If you are currently considering starting an online business, you will probably find that you have a wide variety of business models to choose from; from drop shipping or stocking your own inventory to direct-to-consumer retail or wholesale.
In this article, we’re going to take a look at wholesale specifically, where you’ll get a quick guide to what wholesale is and why it might be a good business model for you. We will also share some ideas on how you can grow your wholesale business on Alibaba.com.
What is wholesale?
Bulk selling is the sale of goods or commodities in large quantities to retailers, other bulk sellers, or other commercial users in the industrial, commercial or institutional sectors. While wholesale is typically used in B2B commerce, you can also create a separate channel within your wholesale business to sell to end consumers.
Bulk sellers can wholesale goods or commodities from the agricultural sector (e.g. grains, bulk foods, spices, beans and other food ingredients), the manufacturing sector (e.g. steel products, cement) or the mining (eg minerals in the iron ore trade).
At present, Eastern Europe accounts for the largest share of the global wholesale market, while the Asia-Pacific market is the largest region of the global wholesale market (accounting for up to 51 % of the market in 2020). The main destinations for wholesale exports are the United States, United Kingdom, Australia, Russia, India and Brazil.
What are the advantages of wholesaling and wholesaling?
There are many reasons that business owners choose to engage in wholesale. Some of these reasons are discussed below:
Higher revenue without higher marketing spend
For each customer obtained by trading as a direct-to-consumer brand, a cost must first be paid to market the products. This is called the customer acquisition cost (or CAC).
Wholesale means that for the amount it costs you to get a customer who would buy a single product, you could acquire a customer who would wholesale who would place an order in large quantities, thus giving you a higher return for the same cost.
This gives you additional time and financial resources, meaning you have the flexibility to channel them into other strategic areas that could expand your brand reach or boost the efficiency of your operations.
Lower risk route to entering new markets
Entering a new market comes with a host of associated costs and risks, including those related to warehousing, logistics and marketing. Assuming such costs can be risky when entering a market that you are still learning, and after all, success is not guaranteed.
A good way to offset these costs and risks is to start wholesaling to a local retailer who will already have an established market presence and a reliable supply chain. This way, you can effectively sell your products in new markets without incurring the installation costs or significant risks associated with trying to sell direct to consumers in a new market.
Wholesale and wholesale considerations
Pricing strategies are extremely important in wholesaling, with wholesalers often giving discounts to their customers to encourage them to buy wholesale. However, these large discounts could mean that your business won’t be able to maintain a healthy profit margin if you don’t come up with a profitable pricing strategy.
To ensure that you are able to maintain profitability, you must offer your discounts based on purchase order quantities, with increased purchases rewarded with better prices. By doing this, you encourage retailers to place larger orders which allow you to increase your income. If customers are looking to buy in bulk but not in such high volumes, however, you can ensure profitability by setting minimum order quantities (MOQs), which customers must fulfill in order to purchase from you.
Beyond freight rates (often referred to as dry bulk rates on the Baltic Exchange) and containerized freight stipulations, you will also need to consider supply chain instability and disruption. These can be frequent because, due to the volume of products involved in bulk sales, they are typically shipped by ocean freight or dry bulk transport (using Handysize or Supramax ships).
The last two years of the COVID pandemic have left the dry bulk market uncertain as fleet congestion has resulted in significant delivery delays, which in turn have resulted in supply shortages in the various markets. .
With that in mind, as a wholesale seller, you should consider diversifying your shipping and supply chain strategy to ensure that such major disruptions do not put your entire business at risk.
Wholesale to retail and to other wholesalers
The best way to start wholesaling to retail or other wholesalers is to start trading in a wholesale market. Marketplaces are advantageous because they often give you instant access to millions of buyers and they already have templates in place for you to easily and quickly set up a storefront from which to start trading.
Ideally, you want to establish yourself in a marketplace that allows for easy integration with your store, while still giving you essential tools like invoicing, inventory management, and lead tracking. Once you’ve set up your store, there are a number of B2B sales and marketing strategies that you need to adopt. These include attending trade shows (in person or virtually); contact brands that sell complementary products and then agree to sell the products of others on your respective websites; and offer customer incentives such as free shipping, bundles, and free samples.
Grow Your Business With Wholesale On Alibaba.com
Alibaba.com is one of the largest B2B e-commerce platforms in the world, with one of the largest online wholesale customer bases with a global buyer base of over 13 million retailers. The platform allows you to grow your business profitably. If you decide to add a wholesale channel to your business, you can easily set it up on your Alibaba.com storefront, and you’ll have access to tons of onboarding resources.
Alibaba.com provides you with crucial B2B tools, such as tools for you to set MOQs and scale prices based on volume. When it comes to sales, Alibaba.com helps you maintain profitability by taking commission as low as 0% for most countries.
Analysts forecast an upward trend in the global wholesale market, with growth expected to reach $ 49.3 trillion by the end of 2021, at a compound annual growth rate (CAGR) of 9.7%. You can grow your business by entering this rapidly growing online wholesale market, and tap into one of the largest commercial buyer bases by wholesaling and wholesaling on Alibaba.com.