Starting a wholesale business can be a game-changer for entrepreneurs who prefer to focus on operations or product development rather than direct sales or marketing.
By using a wholesale business model, you can delegate one big sales responsibility to retail businesses: finding customers.
This comprehensive guide explains how an online wholesale business works and how you can establish one. It also highlights some of the top products to consider for wholesale selling.
What is a wholesale business?
A wholesale business involves selling products in large quantities to a retailer. Typically, wholesale products are sold at a discounted rate. The retailer then sells them to end consumers at a markup.
Understanding the (new) wholesale business model
The wholesale business model has seen big changes recently, thanks in part to B2B wholesale marketplaces like Faire. These platforms have redefined what’s possible for small wholesale businesses by increasing access to a global audience of buyers.
Whether you’re using a marketplace or your own ecommerce website, it’s now easier than ever for wholesale businesses to sell to both individuals and other retailers. You can create dedicated shopping experiences for all your customers, whether they’re other businesses, resellers, or the end consumer.
How to start a wholesale business online
One of the myths about wholesale ecommerce is that you need significant cash flow to get started. Today, there are many ways to scale your growth, from negotiating with your suppliers to reorganizing your existing physical and online spaces to accommodate B2B sales.
Follow these steps to start a wholesale business:
- Decide what wholesale items to sell
- Pick a supplier
- Obtain wholesale licenses and permits
- Set a wholesale pricing strategy
- Create a B2B ecommerce website with Shopify
- Market and sell your wholesale products
- Expand your team
1. Decide what wholesale items to sell
Trying to decide on a product niche can be overwhelming, but by creating some selection criteria, you can build a profitable wholesale catalog.
Consider these product features when choosing wholesale items to sell:
- Seasonality. For example, swimsuits sell better in summer, while coats are popular in winter.
- Profit margin. If you source coffee mugs for $2 and sell them to retailers for $8, your profit margin is $6.
- Size and weight. Selling small items like jewelry can be cost-effective thanks to cheaper shipping.
- Purchase frequency. Items that need to be replenished on a regular basis—such as printer ink or pet food—can lead to a steadier income than only selling products with a lower purchase frequency.
- Competition. If you’re selling handmade soaps and notice that your competitors aren’t offering a lavender scent, that could become your unique selling point.
Leverage your existing knowledge to find wholesale products. If you enjoy going to the gym, for example, you’ll likely have a good idea of what other fitness enthusiasts might want to buy. This can guide you in choosing the right wholesale items.
2. Pick a supplier
If you’re not making your own products, you’ll need to build relationships with wholesale suppliers. A stable wholesale business hinges on a reliable and consistent inventory. Retailers shy away from wholesalers who can’t keep their customers’ favorite products in stock.
When picking suppliers, consider these factors:
- Diversify your supplier base. Don’t rely on just one supplier. Working with several suppliers ensures you have a backup if one fails to deliver.
- Go with the most reliable options. Choose suppliers who have a track record of delivering on time. Delays can disrupt your business and disappoint your customers.
- Look for quality. Ensure your supplier provides high-quality products. Poor quality can harm your reputation and customer relationships.
Setting fair rules with your suppliers is crucial for ensuring professionalism. For example, you might make agreements about delivery times, product quality checks, or what happens in the case of a supply issue.
3. Obtain wholesale licenses and permits
To keep things legal and avoid fines, it’s important to apply for necessary licenses and permits before starting a wholesale business.
Here are some licenses and permits you might need:
- Business license. This is a basic requirement for any business. It gives you the legal right to operate in your city or state.
- Sales tax permit. Also known as a resale license, you may need a permit to buy goods wholesale without paying sales tax. When you sell the goods, you collect sales tax from your customers and then pay it to the government.
- Employer identification number (EIN). If you plan to hire employees, you’ll need an EIN from the IRS.
- Specialized permits. Depending on what you’re selling, you might need specific permits. For example, if you’re selling food items, you may be required to adhere to food safety requirements.
Consider booking a consultation with a business adviser or local government office to ensure you have all the necessary paperwork in place.
4. Set a wholesale pricing strategy
Pricing strategies are a crucial component of successful wholesaling. You’ll need to price products differently depending upon whether you’re selling directly to consumers, to a small retailer, or to a large business making a bulk order.
Most successful wholesale businesses make at least 50% profit on bulk orders and look to increase profit margins when selling in smaller quantities.
Here is an example of a healthy pricing strategy, where a wholesale business would retain a 50% profit margin on wholesale orders and a 75% profit margin on direct-to-consumer sales:
A profitable pricing strategy for wholesale distributors lets them maintain a profit margin while allowing retailers (the customers) to do the same.
Luckily, there are ways to price your wholesale products to mitigate risk. A popular method is to offer discounts based on purchase order quantities.
MOQs
Many wholesale businesses set minimum order quantities (MOQs) that retailers must meet to place an order. From there, you can use marketing tactics to encourage retailers to place larger orders for a better margin upon resale.
MSRPs
Another wholesale pricing strategy to keep income stable is a manufacturer’s suggested retail price (MSRP). MSRPs discourage customers from undercutting each other, which helps you maintain your prices and margins.
An MSRP is often part of a contract agreement between a wholesale business and a retailer. It guarantees the retailer will stick to the suggested retail price—discounts and sale events such as Black Friday notwithstanding.
As the wholesale supplier, you get to set the rules for your retailers. But it’s also up to you to make sure that retailers can make a profit from selling your product.
Setting payment terms
Another pricing decision you’ll need to make as a wholesaler is the payment terms you’ll offer customers. Most retailers are unable to pay for stock upfront. Instead, net payment terms allow retailers to pay for items as they make sales.
Consider setting individual payment terms for each company that you sell to. Terms could vary depending on order size and your prior relationship with the retailer. Popular terms include:
- None: Customers pay for orders immediately at checkout.
- Net (period): Customers pay for orders by an agreed due date, such as 15, 30, or 90 days.
- Upon fulfillment: Customers pay only when the order is fulfilled or received.
💡 Shopify offers eight net payment term options, including net periods, due on receipt, and due on fulfillment. You can also set custom payment due dates.
5. Create a B2B ecommerce website with Shopify
Shopify is the simplest way to sell to other businesses online. Its B2B features make it easy to provide tailored shopping experiences for different types of customers, whether they’re requesting custom bulk orders or purchasing single items.
Here are some of the features that you can use to create an online wholesale store with Shopify.
Company profiles
Shopify’s B2B customer profiles are designed for wholesale. Profiles can represent multiple buyers and locations, keeping all customer information in one place.
Each location profile includes fields for all necessary wholesale data. Manage payment terms, catalogs, tax exemptions, and user permissions directly from the profile.
Catalogs
The catalog includes three features for easy customization of the B2B buying experience:
- Price lists. Set wholesale pricing using fixed amounts or a percentage off the retail price. You can also specify minimum, maximum, and increment rules for each SKU.
- Customer-specific product publishing. Segment your catalog to show different products to different customers.
- Volume pricing. Offer additional discounts based on the quantity a customer adds to their cart.
Customer accounts
The customer accounts feature allows you to show B2B customers your wholesale products and pricing, while keeping your existing product pages for end consumers.
When a retailer logs into your store, they can manage their orders, view past orders, and save their account information.
Use these features to serve retailers, resellers, and end consumers from your Shopify store.
📺 Watch the case study: Brooklinen Scales Their Wholesale Business to New Heights with Shopify
See how Brooklinen, creator of “the internet’s favorite sheets,” took its wholesale business to the next level using Shopify’s B2B features. They streamlined their processes, improved customer experience, and saw significant growth.
6. Market and sell your wholesale products
With a profitable wholesale business idea and pricing strategy in place—and a B2B store set up—the next step is finding potential wholesale customers.
While marketing to end consumers might not be necessary, visibility to retailers is crucial. So, how do you locate these retailers and ensure they notice your business?
Use your website
If you run an existing direct-to-consumer website, you may be able to leverage your audience and visibility to find wholesale customers. Retailers and distributors often will reach out to popular online stores to establish partnerships—either to stock a product in your store or expand your product distribution.
Harness this organic interest by signaling that you’re open to a wholesale relationship and make it easy for retailers to contact you. One option is to put a link for wholesale inquiries in your website footer:
💡 Let your customers submit a form on your online store to request a B2B relationship.
Join a wholesale marketplace
Access a large pool of retailers by listing your products on wholesale marketplaces. You can join multiple marketplaces while running an online store to spread your business across sales channels and reach new buyers.
Before choosing a wholesale marketplace, it’s important to do your research and understand terms and conditions. Some marketplaces ask for exclusive rights, and every platform charges different fees.
Read: 15 Wholesale Marketplaces for Selling Your Products
Attend trade shows
Trade shows have long been a trusted avenue for wholesalers to connect with potential customers. No matter your niche, be it baby apparel or home décor, there’s likely a trade show tailored to your industry. You can find these events listed in trade show directories.
Setting up a booth at these shows provides a platform to network directly with retailers. However, keep in mind that trade shows can be a significant investment. They often involve travel expenses and booth fees.
Before diving in, consider attending a trade show as a visitor first. Walk the floor, gauge the potential, and then decide if exhibiting is a worthwhile investment for your business.
Read: Trade Show Planning: How Retailers Can Get the Most ROI From These Sales Events
Use incentives to motivate buyers
Just like everyday consumers, wholesale buyers respond well to incentives. Many wholesale distributors offer discounts based on the quantity of products purchased. A popular incentive is a percentage off on a customer’s first order.
Here are some other incentives you could consider:
- Low minimum order requirements. Make it easy for new customers to start buying from you in small quantities.
- Free shipping. Consider offering free shipping based on order amount and delivery location.
- Volume pricing. Encourage larger orders by offering discounts on bulk purchases.
- Various payment methods. Make transactions convenient for your customers with a variety of payment method options.
- Bundle deals. Offer discounts on product bundles to increase sales.
- Discount codes. Create time-based or personalized discounts using codes.
- Free samples and testers. Let customers try before they buy.
Another strategy is to offer dropshipping services. As a dropshipping supplier, you deliver your products directly to the end customer when a retailer registers an order. Dropshipping can be an attractive, cost-effective option for your retail customers.
Reach out to complementary brands with Shopify Collective
One added benefit of a wholesale channel is that, unlike direct to consumer, you don’t always need a large volume of customers in order to grow. If you have a handful of high-quality retailers who are successful at selling your product, they can come back and continue to place larger orders again and again.
To find these select partners, reach out to businesses that sell complementary products. You could look for a contact form on their website, find their social media accounts and send a DM, or use Shopify Collective to connect with like-minded brands.
7. Expand your team
Starting a wholesale business can begin as a solo venture. But as your business expands, so does the need for a diverse team. Each role contributes unique skills, from customer satisfaction to inventory management and financial analysis.
Here are some of the job postings you might create if your wholesale business takes off:
Wholesale items to sell
When it comes to selling wholesale items as a B2B business online, the possibilities are vast. Whether you’re a seasoned pro or just starting out, you can broaden your product range with the ideas listed below.
Want more wholesale product inspiration? Read: 20 Trending Wholesale Business Ideas
Educational materials
There is a large annual market for education supplies. The United States alone is home to more than 55.4 million K–12 students, who are taught by more than three million teachers.
Here are some education products to consider wholesaling:
Home décor
Home improvement sales globally are expected to reach more than $1 trillion by 2027, making home décor a solid market for wholesale businesses.
Some home décor products to consider wholesaling are:
Clothing and accessories
From workwear to formal attire, fashion is a large and ever-growing market—expected to reach almost $2 trillion by 2027.
Some popular product types to consider are:
Food
Food can be both a fundamental necessity and a luxury item, making it a reliable category for wholesale business. The constant demand for food products also ensures a steady market.
Here are some food product ideas that could spark your next wholesale business idea:
Purses and handbags
The global purse market is expected to reach $67 billion by 2032. Here are some types of purses and handbags to consider selling wholesale:
- Totes
- Clutches
- Men’s bags
- Kids’ bags
- Wristlets
- Casual bags
- Travel bags
Kitchen materials
The kitchenware segment generates more than $17 billion in global revenue, and is expected to grow annually by 3.83% until 2028.
Below are some kitchen products to get your wholesaling business off the ground:
- Utensils
- Pots and pans
- Bowls/plates
- Platters
- Storage/organization
- Cabinets/shelving
- Knives
- Table linens
- Tables
- Chairs
- Appliances
- Glassware
Health and wellness
The health and wellness industry is set to make almost $7 trillion a year by 2025. Research shows that the COVID-19 pandemic sparked a sustained interest in personal health and wellbeing.
Here are some health and wellness products to consider as part of a wholesale business:
Pet supplies
The average dog owner in the US spends more than $1,500 on their pet every year, which suggests that the pet industry could be your next profitable wholesale business idea. Here are some wholesale pet items to sell:
- Pet toys
- Pet treats
- Pet food
- Health care
- Cleaning supplies
- Grooming
- Bowls/feeders
- Clothing and accessories
- Leashes, collars, and harnesses
- Crates, cages, and aquariums
- Beds/bedding
Party supplies
The global party supplies market is projected to reach $28.8 billion by 2031. Wholesaling party supplies not only gives you a variety of products to sell: it gives you volume.
Here are some products to consider in this category:
- Balloons
- Party favors
- Disposable tableware
- Merch and themed items
- Banquet equipment
- Backdrops
- Décor
- Centerpieces
- Lighting/candles
- Flowers
Is a wholesale business profitable?
Here are three reasons why adopting a wholesale distribution business model might be a smart move for your business.
1. Boost sales while spending less on marketing
In a wholesale model, your marketing is focused on finding retailers, not individual customers. This shift can make your marketing budget go further, as the cost per customer acquisition can be significantly lower.
Running a direct-to-consumer brand often means spending big on marketing to grow, with each new customer coming at a cost. As digital marketing consultant Shane Barker points out, “B2B ecommerce generates much higher revenue than B2C ecommerce,” suggesting that switching to a wholesale model can make growth marketing less expensive.
By selling your products wholesale, another business takes on the cost of finding customers. This allows you to reinvest your time and money into other areas of your business.
Read: B2B vs. B2C Ecommerce: What’s the Difference?
2. Leverage other brands to sell your product
Building a loyal audience of fans and customers is a challenging task that requires time and resources. However, forming a wholesale partnership with an established brand can provide a shortcut.
Whether you partner with a marketplace like Faire, a well-known retailer like West Elm (check out its program for small businesses), an established boutique, or a sought-after independent brand, it’s possible to run a successful wholesale business without consumers necessarily knowing who you are.
3. Enter new markets with less risk
Expanding your business to a new country or territory involves costs like warehousing and logistics. Plus, you might have to start from scratch, marketing to a population that hasn’t heard of you.
Partnering with a retailer that already has a presence and supply chain in a new market can lower the risk of international expansion by reducing your setup costs.
Read: Wholesale vs. Direct-to-Consumer: Pros, Cons and How To Strike the Right Balance
Start selling B2B with Shopify today
For years, ecommerce has helped direct-to-consumer brands launch and grow faster than by selling with a traditional storefront. Now, a new wave of wholesale startups are thriving online—by rethinking the way wholesale works.
An ecommerce wholesale distribution business creates efficiencies that benefit both the retailer and the wholesaler. The retailer gets a new product to sell without investing in research and development. Meanwhile, the wholesaler saves money on marketing and gains access to an existing customer base.
Wholesale business FAQ
What are some benefits of wholesaling?
Wholesaling offers several advantages, including lower costs per customer, thanks to bulk purchases, streamlined logistics from dealing with large quantities, and the opportunity to tap into the established customer base of retailers, which reduces the need for marketing campaigns.
What kinds of businesses can be wholesaled?
A wide range of businesses can operate on a wholesale model. This includes manufacturers, distributors, suppliers, importers, and exporters across various industries such as clothing, electronics, food, and pharmaceuticals. Essentially, any industry that produces goods in large quantities can potentially engage in wholesaling.
What are the challenges of wholesaling?
While wholesaling can offer numerous benefits, it also comes with challenges. These can include managing bulk orders, maintaining inventory, offering competitive pricing, and building strong relationships with retailers. It’s crucial for wholesale businesses to have effective strategies in place to handle these challenges.
What is the difference between wholesale and retail?
Wholesale and retail businesses differ in their target customers and sales methods. Wholesalers sell products in bulk to other businesses at a lower price, while retailers sell individual items to end consumers at a markup. Wholesalers provide a cost-effective supply chain for retailers, who then cater to the needs of individual consumers.
How can a small business start wholesaling?
Small businesses can start wholesaling by listing products on a wholesale marketplace or their own Shopify website. They can then approach specific retailers with a compelling wholesale proposal.
