What is a wholesaler? It might seem like a simple question to answer, but for many, it can be tricky to differentiate between what a wholesaler provides and the service of working with a manufacturer.
After all, there aren’t “quartersalers” or “halfsalers,” so who does the term wholesaler refer to?
In this article, we will dive into everything you need to know about the role of a good wholesaler, how to find one, and the difference between wholesalers and going directly to a manufacturer for your product.
What Is a Wholesaler?
The easiest way to think of wholesalers is as the people in the middle. They’re the ones relaying your request back to the supplier and the ones coming back to you with the supplier’s responses.
They make purchases on your behalf once paid and take a percentage of the money before it reaches a supplier, similar to a football or basketball agent in a contract negotiation.
Sure, the player could do it without an agent and save money on their fees, but do they have the right experience to get the best deals? Probably not.
Thanks to a wholesaler’s position, they can often answer a lot of your questions or queries before having to ask the supplier, which can save you time and effort. They also use their experience of working with different suppliers to help you to get the potential best deal possible on cost per unit and MOQs.
Don’t Skip: Product Sourcing Blueprint – Get the Same Method This Expert Used for 2,500 Products
What Is the Role of a Wholesaler?
Wholesalers play a critical role in the early success of an ecommerce business. A good wholesaler can bring you the right products at the right price without extra hassle. However, a bad one could immediately put you on the back foot, either leaving you with a ton of stock you can’t shift or, worse, sending out order delay communications to your new customers.
So, let’s dive into what role a good wholesaler can play in your business.
Sourcing products
For starters, wholesalers provide business owners with a wide range of products across several categories.
For example, if you were launching a new water bottle company there are many wholesalers that could help you source specific bottles that suit what you are trying to achieve with your brand.
As a new business, you might not already have built-in relationships with any manufacturers to help get your exact product produced or even know what to ask. Wholesalers often have much more established relationships with manufacturers, offering you a line of communication and a way to purchase the product in bulk once you have landed on your chosen style.
While it might seem easier to deal with manufacturers directly, it is often much easier to allow wholesalers to do so on your behalf, using their knowledge of the process to get the best results.
The best wholesalers work as advocates for your business because they know there is money to be made if you end up making large and regular stock orders.
Bulk purchases
Wholesalers also typically require minimum order quantities (MOQs) for each product. This means you will be forced to buy a specific amount of stock in one go, which differs depending on the wholesaler and the complexity of the product.
Want to discover how to reduce MOQs to a number that suits you? Check out our recent article here.
While this can feel a little challenging as an early-stage entrepreneur, it can be advantageous in terms of lower unit costs and shouldn’t be a problem so long as you have followed our rules for product testing.
Pricing and margins
Wholesalers can influence the price point at which you place your product and the profit margin you achieve.
Going back to our water bottle example, if you were planning to sell it for $9.99, but the cost per unit given to you by the wholesaler is $7.99, you would have to reconsider your pricing structure before launch because that profit margin will likely not be sustainable or profitable in the long run. On the flip side, wholesalers can negotiate better deals with suppliers than if you go direct because of their portfolio of clients.
Variety and flexibility
Thanks to the relationships that high-profile wholesalers build with multiple manufacturers, they can offer you a great amount of flexibility when it comes to picking the perfect manufacturer for your chosen product.
This allows you to source samples and prototypes from multiple sources to compare, get a variety of prices and MOQs to weigh up, and pick a manufacturer that aligns perfectly with the needs and goals of your brand.
Comparing Wholesalers vs. Manufacturers
As you have probably realized from reading all that, wholesalers aren’t your only option when it comes to sourcing a supplier for your new product. You could also order directly from a manufacturer, which has its own pros and cons.
Here’s a little breakdown of how the two differ.
Direct from Manufacturer
Pros
- Potentially lower costs for cutting out the middle person
- More control over the design process
- Building a long-term relationship with your supplier
Cons
- Often more complicated to work with
- No prior relationship to lean into
- A lack of choice and variety
Wholesaler
Pros
- Access to a wide range of manufacturers
- Additional experience and guidance to tap into
- Much less hassle
Cons
- Potentially higher cost per unit
- An additional middle step that could slow down the process
Keep Learning: How to Find a Manufacturer That Won’t Burn You
So, Which One Is Right For You?
When it comes to deciding whether to use a wholesaler or buy directly from a manufacturer, the answer is not so black and white.
Ultimately, you must consider a range of different factors, such as your budget, your experience, your storage capacity, and so much more.
However, it’s important to remember that so long as you focus properly on product testing and stick to a MOQ that doesn’t leave you with too much stock, you can always change your mind and test out other options as your business and confidence continue to grow.
With the right product and systems in place, there’s nothing that can stop you from achieving your goals. Check our free ecommerce masterclass to help you make sure you have everything in order to ensure your first product launch is a success.
