How Does Wholesale Work? A Guide

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Are you considering going into business for yourself by selling goods? It can be a one-way ticket to success, with some hard work, a touch of luck, sound systems and processes and if you’re willing to put in some long hours and sleepless nights. Running your own business can mean earning potential well beyond being in a salaried position of employment. But with it comes the risk – of slow times, troublesome staff, supply chain issues and more.

You need to have a firm understanding of how to run a business, and if you intend to sell goods, this includes being aware of how the wholesale process works. Luckily, this helpful article will share precisely how wholesale works in industries such as Australian wholesale jewellery or other sectors, aiming at fully informing the budding retailer. So, read on to discover more. 

What is Wholesale?

Wholesaling can be defined as when a company (in most cases) buys goods in bulk direct from a manufacturer at a discounted price and then sells those goods to a retailer at a higher price. The retailer then sells the goods at the recommended retail price, or higher, or lower if they have a sale period. Each company involved in the supply chain makes a profit at each step. The manufacturer can make the goods cheaply and profit off the sale to the wholesaler. Then, the wholesaler profits from the sale to the retailer. Finally, the retailer’s profit margin is made when the consumer buys the goods online or in-store. 

For instance, a wholesale jewellery business may buy a bulk lot of gold chains from a goldsmith company and then sell those to a retail jewellery shop. The shop then sells the chains at retail value to customers; everyone makes some money along the way.

Since wholesale buyers can purchase such large quantities from a manufacturer, they can lock in discounted rates. Often, the more goods they buy, the bigger the discount. This discount is usually passed on to the retailer, who sells the goods with enough markup to cover their costs and make some profit along the way. 

Different Types of Wholesalers

There are three main types of wholesalers: merchant wholesalers, general merchandise wholesalers and limited-line wholesalers. 

Merchant wholesalers are usually businesses that handle the majority of their business themselves. They’ll connect with manufacturers, buy bulk goods, store inventory, and sell to retailers like you.

A general merchandise wholesaler deals with a high volume and variety of stock, buying from many different manufacturers and selling wholesale goods to various retail customers. They will typically provide storage, transportation and inventory management of their goods. 

Finally, a limited-line wholesaler usually specialises in a single product category and serves a niche market. For instance, a wholesaler of laboratory equipment, board and card games, or paint supplies. In some markets where a wholesaler has a monopoly on their goods, they can become quite powerful and profitable without direct competition.

What Are the Benefits of Buying Wholesale Goods?

As a retailer, there are definitely some benefits to buying your stock wholesale. Let’s list them now.

You’ll Save Money

As mentioned above, wholesalers can typically pass their discount on to retailers, of course, factoring in their profit margin. You can save money on bulk orders, obtaining your inventory at a discount, and then selling them with your profit margin baked into the price. This equals money in your pocket at the end of the day. Depending on the size of your wholesale orders, you could potentially get an edge on the competition if you can move some serious volume through your business. 

You Can Build a Network of Suppliers

You don’t want to rely on a single wholesaler to supply your retail business if you can help it. Unless you’re selling a niche product that only one wholesaler carries, you should try to source your stock from a network of wholesalers. The benefit of this is that you can shop around for the best price on your goods and ensure a consistent supply of stock to sell. If one wholesaler has supply issues or delays, you can contact another in your network to supply the goods you need to keep your business running. 

You Can Grow Your Business

The main goal of your business should be growth. After all, that’s why you’re starting a retail business. You should always aim to grow the business and your profits. By buying your stock retail, you’re taking advantage of the discounts offered. You can funnel the savings back into your business to scale up. For instance, with the cost savings you get from buying your inventory at wholesale rates. Not only that, but you could invest in delivery vehicles, new premises, more staff to help you grow or more stock to sell.

What Do I Need to Buy Wholesale?

This will depend on the country where your store operates, but in most cases, you’ll need to prove that you are running a business. This may mean providing evidence such as a business number or tax record. There may be other requirements too, but it’s worth researching what is required for your corner of the world.

A Retailer’s Guide to Wholesale – In Summary

This informative article has shared how wholesale works for the benefit of the budding retail business. You’ve learnt how wholesale businesses operate and how your retail business selling goods can benefit from purchasing inventory at wholesale prices. By now, you’re a budding expert on all things wholesale. 


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