8 Step Guide to Getting Started as a Wholesaler

In 2022, B2B ecommerce grew 19 per cent from the year before, and that number is expected to continue to grow in 2023. Selling wholesale is one of the most lucrative B2B business models. There is a higher return profit rate with fewer transactions, lower overheads and a great ongoing demand for wholesale suppliers. As long as you sell high-quality products and follow our guide to getting started as a wholesaler, you’ll have a great source of repeat revenue.

What is a wholesaler?

A wholesaler is a business or an individual who buys products in large quantities from manufacturers with the purpose of reselling them to retailers and other businesses. Wholesale distributors sell products to retailers at a discounted price, or a wholesale price, in exchange for the retailer buying those items in bulk.

A wholesale business is an example of a business-to-business (B2B) model because they sell products and services to other businesses in the retail supply chain. Wholesalers are often referred to as the middlemen of the supply chain, as they operate between manufacturers and retailers. Wholesalers can reach a multitude of businesses and don’t have to stop at just one business relationship. In many cases, one wholesale business might be the supplier for hundreds, or even thousands, of retailers. Because of the nature and size of wholesale transactions, though there may be fewer sales in a year, the profit turnover is significantly higher than it is for a business-to-consumer (B2C). Wholesale businesses can also operate as retailers and sell to customers, so there is the added benefit of having the capability to sell to both single customers and other businesses.

How to become a wholesaler in 8 steps

1.     Decide the products you want to sell wholesale

Getting started as a wholesale distribution business means first deciding on the products you want to sell. This will be the foundation of your business, so it’s important that a lot of thought goes into this to ensure your products have enough of an industry demand.

The easiest way to make sure your wholesale products are popular is by choosing a product niche. You want your products to target a section of the market that isn’t yet being sold to. Finding a product niche will help to reduce the number of competitors you face and give you the potential for higher profits. Finding your target market will be a whole lot easier once you find your specialty, as the whole idea of a product niche is that narrow down an existing market to target a specific audience. You’ll also find it easier to create long-lasting business relationships with retailers if you’re the only wholesaler offering your kinds of products, making you the go-to wholesaler.

You should also take into consideration things like profitability, seasonality trends and the selling ability of the niche when you’re deciding on what products you are going to sell. Ask yourself how much money you are likely to make from each transaction, as well as whether or not the products you have chosen to wholesale are seasonal. Seasonality plays a big role in the profitability of products, so make sure you’re aware if your products will only be in demand at certain times of the year or if they are products that will see the same level of demand throughout an entire year.

Some of the most profitable wholesale business product ideas include clothing and apparel, jewellery, luxury items, beauty products, electronics and pet supplies. The demand for these kinds of products is extremely high in 2023, so choosing a niche based on one of them is a great way to ensure your product choice is the most profitable and highly sought after.

2.     Conduct market research

Now that you’ve found a product niche that is bound to attract attention in the industry and appeal to your ideal clientele, you can start to do some market research.  This will help you figure out who exactly you are selling to and what your competition is doing to help you better market your wholesale business and find out what your customers want.

Market research helps you stay on top of trends in the market so you can be better prepared for potential business risks and openings in the market. You’ll be able to predict up-and-coming business opportunities like developing product categories – you’ll essentially keep your finger on the pulse of the market and stay ahead of your competitors. Market research will tell you what other wholesalers are doing so you can assess any changes you might need to make to your business plans. Look for what wholesalers in a particular industry are doing well and try to emulate that, as well as the things they are lacking in as this is a great way to bring in more customers.

Identifying what your customers need is an important step to ensuring business success. You can find out valuable information about your customer, like what they value most when purchasing wholesale items and what their shopping habits consist of through market research. You can predict how your customers will shop in the future and you can easily tailor your products and marketing strategies to suit. You’ll also be able to find out the marketing strategies that your customers respond to best.

You’ll also be able to better plan for things like inventory management because you’ll know exactly what your clients want, how much they might want, and when they want it. Market research makes every business decision you make easier, and it should be a tool you regularly focus on and update with market trends.

3.     Address the legal requirements for wholesaling

There are different legal and regulatory requirements to consider when selling wholesale. Based on the country you are selling in, some states and countries need you to acquire a wholesale license, some don’t. In Australia, you need an ABN and any other relevant business licences required by your state to sell products, goods and services. Make sure you’re up to speed with the Australian Consumer Law (ACL) to ensure you are complying with the laws that apply to businesses selling to consumers, as well as Consumer Product Safety and Information Standards. Register your business name with National Business Name Registration and ensure you’ve got a domain name to set yourself up online.

The Australian Government provides this tool that allows you to fill out a questionnaire based on what type of business you are, and it then gives you a list of licences and permits you will need. The questionnaire will ask you things like if you are planning on supplying electronic materials, if any of your original ideas need protecting, if you will play music or videos on your website or in marketing campaigns, if you will lease an office space and if you will hold personal details about individuals.

You will also need to register for a tax file number (TFN) as well as register for Goods and Services Tax (GST), which is a broad-based tax of ten per cent on most products and services sold in Australia. GST only applies to businesses with a yearly turnover of $75,000 or more and is otherwise optional.

There are a lot of other legalities to consider for your wholesale business, but most are based on the kinds of things you are selling and your intentions as a company. For example, to operate a business vehicle you will need to register that vehicle. If you are planning on using music within your workplace or as hold music on the phone you will need a license. If you plan on hiring employees, you will need to comply with Fair Work, superannuation guarantees, minimum wage requirements and workplace health and safety.

4.     Develop a business plan

Your business plan is a document that is regularly reviewed and updated over time based on changing forecasts in the market and adjusting business goals. Its main purpose is to be a guide to keep you on track throughout your business journey, and it details your measurable business goals and objectives as well as what you need to do in order to achieve those goals.

Start with an executive summary to give an outline of your business, like your mission statement and objective and what kinds of products you are selling. Include the things you’ve found through your market research, like the kinds of customers or businesses you are going to sell to and their buying behaviour.

The next step is to define your organisational structure, this is where you describe your relationships with retail businesses and manufacturers and any others that are fundamental to your business structure. Outline if you plan on hiring employees, their roles and who they will report to. This can’t be done until you have established relationships with other businesses and hired staff. You’ll also want to flesh out the kind of product line you will be selling, making sure to include things like selling points and features. Include anything to do with your products, like what manufacturers they will be sourced from and how.

Next, you will develop your sales and marketing strategies in your business plan, and this is where your market research will come in handy again. Define what marketing styles your customers will respond to best and include the projected revenue of your products so you can easily track unit sales throughout the year. You will want to regularly update your marketing as trends change. For example, email marketing is proving to be among the most popular marketing strategies as 81 per cent of B2B marketers say they invest the most in email newsletters compared to other marketing content. Your customer base might respond well to social content creation, and you find you have the highest return profit from this, so you might choose to implement a marketing strategy with a social media-heavy focus.

You should also outline the fulfilment strategies for your business, like how you will handle the order process and what kind of warehouse space you have, as well as what your supply chain will look like. This will help you break down the financials for your business and determine your break-even point and help you stay on top of your sales predictions; you’ll also know exactly where your money is being invested to avoid potential losses.

5.     Determine your wholesale pricing strategy

Wholesale price

The wholesale price is the price you charge retailers when they purchase your products. Its purpose is to earn you, the wholesaler, a profit margin. To do this, the wholesale price is increased to make it higher than what it cost to make or buy the item.

Retail price

The retail price is what the customer pays for the item. A retailer will mark up the products bought from a wholesaler in order to earn a profit for themselves.

How to calculate your wholesale price

It is suggested that to calculate the wholesale price of your products, you should aim for a profit margin of at least 50 per cent, meaning you should multiply the total of what it cost to either buy or make your products, or the costs of goods manufactured (COGM) by two.

Your research of the market, the pricing of your competitors, the types of products you are selling, and your break-even point (BEP), will all help you calculate your wholesale price. Your BEP is calculated by looking at a variety of business costs. There are fixed costs, those are the costs that aren’t affected by unit sales and will include things like warehouse rental, employee pay and ecommerce website subscriptions. Your variable costs include manufacturing and buying expenses, and this is directly affected by how often you need to purchase from your manufacturer. Because your BEP is calculated by dividing your total fixed costs by the difference between your variable costs per unit and your sales price per unit, your wholesale price directly impacts your BEP. You want to ensure you have set your wholesale price at an adequate price to give you the best opportunity to break even and see business profits.

6.     Develop your logistics strategy

If you’re planning on becoming a successful wholesale distributor, developing an efficient logistics strategy is crucial as 79 per cent of companies with efficient supply chains achieve higher-than-average revenue growth. Whether you’re selling to multiple small businesses or the biggest retail stores in the country, a great logistics strategy helps to ensure your products are delivered on time, your supply chain runs smoothly and is prepared for any future risks.

You can use your business plan for this step, as it will have outlined the things you want to achieve and help you make decisions. You’ll need to determine what your optimal levels of stock will be to ensure a constant stream of products to meet the demands of your consumers. Setting up automated re-order points is also essential. This is a system that will alert you as soon as a particular item is running low on inventory to ensure you have enough time to order that product without it selling out completely.

Implement an inventory management system

There are a few different inventory management systems you can use to ensure efficient product fulfilment. The ABC analysis method categorises inventory in order of most valuable to least valuable to help prioritise your highest-selling products. A-level products are said to take up about 80 per cent of your sales revenue and sell more frequently, B-level products take up about 15 per cent of your sales, and C-level take up about 5 per cent, making them the items of least priority.

The Just-in-Time (JIT) system is when a business only orders products as needed for distribution to reduce waste and improve efficiency. It relies on frequent deliveries to receive products just in time to be delivered to the consumer.

The First in, First out (FIFO) method involves selling the products you receive first to ensure items aren’t sitting in the warehouse for long periods of time. This method is great for wholesale distributors selling perishable items with expiration dates. It is also a great way to stay on top of changing trends in the market, as older stock is moved and sold first.

Develop a shipping strategy

Assess your product weight and dimensions first so you can understand any handling considerations that might need to be in place – do your products require a specific storing environment or have expiration dates? Figure out your customer preferences – are they willing to pay extra for fast shipping or do they prefer free shipping over a certain order amount? These things will help you decide on the best shipping strategy for your business. Your potential customers will want to work with reliable suppliers, and optimising your shipping strategy will help you remain flexible and responsive to changing trends and retailer demands. 33 per cent of consumers have expectations of fast shipping in the digital age, so this is something to keep in mind when developing your shipping strategy.

Implement shipping technology to increase efficiency, like automated label generation and order tracking to help keep track of your data and ensure no mistakes are made during the fulfilment process. You should also assess the best shipping carriers in your area based on their efficiency and price. To save money, you may choose to go with a few different carriers if the products you sell vary in dimensions as some carriers specialise in large items. You should also think about what you will charge for shipping, as this will directly affect the kind of profit you make. Will you give discounts to retailers depending on the amount spent or offer flat-rate shipping to all customers?

You also want to ensure your packaging is optimised to reduce the risk of damage in transit and to also minimise shipping costs. It is much more cost efficient to package products in optimal sized packaging that doesn’t add unnecessary weight. Having specific ways of packaging your products also helps to maintain consistency across the board.  

7.     Develop relationships with manufacturers & retailers

Because wholesalers are described as the middleman that works between manufacturers and retailers, it’s imperative that you foster great relationships between these business partners to be successful in your endeavours.

You should first choose to work with manufacturers and retailers that strongly align with your business values and goals. Think of your business relationships as you would your personal ones, you wouldn’t want to foster relationships with people who don’t have the same fundamental values as you, just as you wouldn’t want to work with businesses with completely different goals in mind.

Upon the initial meeting with your business partners, get an idea of what they need and what they are looking to gain through your B2B transactions. Do your retailers need products by a certain time, or are they planning a mid-year sale that will see an increase in sales demand for a particular product line? This way, you can foster relationships and reduce things like miscommunication down the line.

You should feel comfortable giving regular feedback to your associates, as this will help you improve and create solutions for future mistakes that may occur. Trusting relationships are likely to be more beneficial in the long term for wholesalers, and can provide the greatest value to customers with lower costs and generate significant profits for each party. Studies have shown that retailers who trusted their suppliers were 12 per cent more likely to carry their products in the future and were also 22 per cent less likely to go looking for alternative suppliers, so it’s extremely beneficial to your business to develop a rapport with your retailers.

https://hbr.org/1996/11/the-power-of-trust-in-manufacturer-retailer-relationships

8.     Develop a marketing plan for your business

Building brand awareness is a key step to getting started as a wholesaler. Through the researching your target audience and competitors, deciding the products you are going to sell and creating a detailed business plan, you will have all the tools you need to create a winning marketing plan.

Decide on the marketing channels you will spend your time and money on, choosing between things like Google advertisements, content marketing, email marketing, trade shows and industry events or social media. From there, you can determine a marketing budget, considering your other business finances, to help you meet your marketing goals. Once you’ve decided on these things, you can set up a marketing calendar to outline a timeline for specific initiatives and track the performance of each marketing campaign so you can regularly review and make changes.

Email marketing is one of the best, low-cost ways to get connected with retailers and target their specific needs. It ensures that your marketing message is being delivered, and you can keep your consumers up to date with the latest product promotions, as well as distribute targeted strategies to gain new customers. Other digital marketing strategies will also be beneficial to your wholesale business, so think about what social media apps your target audience is most likely to use and start there. Plan out regular and original content, and you’ll be sure to reap the benefits.

You’ll want to ensure your ecommerce platform reflects your brand while also being easy to use and order from. Retailers won’t buy from websites with slow load times that aren’t appealing to the eye, and they will be far more likely to buy from you again if they found the ordering process simple and fast. Dropshipzone is Australia’s leading B2B2C marketplace and is a great place for you to launch your wholesale products to thousands of Aussie retailers instantly. With such a large customer base, you won’t have to worry about finding retailers on your own, Dropshipzone works only with trusted retailers who are ready to buy from you. This is a great, low-cost, easy-to-use solution to get your wholesale business started instantly, so sign up today for free and start selling more, more often. The best part is, suppliers make 18.33 per cent more in profits when they sell through dropshippers compared to selling the same products on their own website.

FAQs

Is wholesaling a profitable business model?

Wholesaling is an extremely beneficial business model, with the main selling point being that you buy products in large quantities at a discounted price and resell those products at wholesale prices to ensure you see profits. The global wholesale market size is worth 48,883.25 billion USD in 2023, and retailers constantly rely on wholesalers to provide them with products for their stores, making this model extremely lucrative.

Is there a high barrier to entry for wholesaling?

Wholesaling generally has low barriers to entry compared to other business models. It has lower overhead costs and B2B typically sees higher profits compared to B2C. Signing up with a B2B2C marketplace like Dropshipzone can make the barrier to entry even lower for wholesalers, as it removes steps like finding reliable retailers and building a website to display your products on.

Is wholesaling on Amazon worth it?

Wholesaling on Amazon can be a great way to expand your customer base, but there are a few things to consider before choosing to do so. Make sure there is enough of a demand for the products you are selling on Amazon and determine whether your desired retailer base is using Amazon to find wholesalers. Amazon also has a lot of competition because of its popularity, and they charge ongoing fees to promote your products on the website. If you are an established business with enough financial resources, wholesaling on Amazon will be worth it, just make sure you’re aware of the factors that can influence your success.