Sometimes you'll find that selling directly to consumers may not be your forte or hasn't yielded the same results you were expecting.
Before you give up, you might want to consider moving up the supply chain and start distributing your own products (or even other products from other companies) to other retailers. Usually, due to the increased volume you’ll be selling, your revenues will grow much faster, but it is a different kind of business and it takes some getting used to.
The hidden advantage of wholesale ecommerce is that not only do you open the possibility of growing your cash flow, you are allowing other businesses to take part in the marketing of your products. They will talk about your products to their customers and hopefully spread the word about it through their own internet marketing activities.
It may be a bit trickier to control the marketing messages once you’re in this stage—but that’s just a little growing pain that has to be felt when scaling.
Create different pricing for different customers
Now you’ll have at least two different types of customers: consumers and retailers. The golden rule is don’t undercut your retailers.
This means that you should always sell your products to your retailers at a lower price than you do to your consumers. So if you sell widgets for $20 on your public facing website (where ordinary consumers make purchases), make sure you sell widgets for $10 to your retailers so they can make a profit.
Also, keep in mind that If one day you decide to blow out a bunch of inventory and post a huge sale on your website, you might make some of your retailers upset. Especially if they just bought a lot of inventory from you at a higher price than what you’re selling to the public.
In order to achieve selling volume to increase your revenues, you’re going to probably want to enforce a minimum order rule. This means retailers (wholesale buyers) must buy a minimum amount of product or dollar value when placing an order. This allows you to discount your products since they have to buy in bulk.
Advanced wholesale pricing
Some companies take it a step further and would start offering pricing tiers to their retailers. For example:
- If you buy 100 units, you pay $10/unit.
- If you buy 500 units, you pay $9/unit
- If you buy 1000 units, you pay $8/unit.
The idea here is to encourage larger orders and more revenue. It’s probably wise to start out with something simple and see how your business adjusts to this new way of distribution.
It’s going to be tempting to allow retailers exceptions when it comes to placing minimum orders. You’ll have to be the judge of this. You might want to be lenient for new retailers who have signed up for your wholesale program. You can offer “no minimum order” on your first purchase to incentivize sign ups.
But it’s probably a good idea to stick to your guns after the initial grace period. If you always let people buy small orders at a discounted rate, just be aware that it might have detrimental impact on your ability to stay in business.
Allowing other retailers to dropship
Another way to speed up your wholesale business is to allow other online retailers to dropship your products. If you're new to the concept, we highly recommend reading our guide to dropshipping. But in short, the way it works is, their customers purchase your products from their website and you ship the products to their customers.
The retailer will most likely pay you a slightly discounted price for the item since you didn’t have to pay for any of the marketing of the sale.
Obviously this can be a tricky system to set up, but it’s worth spending some time over a spreadsheet to see if it’s a profitable business decision for you. If you think about it, there are tons of online shops out there ready to sell your products if you have a dropshipping program available.
Final words on wholesale selling
In many ways, starting a wholesale distribution business means you’ve reached the big time and can focus your efforts more on your B2B relationships. Take some time to think it through and seek out some expert business advice. It may be wise to consult a business coach who is familiar with this territory. Learning from other’s mistakes is way better than paying for your mistakes.