Have you ever wondered what a “wholesale distributor” is? In a nutshell, the job of such an entity is to act as a middle-man of sorts between manufacturers and retailers. It’s quite rare for manufacturers to sell direct to retailers or even consumers.
That’s because manufacturers don’t want the hassle of dealing with retailers or even consumers. All they want to do is make stuff and sell it on for a profit. Wholesale distributors agree to buy specific volumes of stock for a cheap price and sell it to retailers, often with a big markup.
The reason they add a big markup is to cover the cost of buying the goods from the manufacturer, and the cost to sell them to retailers. Those retailers then add a small markup to cover costs and make a profit from consumers.
I won’t lie to you; a lot of hard work is often involved when setting up a wholesale distribution business. But the good news is that it can be quite a profitable venture – as long as you do it right. The focus of today’s article is to show you how you can set up such a business. Keep reading to find out more!
How lucrative is the wholesale distributorship industry?
Let’s put it this way; there wouldn’t be so many wholesalers in the world if they knew they couldn’t make a big profit from what they do! In the United States alone, the industry is worth over $3 trillion. It accounts for around 7% of the nation’s GDP or “gross domestic product.”
Setting up as a wholesaler is no different to setting up any other business that buys and sells physical stock. It’s a financial game that many people are quite good at, and it could be something that you’re good at too!
If you buy and sell products that are always in demand, and you can buy products cheaper than your competitors; your firm will grow.
What should I specialize in?
Some folks set up wholesale distributor companies based on products they think will always be in demand. For instance, auto parts for popular modern cars will always be in demand.
Of course, other people don’t like taking risks. They prefer to stick with industry products they have vast experience in. What you choose to specialize in is up to you. The only thing you need to bear in mind is that you should specialize in products that have proven to be good sellers.
If you are the kind of guy or gal that likes to spread their risks, you might not want to specialize in one area alone. Let’s say that your primary business involves distributing books. You might also want to sell CDs, DVDs and even electronic goods like games consoles.
Doing such a thing is a good idea because it means you can ditch product lines that don’t sell well anymore, and bring in new lines that do. As I said before, just make sure you sell stuff that people want!
Where should I set up my business?
In an ideal world, you should set up your wholesale distribution business in a central part of the country you operate in. That makes it easier to pick up goods from manufacturers, and for your retailers to pick up goods from your warehouse.
Before you start, you should do some thorough research into where your suppliers and customers are all based. That way you can determine where you need to establish yourself. Of course, you might need to move to another state if your ideal location isn’t anywhere near where you live!
It’s also important that you check the premises you lease are fit for purpose as they say. The space inside the premises should be big enough to accommodate the stock you want to buy.
There should also be loading bays that are easy to access for trucks that load and unload goods to and from your warehouse. You will also need some office space on-site, and the usual facilities that go with them like dining and bathroom areas.
Plenty of parking spaces for employees and visitors alike is also a good idea. You don’t want people to traipse over to your building because there’s nowhere to park!
Do I need a fleet of trucks?
In a word, yes. You will doubtless have to deal with many manufacturers. Some will not be willing to provide shipping services to you, and so it is up to you to arrange transport for anything you buy from them.
The good news is that you can save money on your fleet costs by getting used trucks. Even models that are 12 months old or less are so much cheaper to buy than brand new ones! Websites like http://trucks.autotrader.co.uk/ are great for seeking out the best deals on used trucks.
Another option open to you is leasing. Some new startups have a strict budget and so cannot afford to spend money buying new or used trucks. Leasing is a way of having a new fleet of trucks without paying the large costs associated with them.
As with car leases, you just pay a deposit and a fixed number of instalments. After a period of three years or so, you can then upgrade to newer trucks. Lease costs are deductible from a tax point of view, and it’s a great idea for your cash flow too.
You might have guessed that you will need a lot of capital to set up such a venture. But, as they say, you’ve got to spend money to make money!
As long as you have a solid business plan, you shouldn’t have any trouble getting venture capital funding or even a loan from your bank. It’s rare to find people that set up a company like this without having investors, given that a lot of money is involved.
Thanks for reading today’s featured article and good luck with your plans!