How to Run a Wholesale Distribution Business

By
Nicole Georgiev
Table of Contents
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    Everyone wants to be successful, especially if they’re involved in a business venture. When it comes to how to run a wholesale distribution business, the key to success is strategy. 

    After you familiarize yourself with how to become a wholesaler and the wholesale definition, you’re ready to talk strategy. The right business strategy will allow you to compete in the market while catering to consumer demand. 

    For a business owner or entrepreneur, the wholesale distribution industry is full of opportunities. Thanks to the internet and modern technology, wholesalers have new ways to grow their business, such as through an online wholesale catalog.

    To run a wholesale distribution business successfully, you have to set your business up properly. This article covers the essentials.

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    How to Run a Wholesale Distribution Business Successfully

    A wholesale distribution business refers to a company or entrepreneur that buys products in bulk directly from manufacturers to resell them to retailers. Similar to the food supply chain, the manufacturers, wholesale food distributors, and retailers maintain the flow of the supply chain. 

    When you start a wholesale food distribution business, one of your top priorities will be to provide excellent customer service. Customers will turn to you to buy products in bulk-with flat rate shipping. The goal of a wholesale distribution company is to purchase high demand products in bulk quantities for a low cost. Most manufacturers offer price discounts or deals to wholesale distributors for purchasing in large volumes. Whole distribution can even help offset the inventory carrying cost, since products will fly off the shelves so quickly.

    In most cases, the manufacturers don’t have the resources to sell their products in smaller quantities. This is why they target wholesalers instead of investing money, time, and effort to sell online to individuals. You'll also have to consider white label vs. private label products.

    To differentiate your wholesale distribution business among competitors, you have to master the following eight processes: 

    • Control and automate inventory
    • Hire and train staff
    • Keep up with order fulfillment
    • Focus on customer relations
    • Take advantage of B2B eCommerce
    • Establish minimum order quantities
    • Provide top-notch customer service
    • Manage cash flow

    1. Control and Automate Inventory

    It's time to get familiar with the inventory definition. Crucial strategies for a wholesale distribution business include proper customer handling and a modern inventory management process. When you have wholesale items to sell, you know that the huge volume of orders has to be fulfilled within a certain time frame. To do this, you need proper inventory control

    Staying on top of consumer demand is crucial. One way to do that is by maintaining enough inventory to cater to the demand at hand. This is also known as safety stock. In most cases, this can prevent the need to backorder or preorder products which leads to extended wait times for products to be delivered. Learn how to print shipping labels and the entire shipping process to ensure quick deliveries.

    To fulfill consumer demand on time, you have to be in control of your stock levels. Start by following most inventory management techniques and restaurant inventory management tips to automate your inventory. This is commonly done with restaurant inventory software and similar processes are available for wholesale businesses. 

    Performing inventory calculations keeps you informed on when it’s time to reorder products. This is known as the reorder point. Such calculations include inventory days, reorder levels, shrinkage, lead time, fill rate, safety stock, and inventory turnover using the inventory turnover formula

    Automating the inventory process will give you more control of your products. It also allows you to fulfill customer orders and perform quick operations promptly. 

    2. Hire and Train Staff

    Every business should have reliable staff. When running a wholesale business, staff training is crucial. Staff should be trained to effectively manage inventory and fulfill customer orders. 

    You should consider hiring an inventory control manager, delivery manager to track orders, someone to take care of warehouse manager responsibilities, and an eCommerce manager. This way you’ll be sure that each task is completed accurately and efficiently. 

    3. Keep Up With Order Fulfillment

    When you think about how to run a wholesale distribution business or wholesale directory, you have to remember that order fulfillment is pivotal. With proper order fulfillment, you retain your customers and they continue buying goods. However, in order to fulfill customer demand, you need inventory. 

    Many retailers deliver orders to their customers within 24 to 48 hours which leaves customers happy. This also leads to increased customer retention. With wholesale eCommerce fulfillment, you should be transparent about each order status.

    4. Focus On Customer Relations

    Keeping your wholesale distribution business alive and growing relies on prioritizing your customers. To do so, you must provide a pleasant shopping experience and valuable products. This is what will keep them coming back.

    Your wholesale products should have a market-friendly wholesale price and include accurate descriptions. These details and transparency attract customers and prevent them from shopping elsewhere. Building long-term consumer relationships are crucial for business success, just like with supplier relationship management practices. 

    5. Take Advantage of B2B eCommerce

    In the past, B2B wholesale transactions were completed offline. Most orders were placed through paper catalogs. Now, companies have innovated their processes to offer online shopping for consumers through a digital catalog and B2B eCommerce platform.

    Making your wholesale products available online is possible through an eCommerce website builder. Explore different eCommerce website examples, online marketplace options, or a wholesale marketplace app. Be sure to also look into the best eCommerce platform for SEO.

    To improve your chances of reaching millions of retailers and customers, you will want to consider an online marketplace to sell your products. There are different types of online marketplaces to choose from based on your B2B business model.

    Through these online marketplaces, businesses have the option to reach out to customers, even if they haven’t completed their order. This typically occurs through abandoned cart recovery practices. Such practices include sending an abandoned cart email to remind the customers of their interests. 

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    6. Establish Minimum Order Quantities

    When determining how to run a wholesale distribution business, you should consider establishing minimum order quantities for your products. A minimum order quantity or MOQ refers to the minimum quantity of product a consumer is allowed to purchase. 

    Establishing this minimum on wholesale sales will save you time, money, and effort. This is similar to an EOQ or Economic Order Quantity. It builds relationships with your consumers that have a true demand for your products. This is opposed to consumers that are trying to get a low quantity of products at a wholesale price. 

    It’s common for MOQs to be set 20% higher than you want or need them to be. This gives you some room to negotiate the price with your buyers, especially for first-time buyers. MOQs can be set for products such as wholesale dairy, wholesale meat, wholesale seafood and bulk fish, and wholesale produce.

    In order to make day to day profit, business owners must reach out to their customer base and perform the necessary market research to know what products appeal to them. This is done through different trends including food trends, restaurant industry trends, beverage industry trends, eCommerce trends, and DTC trends.

    7. Provide Top-notch Customer Service

    To make products more lucrative, wholesale distributors tend to offer product discounts. B2B sales are competitive so making your business stand out is crucial. However, it’s risky to compete on price. Therefore, standing up to your competitors with top-notch customer service is best.

    It’s possible to provide quality customer service by offering additional order tracking services, keeping records of order history, and sending order status updates. These practices will differentiate your brand from the competition and get you working towards long-term growth. Quick and reliable transactions have more value to some customers than a lower price. 

    8. Manage Cash Flow

    All businesses have to deal with cash flow and that’s important to keep in mind when learning about how to run a wholesale distribution business. Wholesale businesses deal with large order sizes which make cash flow even more of a priority.

    Keeping the financial health of your business in a strong position is a must. This includes following up with reports such as eCommerce sales numbers, inventory, the best and worst selling products, cash availability, and cost of goods sold. A business process flow chart template may also come in handy for managing processes.

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    Frequently Asked Questions About How to Run a Wholesale Distribution Business

    What Is Wholesale Distribution?

    Wholesale distribution refers to wholesale distributors buying products from suppliers or manufacturers in bulk quantities to sell them at wholesale prices to consumers. The consumers are often retail stores or commercial establishments. There are different ways to look into how to find vendors for wholesale distribution. In most cases, to sell wholesale products, you will need a wholesale license.

    The goal of each wholesale distribution company is to distribute quality products. To run a successful wholesale distribution business, you’ll need solid financial planning, inventory management, and negotiation skills.

    How to Run a Wholesale Distribution Business?

    To run a wholesale distribution business, you have to:

    • Control and automate inventory
    • Hire and train staff
    • Keep up with order fulfillment
    • Focus on customer relations
    • Take advantage of B2B eCommerce
    • Establish minimum order quantities
    • Provide top-notch customer service
    • Manage cash flow

    Most wholesale distributors and small businesses secure storage space. This is essential for storing products for the short or long term. With inventory management software, each distributor and retailer can keep track of their products as they go in and out of storage. 

    What Are the 4 Distribution Channels?

    The four distribution channels include: 

    • Direct selling
    • Sell through intermediaries
    • Reverse logistics channels
    • Dual distribution

    Each distribution channel has its own institution that manages the transaction and exchange of the products. 

    What Are the 4 Subsegments of the Wholesale Distribution Industry?

    The four subsegments of the wholesale distribution industry include:

    • Healthcare
    • Industrial
    • Food and beverage
    • High-tech

    How Does Wholesale Distribution Work?

    After the wholesale distributor purchases bulk products at a low price from the manufacturer, they distribute the products to the next purchaser, which is oftentimes a retailer. The retailer then sells to the consumers. 

    The products are at their cheapest price when the wholesale distributor purchases them from the manufacturer. Retailers typically buy smaller quantities at an elevated price, but it’s still cheaper than what they would pay the manufacturer. In most cases, retailers make that money back, plus profit, once they sell to the consumers. 

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