How wholesale distributors can help digitally-native brands expand into brick-and-mortar
Digitally-native DTC brands are always looking for the next big move they can make to propel their brand ahead of the competition. Whether that’s influencer marketing or pop-up shops or something else entirely, it’s an exciting time to push the boundaries as an eCommerce brand.
For brands looking to hit the next stage of growth, consider all of the retail channels available to determine which might be a good fit for your brand. One of those options? Wholesale.
But, launching into wholesale on your own is time-consuming and can be confusing if your team doesn’t have experience with it. That’s where wholesale distributors come in. There are roughly 300,000 wholesale distributors in the U.S. who can help your brand emerge from online-only to an omnichannel retail success story.
The biggest emerging brands are building wholesale into their growth strategies. See how Sunski, Kinona, and Peak Design expanded into wholesale here.
In this article:
- What is wholesale?
- Wholesaler vs. distributor vs. retailer
- Benefits of wholesale distributors
- Challenges of wholesale
- Is wholesale right for your business?
- How to get started with wholesale expansion
- Setting up your tech stack for wholesale
What is wholesale?
Wholesale retail is when manufacturers sell their products at a lower-than-market rate. Typically wholesale refers to B2B sales between the two companies, often a manufacturer and distributor or retailer. But wholesale customers could also include direct consumers themselves, as seen in Sam’s Club and Costco’s business models.
Typically, wholesale products are available at a discounted rate because they’re sold and purchased in bulk.
Wholesale vs. retail: definitions
So, what is the difference between wholesale and retail?
Wholesale is typically business-to-business (B2B) sales, where one company sells product to another. These orders are typically bulk orders, hence why wholesale often involves a discounted rated due to the guarantee of the volume of sales.
Retail is often business-to-consumer (B2C), but may also include B2B sales if the retail location is reselling other brands’ products. In this article, we’re mostly talking about retailers with brick-and-mortar stores — this is a great way to get into physical retail without the investment of your own storefront. Retail stores will put a higher markup on the product price so they can turn a profit, as they also typically assume marketing, advertising, customer service, and other related costs.
Wholesaler vs. distributor vs. retailer
Let’s back up and look at the entire supply chain process at a high level:
Supplier(s) provides raw materials to manufacturer -> manufacturer makes product -> brand acquires product from manufacturer -> brand sells product to wholesale distributors -> wholesale distributors hold product in warehouses and then sell to wholesalers -> wholesalers sell to retail stores and consumers, and retail stores sell to consumers
For some brands, manufacturing is done in-house. Others outsource it. And as you might imagine, the unit price goes up while the order size goes down through each phase of the supply chain.
The wholesale distributors are the independent agents or companies that purchase directly from the brand (also the manufacturer in some cases) and then sell that product to wholesalers and other companies which will eventually sell directly to consumers. They’re the middle-man between you and the stores that sell your products.
Wholesale distributors also typically hold on to product longer than wholesalers or retailers. Because their business is built on their ability to carry large quantities of merchandise, they have the capacity to do so. Again, as you go through each step in the supply chain process, this holding period shortens.
In short, the major difference between wholesale and retail is:
- The wholesaler purchases from the distributor and sells to retailers.
- The wholesale distributor purchases from the brand or manufacturer and sells to the wholesaler.
- The retailer purchases from the wholesaler and sells to consumers.
Types of wholesale distributors
Wholesale distributors can be individuals or agencies, and be independent from or working in conjunction with the manufacturer. Apparel, furniture/home goods, electronics, groceries, and office equipment are some common verticals where warehouse distributors find work.
You can also break down wholesale distributors even further:
- Retail distributors: businesses that sell to the consumer (could be a brick-and-mortar store)
- Merchant distributors/certified wholesale distributors: purchase products from manufacturer or brand and sell to other businesses, which will either sell DTC or B2B
- Dropshipper: a behind-the-scenes individual or company which handles customer order fulfillment on behalf of another company/brand
- Manufacturer: the company which creates the product
- Importer: some companies may retain exclusive access to import products in specific countries, which could help with an international expansion
- Regional distributor: distributors who work specifically within a geographic area
- Limited service: highly specialized, only offer a specific set of services or distribute a specific product
Benefits of wholesale
There are a number of advantages your eCommerce brand stands to gain by going wholesale:
- More time to focus on your business. Rather than spending time relationship-building and looking for buyers for your product, outsourcing this to a wholesale distributor can free you up to prioritize the areas of your business that matter the most to your long-term success. After eCig Distributors started working with wholesale distributors, for example, they were able to introduce 20 new brands per day across 5 eCommerce sites.
- Greater distribution and market coverage. Working with partners can help you spread the word more quickly about your product, reaching consumers in a larger and more diverse geographic area. You’re also able to leverage your distributor’s existing relationships, and possibly cultivate new ones of your own.
- Free up storage space. If your own warehouses are becoming crowded, enlisting the help of a wholesale distributor will allow you to offload some of that extra stock — not to mention reduce carrying costs.
- Move old product. If you have lots of extra stock on hand for a specific SKU or collection, a wholesale distributor can take it off your hands and help you find a buyer.
- Logistics advantages. Wholesale distributors often have existing processes and systems, or access to discounted shipping or warehousing, for instance.
- Assistance with sales and marketing. These responsibilities typically fall on the last business on the supply chain: the retailer. You can partner with them to align on messaging and make sure your brand is represented cohesively.
Challenges of wholesale
Though wholesale certainly has its advantages, there are a few downsides to be aware of. However, with careful planning and forethought, you can nip many of these challenges in the bud.
- Balancing direct-to-consumer and wholesale customers. You don’t want your customers to know that you’re selling your product for cheaper elsewhere, and you also don’t want to neglect your DTC customers by prioritizing wholesale channels. We’ve put together an article to help you find a balance.
- The mandate to meet minimum order requirements. Especially if you’re just getting started with wholesale, it can be scary (and difficult) to make a large commitment. That’s why it’s so important to find out what the minimum order requirements are upfront.
- Inability to scale that quickly. Many companies face typical growing pains with expansion. It can be difficult for the operational team to keep up with new processes and strategies that affect their day-to-day.
- More susceptible to outside influences. In any business, there are factors you can’t control. When you go into wholesale, you increase the number of factors that your business is susceptible to “fall victim” to, like fuel/transport costs or system breakdowns.
So, is wholesale right for your business? As you can see, wholesale isn’t for everyone. But if rapid, large-scale growth is one of your goals, this is one quick way to get there.
How to get started with wholesale expansion
Getting started with a wholesale distributor starts with creating a list of your options. You want to find the right wholesale partner, not just anyone who comes up in a Google search. There are a few other ways to start your list of options:
- Ask your network
- Reach out to other online brands you admire (or check their product label!)
- Ask your technology partners (website builder, inventory management software, warehouse management software, etc.)
- Attend trade shows and industry events
- Online wholesale directories (Global Sources, BuyerZone, etc.)
- Subscribe to wholesale forums (The Wholesale Forums, WholesaleForum.com, etc.)
- Check local directories
- Look at third-party marketplace resources, like Amazon or Alibaba
Once you have a solid list of options, it’s time to narrow it down. Start with their existing customer base. What do the reviews say? Do they have any case studies? Do they have experience working with brands similar to your own, both in terms of product and growth goals? You may even ask to be put in touch with a customer of theirs to solicit their opinion directly.
If the company checks out there, it’s time to find out what their requirements are. Here are some things to find out:
- Minimum required order: is your business set up to meet this?
- Return policies: what happens when merchandise is lost, defective, or damaged?
- Shipping: can they meet your shipping needs? Make sure they can use your carriers, meet your delivery times, and provide tracking information.
- Pricing and payment: how do they structure the pricing, and how do they assess rate increases? It’s also a good idea to check out how you can provide payment (credit card, check, auto-bill, etc.)
- Customer service: what role does the wholesale distributor play, and does that work for your current capacity?
Once you’ve gone through your checklist, you can determine which are most important for your business and compare the front runners from there.
Setting up your tech stack for wholesale
Congratulations, you’ve found the right distributor and signed the agreement!
It’s important to set yourself up with wholesale software and inventory management software to keep all of your processes automated and your data accurate. Sticking with manual processes may hinder your growth as you expand your wholesale channels.
Take Sunski Sunglasses as an example. When they first ventured into wholesale, they were still using Excel. But this was slowing down growth and wreaking operational havoc. They switched to Stitch Labs inventory management software and grew their B2B channels by 20%.
Stitch manages inventory and orders for brand-owned retail stores and integrates with EDI providers and B2B wholesale platforms to help online brands sell wholesale into big-box stores and boutique retailers, keeping inventory and orders in sync and ready to satisfy customer demands. When Shopify retailers implement Stitch, they gain access to our integration with NuORDER; enabling a streamlined process for boutique retailers to purchase products at a wholesale rate.
With your wholesale, eCommerce, brick-and-mortar, and marketplace orders all tracked through Stitch, you can easily search and monitor order status in a single view, ensuring shipping deadlines are met. This visibility means that, on average, retailers see a 39 percent increase in order management efficiency with Stitch.
Want to see how Sunski, Kinona, and Peak Design overcame their wholesale challenges? Check it out here.