When planning an eCommerce strategy, there are many duties to consider. Brands selling wholesale products must plan how to source their products and deliver them from the production line to their warehouse. Fortunately, wholesale distributors are an effective middle-person.
Wholesale distributors are taking full advantage of the eCommerce boom. 21% of distributors state that eCommerce accounts for 20%-30% of their total revenue. Because of this, distributors are offering more opportunities and ease for eCommerce sellers switching to a wholesale strategy.
But why should eCommerce companies work with a wholesale distribution company? What can you expect with this partnership? And what are some tips to find the best distributor? We will answer these questions and more.
What Is Wholesale Distribution?
Before we describe wholesale distribution companies, let’s give a refresher on wholesalers. When retailers sell wholesale products, they acquire the items from a manufacturer and sell them directly to consumers. These retailers source the items in bulk, usually at a lower price, and store them in their warehouse to sell to the end consumer.
Partnering with a manufacturer can be difficult–especially for new eCommerce companies. This is where wholesale distributors come in. These companies act as the middle-person between a manufacturer and retailers. Wholesale distributors acquire the items from the manufacturer and sell them to individual businesses.
How Does Wholesale Distribution Work?
Wholesale suppliers acquire goods, store them in warehouses, and sell them in smaller quantities to eCommerce businesses. Distributors also arrange shipping and delivery.
Wholesalers are also more versatile, and the industry has progressed over the last several years. For example, some distributors act as dropshipping providers, where the wholesaler stores the product for the eCommerce company and handles all shipping and delivery.
Wholesale distributors have even more to do. These companies must understand market trends, eCommerce needs, build strong partnerships, manage pricing, and ensure operational efficiency.
Types of Wholesale Distributors
Since wholesale distribution has advanced over the last several years, eCommerce companies can find different types of wholesalers. The one you choose depends on your business, preferences, products, industry, and customers.
- Specialized distributors. Manufacturers in specific industries, such as healthcare and food/beverage, may only work with specific distributors. This has many benefits since the wholesaler will have industry knowledge, know the latest market trends, and act as the manufacturer’s spokesperson.
- Manufacturers. Some manufacturers sell their items directly to eCommerce retailers. This is most common with boutique and small-scale manufacturers, but large companies may also sell directly to stores if they don’t have a distributor.
- Regional distributors. These distributors focus on a specific geographical region. This is important for eCommerce companies focusing on a specific area since the distributor can speak the language, knows the customers, is familiar with regional laws and regulations, knows the local market trends, and can import items, if necessary.
- Jobbers. Small courier companies or individuals who deliver wholesale goods to eCommerce sellers.
- Agents and brokers. Agents of manufacturers find customers, negotiate pricing, and make a sale. Most manufacturers hire agents or brokers on a commission basis.
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Why Should You Partner With Wholesale Distribution Companies?
Ecommerce companies will experience many advantages when partnering with a wholesale distribution company. Some of these benefits include:
- Simpler operations. Since wholesalers act as the middle-person, they simplify operations for eCommerce sellers and manufacturers. It’s easier for retailers to connect to a distributor than a manufacturer. And instead of working with individual sellers, manufacturers work through a distributor to fulfill orders. This simplifies the ordering and shipping process for all parties.
- Increased reach. Partnering with a distributor effectively allows eCommerce stores to expand their reach and sell various products.
- Storage. Wholesalers can store a massive amount of inventory, which allows more flexibility for eCommerce sellers. Retailers can buy small-batch orders to reduce storage costs. This is better than working with a manufacturer requiring retailers to purchase order minimums.
- Low cost. There are other ways that eCommerce companies can save money by partnering with wholesale distributors. For example, eCommerce sellers can buy the amount of inventory that fits their budget, saving on investments, operational, and shipping costs.
- Supply chain stability. Ecommerce companies that partner with wholesalers can achieve stability since they always have a regular influx of products. This reduces risks, such as product shortages, and improves the overall supply chain.
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The Challenges of Wholesale Distribution
While wholesale distribution is an effective model for many eCommerce sellers, it comes with challenges. Here are the most common ones to expect:
- Manufacturers can also sell directly. Many manufacturers, specifically small and boutique ones, can sell directly to retailers. It can be difficult for eCommerce companies to know which option is best.
- Profit pressures. While distributors can help your business save money, you must pay for their services. To make your ROI, you may increase the cost of your products. With more pressure to sell your products at an affordable price, it can be difficult to weigh the expenses while making your bottom line.
- Meeting customer expectations. Ecommerce companies also feel pressured to meet customer expectations. It’s integral to work with a distributor that sells the best quality products, offers excellent service, and delivers items in a timely manner.
Tips When Choosing a Wholesale Distributor
Wholesale distribution is complex, which is why it’s essential to choose the best partner. Here are some tips for wholesale distribution success.
Know Your Customers
When looking for a wholesale distributor, always know your customers’ needs. Predicting future sales and trends to plan your inventory is also helpful. This will improve your sales strategies and be an effective way to narrow down your distributors.
Choose a Distributor for Your Industry
If you sell a specific product or work in a niche, choosing a wholesaler with expertise in this sector is best. They will know the most profitable products, best sales channels, effective supply chain model, and can prevent the most common challenges.
Connecting with distributors is easier when you rely on your niche. You can network with other professionals, join industry groups, attend trade shows, and participate in forums. This way, you can meet industry-specific distributors that can improve your overall eCommerce strategy.
Knowing how they communicate is best before ordering any items from a wholesaler. Does the distributor have wholesale distribution software where you place your orders and reach out with a problem? Or do they rely on other communication methods, such as by phone? Knowing this beforehand ensures you can meet their expectations.
Working with a distributor that empowers their processes with technology is essential for an eCommerce business. This ensures they run an efficient operation and can keep up with different tasks in real-time.
For example, distributors can utilize technology by using warehouse and supply chain management software. This way, wholesalers will always know if they have certain items in stock, offering better service to eCommerce sellers.
Related content: Reverse Sourcing
Wholesale Distribution Is Your Solution
Wholesale distribution can help you access profitable products for your eCommerce business without the hassle of working with a manufacturer. There are different types of distributors and many reasons why you should work with one, but the key is to find the best one that fits your needs.
After you find your wholesale solution, there’s more that your eCommerce company must do to prepare for your Amazon launch. Our company can offer the support you need to grow your eCommerce store online. Click here to learn more about our services.
Stephanie Jensen has been writing e-commerce content for seven years, and her copy has helped numerous stores rank on Amazon. Follow her on LinkedIn for more insight into freelance writing and creating high-quality content.