The Reality of Buying Wholesale
by Kirk A Larson
Published on this site: August 8th, 2005 - See
more articles from this month
In my line of business, I often receive emails and phone calls
from people who are just starting their online retail businesses
and searching for wholesalers who can give them competitive
prices on the latest merchandise from the most popular brand
names. While it's understandable that one would want to sell
the latest merchandise from the highest quality, most popular
brand names, it's often an unrealistic goal unless you have
a substantial amount of capital to invest in your business.
This is not to say that every prospective entrepreneur with
the dream of establishing an online retail business should
just throw in the towel - quite the contrary. Prospective
online retailers need to understand the reality of the consumer
goods industry, the abilities that they have based on their
capital investment, and then design their business plan accordingly.
In my next article, I'll discuss some excellent options for
prospective entrepreneurs with limited capital.
But first, let's look at how some of the most successful
companies in the consumer goods market operate their distribution
channels. Companies with highly popular brand names have worked
hard to establish these brands. Understandably, in order to
protect the reputation of their brand names, they often establish
strict controls in their distribution channel to ensure that
their name is not compromised by association with a sub-standard
retailer.
Many of them directly control their distribution channel
and only sell their products to authorized retailers who have
met their application requirements. Their requirements for
authorized retailers often include:
- A substantial minimum sales volume
- A physical presence, not just an online storefront
- An established history of retail sales and an exemplary
credit rating
- Strong recommendations from other vendors with whom a
business has dealt
Some brands don't allow private retailers to resell their
products at all. Companies who operate in this manner may
own their own retail shops and online retail websites. This
is rare, but there are still some companies who operate like
this, not allowing any independent retailer - large or small
- to carry their products.
Many brands don't directly control their distribution channels,
opting to allow wholesalers to handle distribution to retailers.
However, even if they don't directly control distribution,
they still may establish policies that their wholesalers must
follow. These policies may be very similar to the policies
often employed by brands that directly control distribution,
employing one or more of the following requirements:
- A substantial minimum sales volume
- A physical presence, not just an online storefront
- An established history of retail sales and an exemplary
credit rating
- Strong recommendations from other vendors with whom a
business has dealt
Companies who operate their distribution channels with any
of these levels of control will most likely not allow small
volume wholesale purchases, eliminating distribution to start-ups
with limited capital. The best advice that I can give to a
prospective retailer is to pick up the phone and do your research
directly with the source. Call the company's sales or public
relations department and inquire about their distribution
policies before putting forth a lot of effort searching for
their products through wholesalers. You'll potentially save
yourself hours of wasted time. Not to mention, if you happen
to meet the requirements for establishing a direct relationship
with the manufacturer, there is no better place to obtain
your products.
In my next article, I'll look at options that are available
for the majority of prospective online retailers, those who
don't have an endless source of investment capital that would
allow them to meet the reseller requirements of any manufacturer.
For those businesses, the newest merchandise from the most
popular brands may not be an option. However, that doesn't
mean that the dream of owning an online retail store is out
of reach. Until then, do your research by calling manufacturers
to inquire about their distribution policies, and, as always,
good luck in all of your business ventures!
Kirk A Larson has worked for over 15 years in business
as a writer, personnel manager, and most recently for the
last 4 years as a successful entrepreneur. To learn more about
Wholesalers, visit The Wholesale Suppliers Registry at http://www.wholesale-suppliers.net
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