What is a wholesaler? The answer to this question may seem simple, but for many it can be difficult to distinguish between the offer of a wholesaler and the service of working with a manufacturer.
After all, there are no “quarter sellers” or “half sellers”. Who does the term “wholesaler” refer to?
In this article, we’ll look at everything you need to know about the role of a good wholesaler, how to find one, and the difference between wholesalers and approaching a manufacturer directly for your product.
What is a wholesaler?
It’s easiest to think of wholesalers as the people in the middle. They are the ones who forward your request to the supplier and get back to you with the supplier’s answers.
They make purchases on your behalf once they’re paid and take a percentage of the money before it reaches a supplier, much like a football or basketball agent does when negotiating a contract.
Sure, the player could do it without an agent and save money on his fees, but does he have the right experience to get the best deals? Probably not.
Thanks to a wholesaler’s position, they can often answer many of your questions before having to contact the supplier, which can save you time and effort. They also use their experience working with various suppliers to help you get the best possible deal in terms of cost per unit and MOQs.
Don’t skip: Product Sourcing Blueprint – Use the same method this expert used for 2,500 products
What role does a wholesaler play?
Wholesalers play a crucial role in the early success of an eCommerce business. A good wholesaler can offer you the right products at the right price without any additional effort. However, if a bad incident occurs, you could immediately fall behind, either leaving you with a lot of inventory that you can’t move or, even worse, sending out order delay notices to your new customers.
So let’s take a look at what role a good wholesaler can play in your business.
Procurement of products
First of all, wholesalers offer business owners a wide range of products across multiple categories.
For example, if you’re starting a new water bottle company, there are many wholesalers who can help you source specific bottles that fit what you want to achieve with your brand.
As a new business, you may not yet have established relationships with manufacturers that could help you produce your exact product or even know what to ask. Wholesalers often have much more established relationships with manufacturers, providing you with a channel of communication and the ability to purchase the product in bulk once you’ve decided on your chosen style.
While it may seem easier to negotiate directly with manufacturers, it is often much easier to let wholesalers do this on your behalf and use their process knowledge to achieve the best results.
The best wholesalers act as advocates for your business because they know there is money to be made with large, regular inventory orders.
Bulk purchasing
Wholesalers also typically require minimum order quantities (MOQs) for each product. This means that you are forced to purchase a certain amount of inventory at once, which varies depending on the wholesaler and the complexity of the product.
Want to learn how to reduce MOQs to the number that works for you? Check out our current article here.
While this can be a bit challenging for an early stage entrepreneur, it can be beneficial in terms of lower unit costs and should not be a problem as long as you have followed our product testing rules.
Prices and margins
Wholesalers can influence the price at which you place your product and the profit margin achieved.
Going back to our water bottle example, if you plan to sell it for $9.99 but the wholesaler gives you a per unit price of $7.99, you would need to rethink your pricing structure before launching because that profit margin is unlikely achieved will be sustainable or profitable in the long term. On the other hand, wholesalers can negotiate better deals with suppliers based on their customer portfolio than if you deal with them directly.
Diversity and flexibility
Thanks to the relationships that reputable wholesalers build with multiple manufacturers, they can offer you a high level of flexibility when it comes to choosing the perfect manufacturer for your chosen product.
This allows you to obtain samples and prototypes from multiple sources for comparison, weigh different prices and minimum order quantities, and choose a manufacturer that perfectly fits your brand’s needs and goals.
Comparison of wholesalers and manufacturers
As you’ve probably realized from reading this information, wholesalers are not your only option when it comes to finding a supplier for your new product. You can also order directly from a manufacturer, which has its own advantages and disadvantages.
Here’s a little breakdown of how the two differ.
Direct from the manufacturer
Advantages
- Potentially lower costs for eliminating the intermediary
- More control over the design process
- Build a long-term relationship with your supplier
Disadvantages
- The work is often more complicated
- No previous relationship to commit to
- There is a lack of choice and variety
wholesaler
Advantages
- Access to a wide range of manufacturers
- Additional experience and guidance you can use
- Much less effort
Disadvantages
- Possibly higher cost per unit
- An additional middle step that could slow down the process
Keep learning: Here’s how to find a manufacturer that won’t burn you
So which one is right for you?
When it comes to deciding whether to use a wholesaler or buy directly from the manufacturer, the answer isn’t so black and white.
Ultimately, you need to consider a number of different factors, such as your budget, experience, storage capacity, and more.
However, keep in mind that as long as you focus properly on product testing and stick to a minimum order quantity that doesn’t leave you with too much inventory, you can always change your mind and try other options as your business and confidence continue to grow.
With the right products and systems, nothing stands in the way of achieving your goals. Check out our free eCommerce masterclass to make sure you have everything you need to make your first product launch a success.
