How to Start a Wholesale & Distribution Business
The products you buy at any retail store arrived there through a series of business transactions. The product was first manufactured then sold to a wholesale distributor who stored the product in a warehouse before shipping the product to the retail location.
Wholesaler distributors can make good money provided they run an efficient operation and turn their inventory quickly. Starting a wholesale distribution business is a significant undertaking that will require substantial start up capital.
Conduct market research to identify the category of products you want to carry. Look for products that have current demand and are selling in the market today. Competition in a given market is a good indication of demand for that category of products.
Search for suppliers. Look for manufacturers and importers who can supply large lots of high-quality products at low unit prices. The key to being profitable in the wholesale business is buying low and selling high. Purchasing in volume and selling smaller lots is the basis of this strategy.
Select those products from the products your suppliers have to offer that you believe you can sell profitably. Make a list of these products, including price points for various order quantities.
Search for retailers and large industrial operations that would likely buy items from your product line. Make a list of potential clients, including the products in which they are likely to be interested.
List and rank your potential customers according to the volume of product they are likely to buy. This will be determined by their retail sales volume and the product lines they carry.
Approach the customers on your list with your product offerings. Negotiate volume and pricing with them for the items in which they are interested. Many will already have distributors they are happy with but some will respond to lower prices, while others may be interested in expanding their product lines.
Buy, rent or lease a warehouse of sufficient size to store your products. This is likely to be a large expense and will require insurance for the building and contents. Ensure that your warehouse is located in an area close to your customer base to minimise shipping costs and has facilities for loading and unloading freight trucks.
Develop procedures for inventory control. You must know what comes into your warehouse and what goes out at all times. A real-time inventory-control software application with bar-code tracking is the best option for maintaining positive inventory control.
Set up your distribution system. Depending on your operation, this can range from contracting with UPS to make delivery of your products to buying and maintaining a fleet of delivery trucks. Carefully evaluate the costs of the options you consider. Operating your own fleet can be an expensive undertaking and often carries a high degree of risk.