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Inventory Management Tips, Part 2: Wholesalers

Inventory Management Tips

One of the most important parts of small retail business inventory management is finding and working with the right wholesalers to supply your business with inventory. Wholesalers are companies that work with manufacturers to supply massive amounts of products to retailers all over the country and all over the world. They manage logistics, merchandising, delivery and other aspects of serving as the “middleperson” between manufacturers and retailers. Most consumers don’t know the names of big wholesalers and never see the work that wholesalers do behind the scenes of the consumer economy, but wholesalers are hugely important for the service they provide to keep the supply chains of the retail industry running smoothly.

According to statistics cited by SCORE, the U.S. wholesale industry includes approximately 300,000 companies with combined annual sales of $8 trillion, and the 50 largest wholesalers earn approximately 25 percent of total revenue in the industry. This means that even though there are some big players in the industry, the wholesale industry is also complex and fragmented enough that there are lots of smaller companies to buy from too – and there is plenty of flexibility for small retailers to find the right wholesalers to buy the right inventory for their businesses. You can learn some helpful inventory management tips related to wholesalers below.

Types of Wholesalers

There are a few key types of wholesalers:

  • Manufacturers

Manufacturers sometimes sell directly to retailers, but mostly they prefer to sell to wholesalers because the volume is higher and the process is simpler. Instead of dealing with lots of small retailers, most big manufacturers prefer to ship their product out the door as quickly as possible to a strategic network of big distributors.

  • Importers

Importers are companies that often have unique business relationships with manufacturers in other countries and have approval to bring these foreign goods to the domestic market. Sometimes retailers can buy inventory from importers, but it requires time and relationship-building to make sure you’re a good fit for what the importer sells, and to prove that you can buy a big enough volume.

  • Exclusive Distributors

These wholesalers have an exclusive deal with a particular manufacturer or brand, often with international companies (similar to importers), and they sometimes sell directly to retailers. However, this type of wholesaler might not be the best fit for selling to small businesses because they are often working on a national scale and trying to build sales relationships with big retail chains.

  • Regional Distributors

These are smaller wholesalers who sell to companies on a regional or local basis.

  • Brokers
    Brokers are small wholesalers that supply products for individual retail stores.

There are wholesalers for companies of every size and scale, but it all depends on finding wholesalers that are the right fit for your business. You need to find wholesalers that can sell products to you at a volume, price and profit margin that makes sense for your business. As your business grows, you can gradually get to the point where you can afford to make bigger purchases and pursue bigger deals – perhaps by getting an inventory loan.

Where to Find Wholesalers

The wholesale market is big and complex, so it takes some research to find the right wholesalers for your business. Start by using some wholesaler directories like Worldwide Brands or Wholesale Central. If you are an Amazon seller, check out the Amazon Services Seller Forums for advice and ideas from other Amazon sellers – you can probably get some good ideas of which wholesaler sites to explore, or which ones to avoid.

Other ways to find wholesalers include attending trade shows, attending networking events at your local Chamber of Commerce, checking out the ads and wholesaler listings in trade publications and sometimes talking directly with brand manufacturers. Even if a brand does not sell directly to retailers, they might refer you to the right wholesalers that sell their products.

You can also find wholesalers or product manufacturers on eBay, Etsy and online forums for retail sellers – but keep in mind that if you decide to buy directly from small manufacturers (like on Etsy), there are risks to this as well. Small manufacturers might not be able to meet the product volume requirements that you need, especially during the holiday season, and might be more vulnerable to going out of business altogether.

Avoiding Wholesaler Scams

Unfortunately, as with any other area of business, the wholesale industry is not immune to scams and disreputable actors trying to cheat business owners out of their money. The best wholesalers are “factory-authorized” wholesale suppliers that have relationships directly with brands and manufacturers, but some fake wholesalers sell unauthorized or counterfeit merchandise. Other wholesaler scams include fake wholesaler middlemen who take your order, pass it on to the real wholesaler and mark up the price along the way.
Before you start dealing with any wholesaler, it’s important to make sure that they are real and reputable. Do your research and due diligence – find out if there are any complaints about this wholesaler online (check the first several pages of Google search results or look them up on the Better Business Bureau).

Other tips for avoiding wholesaler scams include:

  • Don’t pay extra fees: Legitimate wholesalers will not charge a “sign-up fee” or monthly fee; they make money just by selling products to retailers.
  • Watch out for suspicious behavior: Real wholesalers operate like real businesses – their websites are full of detailed information, it’s easy to find their physical location and contact information listed on the site and they ask for lots of details about your business, including your Sales Tax ID and other information needed to conduct legitimate, legal business. Wholesaler scam artists will often be a bit cagey with the details – they don’t want a real business relationship, they just want your money.
  • Don’t buy add-on services: Real wholesalers just sell products. Scam wholesalers might try to upsell you on added services.
  • Don’t believe hype: Another trick of scam wholesalers is to make elaborate claims about how much money you can make by using their services – real wholesalers don’t do this; they just sell products.

Just like any other business deal, with wholesalers, if it sounds “too good to be true,” it probably is.

Building good relationships with wholesalers can be a competitive advantage for your retail business. Ideally, you want to have a good network of companies that you buy from, with a diverse array of products and a steady supply of inventory that can grow along with your business. Do your research, investigate any companies carefully and make sure you feel confident about any wholesaler or manufacturer before you buy.

Are you a small business retailer with any favorite “lessons learned” from working with wholesalers? Leave a comment and let us know what your favorite inventory management tips are.


Kabbage Team

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