Product Sourcing News   

Seeing the Whole Picture:

A Wholesaler’s Role in the Retail Chain

FEATURED COMMENTARY

By Chris Malta
Home EBiz Product Sourcing Expert

You probably realize that, as a retailer, you need to get as close as possible to the source of your products to maximize your profit margins. But if you’re like most retailers, you may think that means going to the product manufacturer. You might assume that because the wholesaler stands between you and the manufacturer, the wholesaler is a middleman. But by that logic, you as a retailer are also a middleman, standing between the manufacturer and the end user.

To Each His Own
The fact is that each one of these entities plays an important and necessary role in the retail supply chain:

• The Manufacturer’s primary function is making products—they’re not set up to supply individual retailers with small quantities of those products. Through a very complex process, they qualify and authorize a select few wholesalers to distribute their products to retailers on their behalf.
• The Wholesaler, according to Don Beavers, of www.VertexAirsoft.com, “provides a tremendous service to both the manufacturer and the retailer alike.” They have the necessary infrastructure to stock massive amounts of product, and to take and fill retailer orders. They have the warehouse space, sales networks, and computer and tracking systems in place. Not only are they required, by manufacturers, to order astronomically high product quantities that an individual retailer couldn’t afford, they’re also required to carry the manufacturer’s entire product line, rather than just their hot sellers.
• The Retailer is the last necessary link in the supply chain to get the products consumers are demanding into the market. The same way that a manufacturer isn’t set up to sell to retailers, wholesalers aren’t set up to sell to individual consumers—retailers fill that need.

A proper supply chain looks like this:
Manufacturer→ Wholesaler→ Retailer→ End User

Cutting In Often, however, as a retailer, you lose out when extra links are added to the chain:
Manufacturer→ Wholesaler→ Middleman→ Retailer→ End User

Unfortunately, there are many middlemen eager to get in between the wholesaler and you. They claim to be wholesalers themselves and pass real wholesale goods on to you at marked-up prices, eating away at your profit margins. You’ll find plenty of middlemen in the search engines, but very few wholesalers. To find Authentic Wholesalers, you need to contact the manufacturer for their list of Factory-Authorized Dealers.

Working with Wholesalers: How and Why
To earn serious money as an online retailer, you absolutely have to work with REAL wholesalers—and that means getting a legal business name and Tax ID. You may be tempted to skip obtaining these so you can avoid the paperwork. But without them, you can’t establish accounts with any genuine wholesalers. Any supplier that tells you they don’t need your Tax ID—no matter what explanation they give you—is a middleman, NOT a real wholesaler! Period. No matter how tempting it is to try to find product sourcing shortcuts, it will cost you in the long run.

Getting genuine wholesale pricing lets you charge competitive prices and still be profitable. Real wholesalers supply your business with the products you need, at the prices you need. Insists Beavers, “If you want to make your living from your internet business, real wholesalers need to be a major part of your product sourcing strategy!”