What Is Wholesale? Advantages & Disadvantages

In business, terms such as wholesaler, retailer, or distributor are probably not unfamiliar to many people. Especially for those new to doing business, mastering business concepts will give them an overview of the market and help them develop the right business path. What is wholesale? What are the opportunities and challenges for wholesalers?

Read the following article to ensure you do not miss important information about wholesale and the differences between this term and retailer and distributor.

Trade in goods is quite popular in Vietnam

What is Wholesale?

Wholesale is a fairly familiar concept in today's market economy, a form of wholesale goods or services in large quantities.

In Vietnam, wholesalers or wholesalers often import goods directly from distributors or manufacturers in large quantities of products or services, then resell them to small stores (retailers). Rather, they do not directly supply goods to consumers.

However, there are still wholesalers who do wholesale business - supply goods in large quantities and trade small goods for buyers at retail prices.

In general, the wholesaler is an important player in the commodity economy and one intermediary between the producer and the consumer.

Next, let's learn about the difference between wholesale and two other intermediaries in the supply chain with FieldCheck.

Distinguish Wholesale With Distributor And Retailer

Distributor

From the definition of wholesale, we can see that wholesalers have a close relationship with distributors because they are the party that works directly with manufacturers to get goods and distribute them to wholesalers, retailers, or sales agents. Orders from distributors to these intermediaries often have to be in bulk with a high percentage discount for several product groups or based on the total order value. 

Thus, the distributor holds an extremely large number of products from the manufacturer and has the power to determine the price for the wholesaler or retailer.

Distributors will get products directly from the manufacturer

Unlike sales agents, individuals or companies representing distributors to provide products to customers, distributors rarely supply goods directly to consumers, except for some businesses that choose to produce and distribute services and goods directly to consumers without going through any intermediary channels. 

For instance, the cuisine service or the F&B (food and beverage) industry.

Retailer

Small businesses or individuals are collectively known as retailers. It is a form of buying many items in smaller quantities and reselling them to consumers.

Retailers can import goods and services directly from distributors or buy from wholesalers. Retailers who want to be profitable must look for competitively priced suppliers and find the items that fit their business goals.

Retailers can purchase from wholesalers or distributors

For example, a retailer dealing in fashion clothing mainly imports from a foreign wholesaler (Guangzhou goods) because the price is cheap and the products are also of good quality. This retailer can also contact distributors of domestic fashion brands to receive good prices to improve product sales profit.

Thus, the retailer is the last stop of the product before reaching the customer or consumer in the supply chain of goods and services.

Meanwhile, wholesalers are the ones who have the most connections between the parties - both a buyer from a distributor and a supplier of goods to a retailer. Distributors are also an important link, helping to bring the manufacturer's products to the market.

These three entities have a close relationship and interact, forming an inseparable commodity and consumption supply chain.

See more: Retail chain management software

Opportunities For Wholesaler

In the current digital era, if wholesalers know how to use the Internet's power to increase brand coverage, they will gain significant advantages. Especially with the increasing demand for shopping on e-commerce platforms, new opportunities also open up with the wholesale business model of goods.

What opportunities are available to wholesalers?

Fast Business Scalability

Today, many businesses expand their business form from retail to wholesale goods in large quantities. As consumers increasingly have more diverse shopping needs, many business owners will combine wholesale and retail businesses to expand consumption markets with various products and services. Thanks to that, they will also solve the inventory problem.

Business expansion opportunity

Usually, wholesalers do not need to promote themselves or find a way to bring products to consumers. However, as long as the retailer system does well, your products can still be quickly available everywhere. 

That product's popularity makes more retailers want to do business with you. It is the domino effect that helps your business grow stronger.

Drop-shipping

As a wholesaler, you can take advantage of the power of drop-shipping, where the retailer doesn't have to stock and take care of ordering and shipping.

Instead, the retailer only needs to pass the order information to you, who will handle the next steps to ensure the product reaches the customer.

Dropshipping is a very beneficial form of wholesale

This way, retailers will not need to worry about capital input and inventory issues. You will have a direct channel to consumers instead of through retailers, and the profit margin per product will also be higher.

Global Expansion

With wholesalers owning a large volume of goods at competitive prices, their global business path has also become easier because wholesale businesses are often easy to offer and offer competitive prices with cheaper shipping costs when delivering in bulk.

Many retailers can also sell your products overseas, and you just need to assist them in delivering and supplying goods at a suitable discount.

Owning a large number of goods makes it easy for you to expand abroad

Challenges Wholesaler Faces

Keeping Brand Identity

Since wholesalers are not usually a direct sales channel to consumers, they cannot have complete control over how retailers get products to customers. Whether consumers have a positive or negative view of your product depends largely on the retailer.

In addition, other factors determine the sales ability of a product or product from a supplier, such as whether the retailer's promotion program is suitable or the seller's product display. Retail attracts customers or not.

It is difficult for wholesalers to control the brand

Always Have Reasonable Marketing Strategy

Retailers cannot be expected to plan product marketing strategies for you, but wholesalers themselves will have to be responsible for marketing their products for two reasons: needing consistency in messaging and brand identity of the product; and the need to stand out from the competition for retailers to recognize you.

See more: The important of Brand marketing in modern marketing strategy

Since your customers are retailers, not consumers, it's important to make your brand recognizable by retailers.

Wholesalers need a sound marketing strategy

An effective marketing policy should have the following elements:

• Clearly define the target market and customers to source goods for the right audience
• Sell products that meet the great needs of consumers
• Build and promote your brand on social networks effectively

Large Warehousing System And Strict Management

To become a wholesale distributor, you inevitably have to store many goods, so you need a large warehouse to ensure you have enough storage space to facilitate sales.

Another challenge is ensuring your warehouse processes are streamlined and efficient to help minimize any packaging errors or wasted time searching for items in your warehouse.

A large warehouse is a challenge for wholesalers

Handling large quantities can be complicated, so integrate technology into your inventory management processes so things happen quickly and everything gets to the consumer promptly.