesale distributor, you must be able to service manufacturers and retailers that have matching products. Lastly, your focus on one industry will allow you to gain competitive advantage over others in the market.
Choose A Business Model
After deciding which industry to distribute in, you will need a working business model. There are a couple options to establish a wholesale distribution business. Either, you start it yourself or buy a distributor business opportunity. Depending on your current financial situation, starting the business from scratch might be the only option. Of course, there is nothing wrong with that. If you have a friend or family member who manufactures products, you can get started right now. Or, if you have some liquidity, you can buy an established wholesale distribution channel from another business. This will give you a business model to follow from the start. While you have a larger upfront investment, it could scale your business much quicker.
Attract Manufacturers In Bulk
To get your wholesale distributor business started, you need to find the right manufacturers. Without having an idea of what products to sell, it will be very difficult to contact retailers. First, meet with as many manufacturers as you can. This can be done in-person, online or both, preferably. Many manufactures can be found at trade show events, B2B marketplaces or industry associations. Your meetings will determine “fit” like an interview. Also, you can confirm that you are not buying fake Adidas products. By marketing yourself to manufactures, you will attract products that you can buy in wholesale and distribute to retailers.
Offer Superior Wholesale Distribution
Once you have established manufacturer relationships, you’re ready to start buying wholesale and distributing. Remember, since you do not make anything. Your business relies on the ability to connect manufacturer’s products with the right retailers. That means, you must be able to provide a reliable supply of products to your retailers and consistent orders for your manufacturers. As you continue to grow, the quantity of products will afford you lower cost prices. Instead of increasing your margins, past the profits to your retailers. You can offer cashback marketing campaigns when retailers buy above certain levels. If you continue to put your manufacturers and retailers as a priority, your wholesale distribution opportunities will grow quickly.
Manage Distribution Cash Carefully
As with any business, you must be careful with cash flow. Especially in wholesale distribution, your business is dependent on getting paid from your retailers. Otherwise, you will not be able to pay the manufacturer for goods. Exercise caution when extending credit to customers. And, collect your payments in a timely fashion. With a strong level of cash flow in the business, you will have a successful start in wholesale distribution.
Following these steps, you can start a wholesale distributor business. There are many untapped products and industries that are waiting to be exploited. As consolidation is happening in several industries, choose specialty niches and products that can be scaled at a high level. Then, build relationships with manufacturers and retailers to get your business off the ground. Finally, provide a better quality service and keep a close eye on cash flow. If you do all of these, you will be on your way to more wholesale distributor opportunities.
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