What is wholesale distribution?

What is wholesale distribution?

Wholesale distributors purchase products from manufacturers in bulk, and then sell the products to retailers. Wholesale distributors also handle the logistics and warehousing of manufacturer merchandise, reducing the complexity retailers sometimes face when working directly with manufacturers. You can think of wholesale distribution as the middleman between manufacturers and retailers.

Benefits of wholesale distribution

Wholesale distribution provides benefits to everyone involved — manufacturers, wholesalers, and retailers.

Wholesale distribution benefits for manufacturers

• Focus on Core Competencies: By turning to wholesale distribution to sell their products, manufacturers free up time and resources to focus on core competencies like product development, production, and innovation, while outsourcing distribution activities to wholesalers.
• Access to Broader Markets: Wholesale distribution channels provide manufacturers with access to a network of retailers and markets with further reach than they might otherwise achieve. With wholesale distribution, they can reach new customers and new regions.
• Simplified Logistics: Wholesale distribution helps manufacturers streamline their logistics processes, because wholesalers handle tasks such as warehousing, inventory management, and order fulfillment.

Wholesale Distribution Benefits for Wholesalers

• Economies of Scale: Wholesalers are often able to purchase goods in bulk quantities, allowing them to negotiate lower prices from manufacturers or producers. This enables them to reduce their per-unit costs and increase profitability.
• Expanded market reach: By selling to a variety of retailers or businesses, wholesalers can increase the potential for sales and business growth by reaching a broader market than selling directly to consumers.
• Risk Mitigation: Wholesalers are able to diversify their product offerings and carry a variety of items from various manufacturers. This diversification minimizes the risks associated with fluctuations in demand or changes in consumer preferences for specific products.

Wholesale Distribution Benefits for Retailers

• Convenience: Retailers are often able to source a wide range of products from one wholesaler. This simplifies the procurement process and allows retailers to focus on sales and customer service, while still being able to offer a variety of products.
• Cost savings: By purchasing goods from wholesalers at discounted prices, retailers can reduce their procurement costs compared to buying directly from manufacturers.
• Flexibility: Wholesalers often offer retailers flexible ordering options, including small minimum order quantities and the ability to replenish inventory quickly. This flexibility allows retailers to adapt to changing customer demand and seasonal trends more effectively.

Starting a Wholesale Distribution Business

If you’re looking to start your own wholesale distribution business, the first place to start is research, research, research. Wholesale distribution can be profitable, but it also requires investment, space, and risk. You’ll be buying in bulk directly from manufacturers and you’ll need to make sure the merchandise you purchase will have enough consumer demand to generate healthy sales. Since wholesale distribution involves a larger buy, you’ll also need a large space to store your merchandise. Some states require wholesale licenses, and specific goods might require additional licenses on the federal level. 

If you want to tap into more markets and increase sales, consider using an online marketplace like NuORDER by Lightspeed to connect with retail buyers and spread awareness about your merchandise. 

Get Started with Wholesale Distribution

Finding a Wholesale Distribution Partner

Use a Distribution Partner to Avoid Minimum Order Requirements 

Reaching out to a manufacturer of interest directly can remove the costs associated with using a wholesale distributor as a middleman. However, many manufacturers have a minimum order requirement. If your business is too small for their minimum order, ask about their established wholesale distribution channels. The manufacturer likely has existing relationships with wholesale distribution partners, who may be able to sell your business a smaller minimum order at a higher price per item. Remember, the fewer people involved in your wholesale distribution purchase, the larger your profit margins will be.

How to Find the Right Wholesale Distribution Partner

Once you’ve found a wholesale distribution channel for your desired product, there are several things to consider before moving forward with the relationship. Make sure to ask where materials are sourced and about their ethics and sustainability. Consumers value these considerations today more than ever, so look for wholesale distribution partners with sustainable initiatives who can offer you an extra layer of credibility in consumers’ eyes. 

Here’s a checklist of key data points to request at your first wholesale distribution meeting:

Digital tools for wholesale distribution

There are a variety of digital tools and innovations that can help you find wholesale distributors or even help you start and manage your own wholesale distribution business. Tools like digital trade shows and online marketplaces connect retailers and distributors, share new products, and simplify ordering processes. 

Digital trade shows

Trade shows are one of the most important methods of finding and building a wholesale distribution partnership that grows your business. Digital trade shows add the technical advantages of being able to sort merchandise by category from the comfort of your computer. Digital trade shows can help narrow the search for a perfect wholesale distribution partner. Be sure to research which digital trade event fits the vertical most relevant to your business. 

Online marketplaces

Outside of scheduled digital trade shows, an online marketplace can give you year-round access to an even larger pool of potential wholesale distribution partnerships. Brands and wholesaler distributors can also reach out to you if they think they have merchandise that fits your retail style. This allows for a two-sided interaction that interests both parties.

If you’re looking for a diverse and sizable digital marketplace, retail buyers can sign up to explore over 2,500 brands on NuORDER Marketplace for free. Simply fill out an application here to get started. 

Read more about what digital solutions mean for the future of wholesale.