Tuesday, August 21, 2007

Wholesale Distributor Defined and What to Look For in a Good One

The wholesale distributor is incredibly vital to manufacturers and retailers. They simply could not survive without them. So, what are they, how do they work and how do we tell if they are legitimate or not?

Many do not know what the wholesale distributor is, what makes them so important, to the whole process of creating and selling manufactured goods to the customer. The answer to this question is simple; understanding the answer will provide you a chunk of information that will aid you in the search for your first or next wholesale distributor.

The wholesale distributor buys from the manufacturer at the lowest price obtainable through compromise and long-time exchange. One example of this would be an electronic mp3 player. The manufacturer produces the mp3 player in huge amounts. They focus on creating the best mp3 player on the market. They underline making it better, faster, with more storage, with better audio and many other details.

After the item is manufactured, the wholesale distributor negotiates the price. This is very important to the entire process as this is how the product reaches the consumer. This gives the wholesale distributor some bargaining ability to get a very good price. The manufacturer acknowledges that they could not function without the wholesaler.

Once the agreement is made, the wholesale distributor takes their large purchase and integrates it into their inventory consisting of many other related products. This expands their line of goods to make them more alluring to the retailers.

The wholesale distributor then starts promoting this new electronic mp3 player by contacting their retailers and offering deals, specials or whatever it takes to get the new product onto the retail marketplace. They sell these items to the retailers for an improved price to enable the wholesale distributor to make a profit. They attempt to keep the price low enough to be reasonable and to enable the retailer to purchase the product at a fair enough price to allow them to be profitable as well.

Most of you reading this are not wholesale distributors; you are most likely to be retailers exploring options for product sources. You should contact the wholesale distributor to obtain a wholesale price list. There are many ways to go about this, but remember, the majority of wholesale distributors will want to verify that you are a legit business before the reveal their inventory and their wholesale pricing.

To verify that you are a legit business to the wholesale distributor, you will need a business license from the state where you operate and an EIN number given to you by the IRS. These two items make you a trustworthy business. It is a positive thing when the distributor verifies this information. If they will sell to those that are not legitimate businesses, they are not legitimate wholesale distributors. They would simply be middle-men placing themselves between you and the true wholesale distributor.

To clarify a bit more about the exact definition of a wholesale distributor, remember that according to U.S. Industry and Trade Outlook, published by The McGraw-Hill Companies and the U.S. Department of Commerce/International Trade Administration, wholesale trade includes establishments that sell products to retailers, merchants, contractors and/or industrial, institutional and commercial users. Wholesale distributors commonly do not sell to consumers. If you find that you have a potential wholesaler that does sell to the consumer, drop them like a bad habit. There are many more that do not practice this.

Why would I advise you to avoid the above scenario in which the wholesale distributor is selling to the public consumer? Ask yourself how you can compete. In all actuality, you will be purchasing products at a discount and not at a wholesale price. It would be like shopping at a sale at your local retail store. You are not getting the best price and therefore, are not going to make the profit essential to maintain a solid business.

On the other hand, a true wholesale distributor could possibly offer their products to the consumer. This does happen at times. Ensure that you examine this practice closely. About the only condition that I might do business with a wholesaler that retails is when they offer their goods to the public at bulk buy rates. I would make sure that they would still offer my retail company a significantly better deal than the consumer is getting. Otherwise, the profit is not there and the endeavor is not worth it.

Now you should have a good understanding of the wholesale distributor. You know what their function is and how they fit into the commerce method. You now know what to research such as the pricing of the wholesale goods, whether they sell to the public and whether they verify that your company as a legit business.

1 comment:

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