A wholesaler is a vital part of the supply chain for many businesses, able to offer discount prices for bulk purchases. Here’s how to choose the best wholesaler for your business.
Wholesalers are the backbone of many small or start up businesses. If your start up is involved in markets such as retail, food, drink and catering, chances are you’ll need to forge a great relationship with a reputable and reliable wholesaler.
What is a wholesaler?
Wholesalers sell goods in bulk quantities to smaller businesses who then resell items individually to customers. Wholesalers are sometimes known as cash and carry businesses.
Examples of wholesalers in the UK include
They are usually found across the UK and most have websites that you can order products in bulk from.
A wholesaler supply chain looks like this:
- Manufacturer – A large company that makes products, such as a fizzy drinks company or a pet food maker. They produce products in volume, but lack the distribution network and capabilities to sell directly to consumers. Instead, they rely on wholesalers to buy their products and resell them onto retailers.
- Wholesalers – Large warehousing businesses that store vast quantities of different goods. They buy in bulk from different manufacturers, then sell in smaller quantities to traders and individual businesses. Wholesalers negotiate low prices for buying in vast quantities – for example a wholesaler might bulk buy cans of fizzy drink for £0.10 per unit from the manufacturer.
- Traders – Small businesses, such as restaurants, newsagents and retail shops buy their stock from the wholesaler. A newsagent might buy 96 cans of fizzy drink from a wholesaler for a unit price of £0.20, and then sell them individually in their shop for £0.40 per can.
Wholesalers themselves operate at different scales too, such as national wholesalers that sell in massive bulk to regional wholesalers.
It is important to note that as products increasingly move along the supply chain, they increase in unit price as their bulk quantity decreases, until they go on sale to consumers for a retail price.
Wholesalers tend to sell a wide range of products, though they typically reflect demand for goods. Wholesalers selling food, toiletries, clothing, alcohol, confectionary, stationery and cleaning products are common, but you can find a wholesaler specialising in most retail and business products – from technology and computing to pet supplies and office equipment.
There are specialist wholesalers, known as discount wholesalers, that are also worth considering. These wholesalers specialise in unwanted or unsold stock from major retailers and chains, reselling lots of clothing, electronics and homeware for prices far less than the retail price.
Why use a wholesaler?
Using a wholesaler is vital if you need to sell products in volume to consumers and your business makes a profit based on the mark-up you make on each product you sell. Using a wholesaler has a range of benefits:
- Buying in bulk saves money – Products often cost far less, as much as half to a one third the retail price a customer would expect to pay for the same product.
- Bulk doesn’t mean massive quantities – Many wholesalers sell smaller volumes to retailers, down to a few units, and these will still be cheaper than on the high street. However, discounts increase the more units you buy. Going direct to manufacturers seems tempting to source even cheaper products, but be aware that most manufacturers will not sell in small volumes direct to retailers.
- Better relationships – As most manufacturers simply aren’t interested in forging relationships with small businesses, you’ll likely have a more profitable relationship with a wholesaler. Many manufacturers have exclusive distribution arrangements with wholesalers, preventing them from dealing directly with retailers and small businesses.
- Returns and ‘end-of-life’ goods – Some wholesalers specialise in returns and end-of-life or end-of-season products. This is when customers have returned products, usually to catalogue retailers or online stores, and these returns are sold in bulk to the wholesaler for a huge discount – sometimes as much as just a quarter of the retail price. These bulk batches of returns are divided into smaller lots by the wholesaler and resold to trade and retailers, allowing small businesses to make massive savings.
How to approach a wholesaler
Many start ups are uncertain about how to find a wholesaler, and think that wholesalers will only supply big retailers and large businesses. Yet wholesalers welcome new businesses, especially start ups, as they’re keen to forge a working relationship so your business continues to buy from them for the years to come.
Most wholesalers are ‘trade only’ which means you need to either own or be a director of a limited company, a sole trader, or a professional such as a doctor or lawyer. Some will ask for proof of running a business, and a letterhead or business card is usually acceptable. A bank statement listing your business details, company registration details or VAT number can be used to start buying from the wholesaler.
Many wholesalers charge an annual membership fee. Depending on the size and stock of the wholesaler, membership ranges from around £15 to £30 per year, but can be higher in some cases.
It’s worth introducing your new business and asking what initial discounts or incentives can be agreed to help your new business grow – and hopefully buy more products from the wholesaler.
How to find a wholesaler
Wholesalers can be difficult to find. If you know the exact products you want, try contacting the manufacturer for a list of UK or local wholesalers, otherwise you’re on your own.
You’ll struggle to find one by searching online unless you already know the company name. Few wholesalers have decent websites that rank highly in Google and other internet search engine results, so typing in ‘wholesalers’ as a search term might not be successful. Try searching for the term ‘wholesaler’ plus ‘uk’ and the type of product you’re looking for, such as ‘books’ or ‘bags.’
Alternatively, head to a wholesale directory website such as The Trader and The Wholesaler – both offer details of wholesalers across various product categories from baby clothes to electrical goods, although you may have to pay to access their directories.
Trade magazines such as The Trader can be worth a look, as they carry plenty of advertising from wholesalers, along with a list of contacts that may be of use.
Another good way to source wholesalers is to visit a large trade show or exhibition. Even if you’re not ready to commit, they’re a good opportunity to see what’s on offer, check pricing, discover new market trends and network with potential wholesalers.
Visiting a trade show can be time-consuming and expensive, so check that the one you plan to attend is relevant to your needs. Some cater for a specific market and have a very narrow range of products on offer. Check the trade show websites or call the organisers for a list of exhibitors, so you can identify the wholesalers you’d like to see before the day itself.
How to choose the right wholesaler
Choosing the right wholesaler for your business means you’ll be able to offer your customers the right product selection at the most competitive prices – all of which ultimately determines your profit margins.
Here’s some essential things to look for:
- Low prices – When comparing wholesale prices, work out the profit margins on the products you resell to customers. The lower the wholesale price, the larger the margin and the more profit your business will make.
- Reliable supply – Some wholesalers can have a varying selection of products. If securing product consistency is important, check which brands and product lines are always stocked by the wholesaler.
- POS materials – Check if you can get hold of point of sale (POS) materials, such as posters, displays or product photos for use on your website.
- Exclusivity – Some wholesalers create territory exclusive or niche exclusive deals, whereby they’ll only supply products to your business if in a certain area.
Wholesaler buying tips
- Maintain a good relationship – Get to know the wholesalers that you work with and stay in regular touch. That way, you’ll be first in line when new products come into stock and older products are discounted. There may also be an opportunity to get a better price deal going forward.
- Haggle for a better price – While negotiating with a wholesaler isn’t quite the same as haggling for goods in a Marrakech market, there’s every chance they’ll consider a price reduction. Savings will depend on several things, including how much you’re buying and the age of the goods. A wholesaler may need to shift goods quickly to free up warehouse space or boost their cash flow or bottom line at certain times of the year. The best discounts are usually achieved by traders buying in large quantities, and a wholesaler may not be tempted by a small order. That said, it’s always worth asking – the worst they can say is no.
- Shop around – Many wholesalers sell the same products so shop around to find the best price. Alternatively, see if your chosen wholesaler will ‘price match’ a cheaper supplier, particularly if it’s for a large order.
- Cash not credit – Many wholesalers offer credit to trusted long-standing customers. Don’t expect to get an instant credit account from the start, especially if you’re a new business. Pay cash up front for a couple of months before raising the subject.
- Returns policy – Even the best wholesalers receive a bad batch of products now and then. To protect yourself from being left with goods you can’t use or sell, check a wholesaler’s policy on returns. Can you return some or all the defective or damaged items?
- Question bargain goods – Liquidation sales are plentiful when you visit wholesale supply websites. They may sound like fantastic opportunities but ask about products before buying. Are they damaged or expiring soon? Make sure you don’t end up with items that you can’t use or sell because that won’t help your business’ bottom line.
- Become a member – Some wholesalers run membership schemes or issue trade cards to reward loyalty from regular buying. Often these are free and give access to extended hours or bulk discount.