Wholesale business: how profitable is it?
The wholesale business is based on a simple scheme: to buy goods in a large batch and thereby save on the price, and then sell them at retail, but at an inflated cost. But, not in all niches, it is profitable, in addition, you need to work out a base of suppliers and buyers, otherwise, you can get a big minus and a warehouse of goods that no one needs. And how to do it correctly – let’s talk further.
The main advantages of the wholesale business
A wholesale business, even from scratch, is beneficial because:
- An entrepreneur immediately sells large quantities of goods, which means that he also makes a large profit for one transaction. This is the essence of such a business – not to work on small implementation, but only “on a large scale.”
- A thorough understanding of the product that is being sold appears – unlike retail, here it is concentrated only on one niche, and this makes it possible to perfectly study the strengths and weaknesses of the product, understand its position on the market, and so on.
- A simple scheme of work, so that even a beginner can get started. Regardless of what product is being sold, the principle is the same – to buy at the same price, to sell at a higher price. The difference is the entrepreneur’s income.
- No need to purchase specialized equipment. We need a warehouse, equipment for loading / unloading and vehicles for delivery, if it will be implied.
- Minimum business investment. In fact, the main item of expenses is renting a warehouse and purchasing goods.
How do I trade?
There are several types of wholesale business:
- A large wholesale base – here we work only for large enterprises to which goods are sold in very large volumes. If we talk about the scale of a small city, then one such base can act as the main supplier of a certain product for all small shops in the region.
- An average wholesale base, like a large one, works directly with a supplier of goods, but sells in smaller quantities, specializes in several areas.
- A highly specialized base – in this case, the wholesaler will work with only one type of product, selling it in medium and large volumes. For example: the base sells only mattresses, but does not sell additions to it (mattress covers, bed linen).
- An intermediary – he cannot be called the owner of a wholesale business. He acts as a link between the seller and the buyer, and his profit is a percentage of a successful transaction.
The latter option is optimal for novice businessmen, since there is no need for any financial investments.
Getting down to business: how to choose your niche?
Everything is quite simple, but the sequence is important:
- What the region specializes in, where the activity will be carried out. These can be enterprises located directly in the city or in neighboring regions.
- Consumerism level. Estimate how big the demand is for the product that you intend to sell. If you have not yet understood that you want to sell, analyze the need – which is too much, which is not enough.
- Seasonality of the product – will it always be in demand or only at certain times of the year. Of course, the priority is the product that is always needed, and accordingly there will always be profit.
- The conditions for storing and transporting goods – the simpler the better, at least at the initial stages of doing business. For example, if you want to wholesale seafood, you will need equipment not only for storing it, but also for proper transportation. But with bricks it is simpler – they do not require any storage systems, except for a dry warehouse.
Based on the chosen niche, you can already calculate your business plan: what equipment, what premises you need, how much money will have to be spent on it, as well as how much the purchase of goods will cost and what profit (approximately) you can get.
If the work is supposed to be in the format of a large wholesale base, then as suppliers it is better to establish work with manufacturing plants, since this way you can get the most favorable price and, moreover, get a discount when purchasing large quantities.
For wholesalers who intend to work in the middle segment, it is possible to consider not only manufacturers, but also regional wholesale bases as suppliers.
Search for clients: we connect advertising and develop a marketing strategy
To find customers, you need advertising. Selling goods in bulk is not something that every ordinary citizen needs, so using all advertising tools in a row is just a waste of money.
Advertising here should be targeted, targeted at potential customers. Who are they for wholesalers? This:
- Shopping centers.
- Stores – both retail and wholesale and retail.
- If this sale of food products – a network of catering , bakeries, canteens in businesses, public institutions. But, as far as government agencies are concerned, most likely, they will have to participate in the tender system in order to get a supply contract.
Advertising in the form of banners, flyers, distribution of leaflets, or sticking on the porches will not work here. Will fit:
- A well-developed commercial proposal and its distribution to enterprises. Try to make it personalized at least by niche.
- Advertising on city portals.
- Placement in specialized publications.
- Cold calls.
There must be a website. But: well-designed, with available information, prices, contact details. There is no need to create a site for the sake of a site, because “and Petrovich has one from the neighboring database, so we need it too.”
It is important to work efficiently, responsibly, to offer the best conditions to your customers, since in the future this will form your reputation, and sales, the number of customers, and, moreover, word of mouth will work on your reputation.
There is competition in every business. Therefore, before starting to do anything at all, and even more so to spend your money, conduct a market analysis. Based on its results, it will be clear: what to sell, in what quantity and whether it should be done at all in a given region, or maybe it is better to work for the region.
The foundation of any business is a well-researched market analysis and a well-thought-out strategy.