Looking to form relationships with wholesale suppliers? Searching for suppliers with the best offers for small businesses? Here are some steps for finding wholesale suppliers perfect for small business and best practices for entering into agreements with them.
Step 1: Understanding the wholesale business
The size of the wholesale industry makes it harder for buyers to select from. The wholesale industry is highly fragmented with 50 of the largest distributors generating 25 percent of the industry revenue. Wholesalers have a variety of distributors channel and supply chain. The chain starts with manufacturers on top followed by wholesalers or regional distributors and then comes in the brokers. For small businesses, it is easier to target the regional distributor or the brokers. They are the ones that deliver goods to small or medium businesses. It doesn’t even mean that their prices will be bad! Local distributors tend to make up for it with flexibility, availability and delivery, which matters in business.
Step 2: A volume-concentric business
The wholesale business is mainly about the volume-buy, if not totally about the volume. The main advantage of wholesale buying is the chances to reduce the price per unit. The more you can buy, the lesser the price gets. Unfortunately, for small businesses, that is not always the case. A small business is unlikely to be able to negotiate relationship from a high-volume wholesaler. Mainly because your sales volume won’t be able to support you in buying in large amounts. Thus, it is beneficial for you to target small wholesalers, who can help you in getting the best deals. Gradually, as your business improves, you will be able to move higher up the ladder in the wholesaler hierarchy and manage to negotiate higher volume and lesser rates. You can also make up for volume pricing with cash terms & payment terms. It might be the right time for a bank to step in and offer the financing required for higher volume purchases!
Step 3: Researching wholesalers around you
Finding the perfect wholesaler takes time. The most easiest source is, of course, the internet. The clever thing to search for wholesaler is by product. This will help you identify the local suppliers. A demographic approach is better as it reduces the logistic cost and also there is the factor of supply-time. Other than internet there are trade shows you can attend. If you have the budget and time, trade shows are the perfect venues for finding suppliers. Other than these, there are trade magazines that comes with ads and classifies the suppliers in the industry.
Lastly, if you know the specific brand you want to purchase, consult the brand manufacturers. They usually maintain very good ties with agents and distributors and are motivated to provide you with a good contact!
Step 4: Try consignments
To start off, two major parties are in partnership when you consider a consignment deal – usually the wholesaler (consignor) and the retailer (consignee). In essence, to consign is to place goods or stock in the hand of another, but retaining ownership until the products are sold. Under a consignment arrangement, the consignor retains legal ownership of the merchandise, and the consignee is not required to pay for the goods until after they have been sold. The consignee can even decide to return any leftover stock!
This model can be considered after setting a track record of sales for a specific line of products, because you will be required to demonstrate your ability to move the goods. Once start selling out the consignment goods, its in the suppliers best interest to keep you well stocked, and it may turn out to be a very fruitful relationship! Whats in it for the supplier? Inventory is costly. Warehouse space rental, employee remuneration, utilities, and a million other small things all add up to put a strain on business finances. With consignment, you are placing products in the hands of another for the purpose of sale, but retaining ownership until the goods are sold. The retailer sells the goods on behalf of the supplier, usually according to his instructions. Isn’t that getting the best of both worlds?