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Contents
Introduction
Wholesale Distribution and the Wholesale Process
Moving Goods to Market
What are the Types of Wholesalers?
How do I Start a Wholesale Business?
Requirements for a Wholesale Distribution Business
Risks of Wholesale Distribution Business Model
What Is a Wholesaler?
How Wholesalers Work
Pros and Cons of Wholesalers
Tips for Running a Successful B2B Wholesale Distribution Business
Steps to Start Your Wholesale Business: Startup Ideas & Tips
Wholesale Business Ideas & Opportunities in India
Things to Consider Before Starting a Wholesale/ Distribution Business
Essential Wholesale Terms – Wholesale Terminology
Advantages of Wholesale Business
Disadvantages of Wholesale Business
Step-by-Step Guide on How to Write a Wholesale Terms and Conditions
Agreement
Other Influencing Terms & Conditions
Conclusion
Introduction

Wholesale distribution is one of the oldest business models in history. From

the earliest days of traders selling goods from faraway lands – brought to
another country by ship or caravan – manufacturers of products have
required the services of skilled sales professionals to get their goods to a
willing market with money to spend. Wholesale distribution has taken place
throughout history in many countries and cultures. In the U.S., wholesale
distribution is a big industry, and most of the companies in the industry are
small businesses, not large corporations. The distributors who make up the
industry, however large or small, all follow a more-or-less uniform process
in playing their part in getting goods to their end users. There are a few
different variations in wholesale distribution regarding how the distributor
passes on ownership of the goods they sell, and the manner in which those
goods wind up in the hands of the end user.

A wholesaler is a company or person that buys products in bulk from

manufacturers and sells them to retailers. Whether you want to sell online
or from a retail storefront, if you're not manufacturing products yourself,
you have to get products to sell from another source. While you might be
able to buy directly from a manufacturer, you'll most likely buy from a
wholesaler.
Wholesale distributors buy products and goods from their manufacturers
then sell those goods to retailers, who then sell them to the end user.
Wholesale Distribution and the Wholesale Process

The process of wholesale distribution fills a crucial function in modern

retail commerce and manufacturing industries for both consumer and
business markets. The businesses that create and produce goods for sale
must rely on other businesses to move those goods into the stream of
commerce, where the end purchasers can ultimately buy them for personal
or business use.

Take the example of a Christmas-tree ornament maker. If this maker is an

individual artisan crafting only a few hundred ornaments a year, the best
distribution model will involve a direct approach to local retail and
specialty stores. The stores purchase the ornaments, then sell them to
individual purchasers who then display the ornaments on their Christmas
trees. The individual purchasers in this scenario are the end users, and they
buy directly from the retail establishment. This method may work well for
the ornament maker at this small level of production.

However, if that same ornament maker then ramps up production methods

putting out thousands of ornaments each year, this distribution method will
not work. For one thing, the ornament maker will no longer have time to
oversee the process of selling and delivering the ornaments to retail stores.
Also, the retail stores currently selling the ornaments will not be able to
handle such a drastic increase in inventory. More retail stores will need to
be persuaded to carry the ornaments. That’s where a skilled wholesale
distributor comes in.

A wholesale distributor will typically have strong sales skills and expertise
in the industry. He will contact new retailers, form relationships with them
and sell more ornaments to them for resale at a higher price to the end
users, which in this case are consumers.
However, the wholesale distributor does not work for the manufacturer, or
for the retailer. The distribution company is its own separate business. It
purchases the ornaments directly from the manufacturer at a reduced price,
stores the inventory in its storage facilities – usually one or more
warehouses that the distributor either rents or owns – and then sells the
products at an increased price to other businesses that then sell the items to
the end users.

Thus, the wholesale distribution industry provides the conduit between the
makers of goods and the shops who sell them to the end users. On occasion,
that pathway moves from the manufacturer directly to the end user. These
types of wholesale distributors typically operate reduced-price outlets or
retail stores. In either case, the wholesale distribution company purchases
the products from the manufacturer, takes possession of the products, stores
them as inventory and then sells them to the retailer.

The Impact of Wholesale Distribution on the Economy

Wholesale distribution is responsible for a large chunk of the national
economy. Over 300,000 distributors do $3.2 trillion worth of business in the
U.S. every year.

Statistics from the U.S. Census Bureau for August 2018 indicate that the
wholesale distribution trade is responsible for about $500 billion in sales of
goods worth about $600 billion.
Moving Goods to Market

The secret to the wholesale distribution model’s success is simple; purchase

high-quality products that people want at prices that are low enough you
can sell them to someone else and make a profit. Wholesale distributors
typically buy in bulk in order to secure sufficient inventory at low prices.
Then they turn around and sell that inventory to others at higher prices.
These resales also generally take place in bulk, so that the retail company
can also make a profit on the final purchase.

Three types of distribution channels are available to a producer of goods.

Each of these channels involves some combination of a manufacturer or
producer, the wholesaler, the retailer and the end user. The shortest of these
chains of commerce run directly from the producer of the goods to the end
user. Another model uses a single intermediary. The producer sells to a
retailer, who then sells to the end user.

The longest chain of commerce in wholesale distribution involves all four

channels. The producer sells to the wholesale distributor, who sells to the
retailer, who then sells to the end user. For example, after Prohibition in the
U.S., vineyards produced wine, but they could not legally sell directly to the
consumer across state lines. That led the wine producers to turn to
wholesalers who sold to retail spirits-or-wine shops. Those retailers could
then sell bottles of wine directly to the consumer. This restriction no longer
applies to a large extent, although the sale of wine and spirits is still
extensively regulated.
What are the Types of Wholesalers?

There are several methods of classification that could be applied to

wholesalers in general. One of the most common classification schemes is
the one developed by the Census of Wholesale Trade, which breaks down
wholesalers into three main categories:

Merchant wholesalers
Agents, brokers and commission merchants
Manufacturer sales branches and offices
Merchant wholesalers are known by many different names such as a
wholesaler, distributor, supply house, importer/exporter and jobber. These
are the classic wholesale distributors who buy products in bulk from the
producer, then resell those products to retailers or other businesses. This
type of wholesaler is the most commonly encountered, and responsible for
the vast majority of wholesale companies and sales. They often specialize
in specific kinds of products. Other wholesalers deal in a broad variety of
product types. Some may even specialize in services, such as warranties and
the like.
Agents, brokers and commission merchants differ from merchant
wholesalers in that they don’t typically take legal title to the goods they sell.
They are, however, active participants in the chain of commerce who help
negotiate the purchase of goods. This type of wholesaler is most commonly
found in agricultural products, representing specific clients and earning
their fee on a commission basis.

Manufacturers' sales branches and offices are a way for manufacturers to

deal directly with the sale of their products. Usually, they operate from
different physical facilities than the factories or plants that produce the
goods and the stores are used for wholesaling the company’s products.
These facilities may be connected to the warehouse for large inventory, or
they may be a small office where sales are negotiated and formalized.
How do I Start a Wholesale Business?

New wholesale distributors can launch their businesses from scratch, or

they can decide to buy a business from an existing distributor who is willing
to sell that business outright. Buying a business may be preferable to those
new to the wholesale business or first-time business owners since it reduces
the risks of creating a new business from scratch. The seller of such a
business may make it even more attractive by offering assistance and
advice, or valuable data such as client and vendor lists.

Distributors may sell a wide variety of products or specialize in niches. Of

course, a wider variety of products in a distributor’s inventory requires
larger warehousing and storage needs.
Requirements for a Wholesale Distribution Business

To launch any new business, an entrepreneur must be proficient in basic

business skills such as bookkeeping, budgeting and accounting. New
distributors will also require strong sales skills since wholesale distribution
involves the sale of products on a much larger scale than a consumer-
oriented retail business.

Ideally, a new wholesale distributor should have some level of experience

in the product industry. Product knowledge is essential for the distributor to
promote and sell his inventory.

Physical requirements for wholesale distribution include sufficient storage

space for adequate inventory levels. In some cases, a new distributor may
be able to launch a new business out of her home. A basement or garage
may be sufficient to store small items, at least in the beginning. However, if
you are engaged in selling large items or a wide assortment of products, you
will most likely require warehouse space. Wholesale distributors also need
office space, computers and furnishings.
Risks of Wholesale Distribution Business Model

While the wholesale distribution business model is advantageous, even to

brand-new entrepreneurs, it also carries some risk. For example, the cost of
shipping and storing the goods between the manufacturer and the retail
store usually falls on the wholesale distributor. That means that the
volatility in pricing for transportation, fuel and associated costs can make
budgeting and cash flow a tricky line to navigate, especially for
inexperienced distributors.

Moreover, space to store inventory can come with a hefty price tag or rental
cost, depending on the commercial real estate market in the distributor’s
geographic area. With limited storage space, wholesalers need to move
product quickly, which means maintaining a constant and rapid turnover.
Any slowdown in the chain of commerce between manufacturer and
distributor, or between distributor and retailer, can radically upset this
efficient flow of goods. If retail prices rise dramatically, or public relations
crises result in a sudden drop in demand for the products, the wholesale
distributor may be stuck with goods they cannot move. This can radically
eat into the distributor’s profit margins and keep capital tied up beyond a
product’s viable lifespan. This is even more of a risk for distributors of
goods that are subject to spoilage, such as food products and other
consumables.
What Is a Wholesaler?

A wholesaler is essentially a middleman between a manufacturer and a

retail establishment. Wholesalers obtain large quantities of products at a
lower price and sell them to retailers or other businesses, which sell them
from their e-commerce sites or storefronts, usually to end consumers.
While the most common type of wholesaling is between manufacturers and
retailers, an increasing number of wholesalers sell to other wholesalers. A
wholesaler may also sell materials to make goods, buying them from one
manufacturer, and selling them to another.

Wholesaling has also become a retail business model. Chains such as

Costco operate on the premise that goods are sold to consumers “factory
direct,” cutting out the wholesaler and passing on the goods at lower prices.
How Wholesalers Work

Wholesalers buy products from manufacturers at a lower price than other

businesses because they receive discounts for volume buying. They make
money by selling these products to retailers for more than they paid, but
still at a better price than the retailer can get directly from the manufacturer.

For example, a small business buying 100 dolls per month to sell in its store
might have to pay $10 per doll to buy directly from the manufacturer. If the
doll is sold for $12, the retail store makes only $2 per doll.
However, a wholesaler who buys 50,000 dolls a month from the same
manufacturer can negotiate a better price of $4 per doll. If the wholesaler
sells the doll to the retailer for $8, the wholesaler makes $4 from the doll,
but so does the retailer selling that same doll to a consumer for $12.

Buying large quantities of a product comes the need for storage. Most retail
establishments don't have a warehouse to store 50,000 dolls, so even if they
could afford them, this option isn't reasonable.
Pros and Cons of Wholesalers

The most significant advantage of purchasing from a wholesaler is that it

lowers the cost of doing business. By buying items in bulk, you get to take
advantage of lower prices, which generally leads to either making more
money per product, dropping your prices and undercutting your
competition, or a combination of both.

The practice of wholesale buying and selling can be complicated, though,

because there are many other factors involved in the buying, selling, and
distribution of products, including:

Business partners
Import availability
Product distribution

The product supply chain between wholesalers and manufacturers can vary
depending on the types of businesses they want to work with. They may
choose to deal only with businesses that can buy particular volumes of
merchandise or sign contracts to supply goods for definite periods of time.

Some of the most affordable products for retail sales come from
wholesalers in other countries, and importing may be your best option for
getting the products you want to sell. However, some wholesalers may not
be willing to ship products to other countries, making it difficult for you to
import products into a U.S. import business or a Canadian import business.
Another factor is how products are distributed. Wholesalers don't just sell
products they receive to the next retailer. Some wholesalers break products
down into smaller units, which are then sold to different retailers. Other
times, they assemble goods as part of the wholesaling process.
Tips for Running a Successful B2B Wholesale Distribution
Business

1. Hire the right people.

While it may seem like an obvious tip, to many businesses often fail to put
enough effort into the hiring process. Hiring decisions are some of the most
important decisions you’ll ever make for your business. Make sure that
you’re properly benchmarking each new position and evaluating each
candidate against that benchmark, rather than each other.

Also avoid general questions that “guide” the candidate to the right answer,
and instead focus on behavioral questions using phrases like, “Think of a
time when…” These will give you a clearer idea of how the candidate will
handle certain situations. For more on hiring sales reps in particular, check
out this post by guest contributor Nancy Bleeke, President of Sales Pro
Insider.
2. Stop writing and managing orders manually.
According to a recent survey, order writing inefficiencies were cited as the
number one order writing challenge among wholesale distributors. Too
many wholesale distributors are still taking orders down on antiquated
clipboards and paper order forms. Some have taken a half-step towards
using technology with PDF order forms and Excel spreadsheets, but these
methods are equally (if not more) cumbersome than paper.

With the pervasiveness of mobile technology in our lives today, many

successful wholesale distribution businesses are taking advantage of mobile
order writing technology, giving sales reps access to customer information,
product catalogs, and an order writing interface right on their smartphone or
tablet.
3. Get your inventory under control.
You can’t run a profitable B2B wholesale distribution business if you don’t
have a good handle on inventory management. Some companies have a
system of maintaining minimum stock levels in their warehouses,
replenishing with new stock once levels reach the minimum. Others keep
safety stock on certain products to protect against sudden spikes in demand,
while others utilize a “Just in Time” inventory strategy, delivering items just
in time for manufacturing/shipment.
Tracking incoming/outgoing inventory, doing regular physical inventory
counts, and coordinating your inventory levels with fluctuation in demand
are all key to deciding which inventory management strategies are right for
your business.

4. Give your sales reps what they need to succeed.

Do your sales reps have all the information they need going into sales
appointments? Forward-thinking wholesalers, manufacturers, and
distributors are understanding that in order to make sales in this day and
age, sales reps need to add value to their sales conversations, not just go
through the motions of writing down a reorder.

Companies are arming their sales reps with easy access to key information,
like customer order history, most ordered items, and stock levels for each
product. They’re also giving their sales reps digital catalogs with customer-
specific pricing already built in, so that reps don’t have to waste their time
memorizing data or looking up pricing. Instead, they can concentrate on
what they’re actually there to do: sell.

5. Differentiate on customer service, not price.

Wholesale distributors today are operating in an incredibly competitive
marketplace. Many try to differentiate their brands on price in the hope that
lower prices (and margins) will lead to a higher volume of sales. This
approach, however, is not an effective strategy for long-term growth.
Instead, companies who can differentiate their brands by providing great
customer service are seeing returns. Think about how you can create a
modern, convenient experience for your customers. How can you fulfill
orders more quickly and replace transactional activity with strategic value?

6. Keep your cash flow under control.

Cash flow is the lifeblood of any wholesale distribution business. One of
the biggest mistakes a wholesale distributor can make is to give an
overextension of credit to their customers. Avoid folding to demands for
extended payment terms, and be diligent about collecting receivables.
Accept credit cards, invoice/get paid online, and outsource collection if
necessary.

It’s also important to stay aware of your financial status at any one time.
Produce regular flash reports that include information like cash availability,
daily/weekly/YTD sales, payables, key inventory, best/worst selling items,
etc.

7. Invest in B2B eCommerce now.

This one is hugely important. According to a recent report released by IT

consulting giant Accenture, 86% of leading B2B companies surveyed are
already offering their customers the option of ordering online. Only 14%
are not.
As customers get used to the convenience of ordering online in their
consumer lives, those expectations for 24/7 availability are increasing in
their work lives. Businesses that are able to implement omnichannel
strategies (by allowing customers to order from the rep, on the web, or on a
mobile device) are already seeing returns. Those who do not take these
steps will be left behind.

8. Make proper sales territory management a priority.

Territory management is all about making sure that your sales reps are
putting the right amount of time into the right accounts. Many wholesale
distributors neglect to effectively segment customers, track sales
performance, and improve sales prospecting strategies. Successful brands
create detailed customer segmentation strategies and detailed plans that are
ultimately aligned with the company’s overall objectives.

9. Speed up order fulfillment.

In a survey conducted this year, it was discovered that 68% of respondents
can get orders from the field to the back office in less than 24 hours. 30%
could do it in less than one hour. When it came to shipping, 47% of
respondents reported that orders were actually shipped within 24 hours,
setting a clear benchmark for the rest of the industry to follow.

In order to succeed, today’s wholesale distributors must digitize the order

writing and submission process to increase efficiency. If you are selling
through multiple channels, like field sales and a B2B eCommerce portal, be
sure to consolidate those orders for faster fulfillment.
10. Build long-term relationships.
At the end of the day, what’s going to make you successful as a wholesale
distributor is your ability to form strong, lasting relationships with your
customers. By prioritizing customer service, adding value during sales
conversations, and making faster order fulfillment a priority, you’ll be well
on your way to building a long list of repeat customers.
Steps to Start Your Wholesale Business: Startup Ideas & Tips

1. Identify the Market for Your Wholesale Business

You will need to do proper research to identify the ideal market for your
products. You will need to find dealers, store owners and other customers
who will be able to procure the products from you.
As you start building a brand, you’ll also need to check out the competition,
which can be fierce in the wholesale business. Make sure you know what
products they carry, their prices and the quality of service that they provide.

2. Identify the Location of Your Office and Warehouse

Along with the above, you will also need to identify a place where you will
be conducting your business. Sometimes, space is so scarce and expensive
in big cities that you might need to keep your office and your warehouse
separate.
However, you will need to hire efficient and honest staff – or even a family
member – to ensure that your inventory doesn’t get misplaced or pilfered.

3. Identify your Suppliers

You will have to get in touch with manufacturers who will be willing to
appoint you as a wholesaler for their products. Many companies will have
sales targets for you to meet – so think carefully before deciding on any
one.
In some cases, you will have to get in touch with the company’s distributors
if they are not willing to supply directly to you. In this case, there will be a
division in profit margins, so you will have to factor in these calculations
before you can proceed in dealing with them.
4. Set up a Website
If you are considering starting a wholesale business, you will need to set up
a website. This has become very easy using AI-based tools like Jimdo
website builder, do-it-yourself tools like Wix, or setting it up using
WordPress on hosts like Siteground. Through it, you can inform
manufacturers that you are willing to do business with them.

This way, they can contact you instead of you running after them. Your
website will also attract retailers who might be interested in selling your
products. You can also start selling wholesale on Amazon, which is often
referred to as the world’s largest marketplace.

5. Know Return Policies

Check out the policies of different manufacturers, including how they plan
to handle any goods returned back to them due to defects or for any other
reason. You will also need to check their after-sales service policies.
It is best to steer clear of any manufacturers that you cannot get a clear
answer from – or you could end up with a lot of inventory that you just
can’t sell.
Inventory that you can’t move is wasted money – period.

6. Get Easy-to-Use Inventory Software

You should purchase a simple inventory control software package, which
will help you keep track of your products, even if they are in more than one
warehouse.
This will help you in giving proper quotes and delivery schedules to your
customers – thus helping you to earn more money by rotating your products
in an efficient manner.
7. Keep a Strict Payment Policy with your Dealers
You should keep strict control over your finances – and also over your
dealers, since the amounts involved could be quite large compared to if you
were selling retail.
By using the above tips, you can ensure that your wholesale business gets a
flying start and stays on track in the coming years. Do proper research, and
keep an eye out for good deals from your suppliers to stay ahead in the
game.
Wholesale Business Ideas & Opportunities in India

Here is the list of lucrative wholesale/distribution business ideas &

opportunities in India:

1.Agriculture Equipment Wholesale Distribution

The agriculture equipment segment has a huge potential in retail

distribution. And there is the number of manufacturing and import
companies who look for distributors for the specific regions. Some of the
most popular items are farm machinery, hand tools, etc.

2. Agrochemical Wholesale Distribution Business

Generally, agrochemical includes a wide range of products. The list

includes fertilizer, nutrients, growth promoters, pesticides, insecticides,
fungicides, etc. And fertilizer distribution is a highly lucrative opportunity
that one can consider. However, metro cities are not the preferred locations
for this business.

3. Apparel & Textile

This is another lucrative segment for entrepreneurs who are looking for
wholesale distribution opportunities. Broadly, the industry caters to textiles,
threads, sewing supplies, safety clothing, upholstery, readymade garments,
footwear, accessories, etc. However, if you want to initiate a business in this
segment, you must have specific knowledge about the industry.
4. Arts & Crafts Wholesale Business

Actually, art and craft segments cater to a wide range of products. Some of
the most popular items are art supplies, handicrafts, corporate gifts, wooden
crafts, etc. Generally, small gift sellers are your target audience in this
business. And if you want to go with art supplies, then artists, retail stores,
and art schools are your target audience.

5. Automobile Wholesale Business

Some of the most potent products in the automobile segment are vehicles,
spare parts, accessories, lubricants, batteries, tire, etc. And in our country,
the automobile segment is partly organized. So, there are plenty of
distribution opportunities you can find in several niche segments.

6. Building and Construction Material

Starting a business in this category demands moderate capital investment.

Generally, the products under this segment are high-valued. Some of the
most lucrative items are cement, TMT rods, sand, stone chips bricks, glazed
tiles, paints, etc.
7. Books Distribution

Globally, book distribution is a multi-million dollar industry. And literally,

you can earn good revenue from this business. Also, the book industry
caters to magazines, CDs, and DVDs. You can grow the business by
expanding the territory and product lines.

8. Chemical Distribution Wholesale Business

Broadly, the chemical industry includes a wide range of products. These are
plastic & polymer, natural gas, petrochemicals, inorganic chemicals,
surfactant, rubber adhesive, etc. And there are plenty of products you can
find have good potential for distribution.

9. Computer & Peripheral Distribution Business

Nowadays, computers and peripherals account for a major share in the
electronics product segment. Initiating a distribution company in this
segment demands huge capital investment. And in our country, the retail
market is highly competitive. So, you must have financial planning prior to
start this business.

10. Cosmetics Wholesale Distribution Business

Cosmetics and personal care market is very vibrant in India. And several
companies are fighting hard to get consumer attention. So, initiating a
wholesale distribution company in this segment is a highly lucrative
opportunity. Also, organic cosmetics products are gaining tremendous
popularity.

11. Education & Training Industry

If you want to start a business in the service industry, then this is the most
profitable one. Generally, the industry consists of preschool, computer & IT
training, vocational training, language school, corporate training, sales
training, soft skill training, etc.

12. Engineering and Industrial Supplies

Practically, this is a huge industry. And it caters to a wide range of products
and sub-categories. Some of the most lucrative items are machinery, control
equipment, pipe & fittings, plastic & PVC products, etc. It is better to start
the business of a reputed brand.

13. FMCG Product Wholesale Distribution Business

FMCG product distribution is the most lucrative business in India. The top
FMCG companies get success from the wide distribution channel. So, every
new and old FMCG company always looks for a good distributor for the
region where they are functioning.

14. Furniture Wholesale Distribution Business

Furniture is another lucrative industry in both developed and developing

countries. Also, the product has great foreign trade potential. The plastic
furniture, steel furniture, wrought iron furniture, wooden furniture, office
furniture, and patio furniture have a great demand currently.
There are several furniture making companies that look for distributors in
the regions.

15. Gem & Jewelry

If you want to start a business in this segment, it is better to start with the
distributorship of a renowned company. However, initiating any business as
such in this industry is cash-intensive. And you must have enough
investment capacity to start a business in the gem and jewelry category.
16. Herbal &Ayurvedic Product Distribution Business
Due to the raising awareness of harmful chemicals, the demand for
ayurvedic and herbal products is increasing. Also, there are several
established companies like Patanjali, Dabur is appointing distributors
throughout the country.
And definitely, this is the right time to tap the opportunity for the aspiring
entrepreneurs who want to make money from the Ayurvedic and herbal
business.

17. Home Appliances Distribution Business

This is another great segment for initiating a successful distribution

company. Also, the industry is highly profitable. However, starting a home
appliances distribution business demands moderate capital investment and
strategic planning. Also, you must select the products according to the local
market demand.
Generally, you can set up the business in two ways. Either as a distributor
of a renowned brand like Godrej, Samsung, etc. or as a multi-brand dealer.

18. Hospital Equipment Distribution

If you want to initiate a business in the medical industry, then you can
consider hospital equipment distribution. Also, it is a cash-intensive
business and you must have a sound hospital network. Generally, patient
beds, ECG machines, X-ray machines, operation theater equipment, MRI
machine, wheelchairs hold the major share in the industry.
19. Leather Products Distribution Business

The leather industry is very prominent in our country. And there are several
products that have both domestic and industrial applications too. Also, it
caters to the fashion industry. Some of the most popular leather items are
handbag, footwear, belt, garment, gloves, etc. Also, corporate leather gifts
are very popular these days.

20. Livestock Wholesaling Business

Currently, the ready to cook non-veg items are getting huge popularity in
the metro cities and even in small towns. If you check the supermarkets and
shopping malls, you can find a lot of brands that are operating in this
segment. So, it is high-time for starting a distributor business to tap the
growing market.

21. LPG Distribution

In India, there are several petroleum companies that appoint distributors for
the domestic and industrial LPG supply. However, initiating this type of
distribution company demands adequate investment capacity. LPG
distribution is a highly organized sector and you will need to fulfill the
criteria of the LPG companies to get the distributorship.

22. Medicine Distribution

This is another great opportunity is the pharmaceutical industry. In India,
medicine distribution is a highly lucrative sector. Apart from medicines,
you can also consider different products like personal care, beauty products,
nutrient supplements, energy drinks, etc.

23. Mineral Water Distribution Business

Actually, mineral water distribution is a highly localized business. And the
demand for packaged drinking water specifically depends on the quality of
the drinking water of that particular area. So, it is important to check the
potential first.

24. Organic Food Distribution Business

Both in developed and developing countries, the demand for organic food
items is growing. Also, the organic food companies are selling the products
offline and online too. Actually, there are several organic food items
production companies that look for the distributors for the regions where
they want to capture the market.

25. Paper & Stationery Distribution Business

Paper and stationery are the vast industry. And literally, there are thousands
of products that are perfect for distribution.
Some of the most potential items are exercise books, computer papers,
pens, pencils, erasers, geometry boxes, color papers, gift wrappers, art
papers, etc. Also, the business is suitable for any location regardless of the
population density and buying capacity.

26. Safety and Security Products Distribution Business

Actually, these products have both domestic and commercial buyers. Also,
these have industrial applications. Nowadays, security is everyone’s
concern. Even, the homeowners are these days look for the basic security
items to protect their homes. Some of the most popular items are CCTV
cameras, intelligence systems, access cards, devices, etc.
27. Scientific Instrument Distribution

This is another a great B2B business that you can start even with a small
investment. Actually, you can start the business with limited products. And
as your business grows, you can enhance the product range.
Generally, educational institutions, government laboratories, and private
manufacturing companies are the major buyers of these items. And some of
the most popular items are measuring tools, devices, test equipment, and
laboratory supplies.

28. Seeds Distribution Business

Actually, seeds are the essential items in agriculture. And the quality of the
crop and yield highly depends on the quality of the seeds. Therefore,
farmers and growers always look for good quality seeds for better yield. In
our country, seed distribution ensures a good margin. Also, there are several
seed distribution opportunities available in different regions.
29. Sports Items Distribution Business

Games and sports are a huge industry. And practically, there are thousands
of products available for distributions. Also, you can consider importing the
products and distributing them to the domestic sellers. Also, the toys, water
sports equipment, sportswear, and apparels have great potential in the
domestic market.

30. Telecom Products Distribution Business

Due to the increasing mobile connectivity throughout the country, the

demand for several telecom products is increasing. Also, the digitization is
one of the major reasons for this booming demand. Hence, initiating a
telecom product distribution business is a highly lucrative opportunity for
individuals who want to start a business in this industry.
Things to Consider Before Starting a Wholesale/ Distribution
Business

In countries like India, starting a distribution business is comparatively

easy. However, you must consider carefully the aspects such as logistics,
cash flow, and inventory control. Some basic factors that must be explored
are the following:

1.Choose the Right Product

Choosing the right product is the single most important decision to make
before starting a distribution business. Conduct market research and
understand the demand and trends of the local population, competition from
existing players. This will help you in exploiting the gaps and define your
product properly.
In addition, you must check whether the profit margin is good enough to
overcome working capital expenses.

2. Understand the Size of the Market

To make a good profit from distribution, it is essential that the size of the
immediate market is big enough. There must be enough space to appoint
retailers throughout the area that you intend to cater to.

3. Select a Proper Location

Unlike a retailing business, wholesale or distribution ventures need a large

area for inventory purposes. Space must have enough space to store a
bigger inventory and must be located in an area where transportation costs
won’t be much for distribution.
Essential Wholesale Terms – Wholesale Terminology

Lead-time
The time difference between placing the order and when it is ready to ship.
This is also known as turnaround time. You can determine lead-time in
hours, or business days.
There are many factors that affect lead-time.
For example:

Does your product need a final art approval? Lead times begin
when the product has got approved.
The frequency at which you check your orders, at the end of
the day, or every hour.
Sometimes it takes reasonable time to get ready the product,
this will also include as lead-time.

Minimum Order Quantity

The minimum quantity of a particular item the customer needs to place an
order.This could differ from an item to item.
Suppose, from a bookstore, you need to buy at least 3 books for placing
your order. This could change for magazines from the same shop, maybe
for magazines, the limit is only 2.
MOQ depends upon the margin of charges in shipping, delivering and
processing to the cost of books. Only if you’re making a profit after these
charges, then it is possible to place an order.
Sometimes, a certain raw material is required for a product, mainly in art
stores, then MOQ depends upon the raw material you’re going to use.
Because you don’t want to waste the raw material just by making a single
unit out of it.

Order Minimum

The minimum amount of purchase set by the retailer for placing your order.
This could be $5 or any in case, the amount totally depends upon the
retailer.
Mainly it is the cost of initial investment that would be required to make the
ordered product.

Sometimes, it is the limit above which the retailer starts making a

considerable profit. It is different from MOQ because in that case, a number
of items are considered, here it’s the money.
This aspect of the business is important, and you should definitely spend
some time on accounts, judging the order minimum and setting the bar.

Back-order

Sometimes it happens that the ordered products are not in the stock, this
would restrict a retailer to ship them. The order is then called a back order,
or products are back ordered.
Suppose an order is placed, and there are three items, you only have two
available, so you back order the third, and ship the other two. You can ship
that item when available to you.
Some retailer would cancel the third item, and reorder it when available. It
is easy for them to manage receipts that way. Backorder is not a good thing
to happen, but in the retail business, it is quite common.

Case Packs

The order must be in multiples of a case pack to make it easy for you to
ship.
Suppose you have a case pack of 10 products, and minimum order quantity
is 50, that way, order like 60, 70, 80 and so on, would make it easy for you
to package, deliver and manage.

Manufacturer’s Suggested Retail Price (MSRP)

The manufacturer puts a label on the product of the suggested price at

which the product should be purchased at.
This suggested price can be different from the actual retailer price a retailer
sells on.

The difference between suggested and the actual retail price is various
factors like transportation, service charges, tax, and demand.
Minimum Advertise Price (MAP)

The price bar set by the manufacturer that in any case, the retail price can’t
go below than that.
Because if it happens, it can seriously damage the brand reputation and
image.
People could doubt the source of the product and may think that it is not up
to the mark.
Some retailers would also rebel as to how the manufacturer can sell that low
to a retailer, or series of doubt can revolve around the process of selling the
products to retailers.
To avoid any of the above problems, a MAP is set, for which, if any
retailers go below that, serious action can be taken.

Net Payment Terms

The retailer sets terms towards the payment of the products, of course, if
they’re in high volumes, mostly happens in local shops and store.
These terms have a time period, by which all the due payment must be
received by the retailer.
For example, ‘net 30’ means within 30 days, the payment should be made.
‘1/10 Net 30’ means that the buyers get 1 percent discount if the payment is
received by the retailer within 10 days, with maximum limit 30 days.
There are various payment terms set by retailer and that change from
retailer to retailer. You have to know these terms in order to have smooth
payments.
Week to Date / Month to Date / Season to Date / Year to Date

It is a way to tell the sales in the time period.

If you hear a retailer say that he has sold 50 items year to date, that means,
from the starting of the fiscal year to the current year, he has sold that
particular number of items.
The fiscal year change from retailer to retailer.
Some start from January, some from April or whatever date they like.
Similarly, the concept is for week, months and seasons.

Drop Ship

When the retailer receives an order from the people, but shipped, delivered
and supplied by the manufacturer directly to the customer. The retailer acts
as a receiving end of the orders.
Mainly, retailer deals with the advertisement, promotion, and feedback.
A retailer in this is the face of the manufacturer.
Manufacturer and retailer can work on the terms set by the both parties, and
often decide how much percent of the sales are going into retailer’s pocket.
The retailer mainly works on directing maximum customers to the
manufacturer, collects data, surveys and has tools to make it easy for the
manufacturer.

Product Line

It is the list of products, sorted in any way you like, in terms of sales, price,
names or dates.
The list must have you are a line of products, and the customer can find the
product easily depending upon the sorting.
You can also keep sections like best sellers, 50 dollars products, 100 dollars
products etc. if I had to put in one line, it’s the menu of your inventory.

Keystone Mark-up

It is the famous method of setting the selling price by instantly doubling up

the wholesale price.
If your product has a wholesale value of 10 dollars, you’re going to sell it at
20 dollars.
This roughly includes service costs, tax, processing cost, labor,
transportation and stock maintenance cost.
This way you can cut these costs and make a profit.

Margin

The net profit after cutting all the prices from the selling price. That is
considered as margin on a particular product.
The total sales profit often is calculated by multiplying margin by the total
number of products sold.
The margin is a great way to see whether you can break even or gain profit.

In the case of break even, the margin becomes zero. The margin is purposed
by considering the extent of the profit.

Buyback

Retailers on initial time, try to woo customers by giving them a no loss deal
for trying their products.
For example, some retailers would give you 30 days no reason return
policy, in which retailer won’t bother you to ask a question as to why you’re
returning it. It’s called no question asked policy/ the phenomena is called
buy back.
But that doesn’t mean that you should not limit the items for the buyback,
for example, if someone buys 200 items, make sure you only buy back 50
of them, because buying back 150 items doesn’t make sense and is wrong
for your business.
You can additionally charge for shipping because you’re only getting back
the product, not the cost of delivering and processing. You should
strategically set up this whole thing.

Shipping window

The time gap between shipping and cancel dates is a shopping window.
Basically, in this time, the client can cancel the order, and after the cancel
date, you have to ship it no matter what.
Generally, shipping window is of 2 weeks, if I have received an order on
08/02, then the cancel date would be 22/08, and I can ship the product in
between this timeframe, it could be right away, on the same day, or the last
day, i.e. 22/08.

Open to buy

It refers to the buyers’ checkbook, so the terms mean whatever you could
spend money on, a thing which is open to buying.
The tool analyses your receipts and picks up the items on the basis of your
interests and visits.

Point of sale

The point of sale means when and where the sale happened.
The term has vast usage, and could also be used for a software that conducts
transactions of a retailer.
It is like a register book, keeping a record of the point at which the sale is
made.
It can also be used for referring an event, like POS market down, which is
used when the market goes down at the point where the sale is made.

Private Label or Brand

Creating a reputation and making people follow your name while buying
means that you have successfully created a private label.
Some retailers would sell the same product, but with a different name, to
establish them as a brand.
For example, books, but we have different brand labels like a target,
Nordstrom, etc. which do the same thing.

Purchase order

It is the notification or agreement retailer submits to the vendor, of the order

he has purchased.
Details like a number of items, their name, type, date of purchase,
everything matters, because that would help the vendor to create a
legitimate invoice.

Cost with terms

The wholesale price set by the vendor, and the retailer overhead, due to
their specific terms, together makes the costs with terms.
Vendors want to know that extra cost you put on the wholesale price before
you sell it.
It is usually a retailer’s wish as to how much the terms costing him, or what
overhead he is willing to go for.

Chargebacks

Vendors usually avoid giving retailers checks, rather cut the cost of
advertising, or directing customers, or affiliated marketing from the future
payment.
For example, you have to give the vendor a check of 10k, but 1k is a cost of
your services, so instead, you will pay the vendor only 9k. This way, you
charged back the vendor for your future services in advance.
Vendor compliance

The terms and conditions every vendor have so that they can run smooth
businesses with the retailers. These terms and conditions are compiled of
various rules, regulations, and ways of doing business.
A retailer must have these terms and conditions agreed for smooth business.

Exclusivity

For a manufacturer to be exclusive to only one retailer in a particular

region, is called exclusivity of that manufacturer.
One of the examples would be Oneplus and Amazon.
Oneplus only sells phones through the Amazon, or on their official website.
This can prevent competition for the retailer, and manufacturer can get a
fair deal on his products stock

Keeping Unit

SKU are the codes given to products in an inventory so that the software
can easily identify, manage and sell them.
These codes are unique to every product and inventory and usually kept
similar to the products type and function.

Assortment
The vast range of products a seller has to offer a retailer is called the
assortment.

This could be of a single type, or multiple types, for example, a shop having
only electronics, and a shop having electronics, grocery, and clothing.
So, the assortment directly relates to the type of products a retailer can buy
from the seller.
Advantages of Wholesale Business

Everybody can get benefits buying wholesale products because they have a
low price. It is a good procedure for smaller shops because they can save
money buying items to suppliers. But not only business people can buy in
bulk. The only rule to buy in bulk products is to respect certain amounts of
things. The wholesalers desire to sell the huge amount of items in order to
win more money and then retailers or particular can sell it at higher prices.
Dealers are more interested in purchasing in bulk because they can buy all
they need to one distributor. It is really difficult when you need to buy
things from different suppliers because sometimes they don’t have enough
merchant. However, wholesalers ease this process that retailers can get
products easily. It helps to save time and money.
People who deal with distributors have vast differences in merchandise. So,
if you are interested in buying there, make sure you will have to choose
among million of product.
Distributors can negotiate lower prices with the manufacturers in order to
receive discounts or coupons. They can reach an agreement taking into
account the number of products they are going to buy. Both get benefits of
these deals because they sell more at one time and traders get products at a
lower price.
Disadvantages of Wholesale Business

Since the product will not pass through the business owner, the quality and
condition of the product cannot be checked. If a supplier is unreliable and
irresponsible, problems might arise and may affect your business deeply.
Traders need to have a big storehouse if they want to keep their products. If
they have their own warehouse it is better but if they don’t, they would have
to rent it, what it means an additional cost. Warehouse are expensive and
more if you don’t have one.

A distributor has to control several things: shipping, marketing, and

inventory. It is an exhausting work if you don’t have help. A better option
would be drop shipping because you don’t have to keep your own
merchandise.
Nevertheless, it has more advantages than disadvantages. It means that
wholesale is a useful and alive process that is making our lives easier.
Traders have a difficult work, but distributors normally offer extra support
in order to ease their labor.
Step-by-Step Guide on How to Write a Wholesale Terms and
Conditions Agreement

I have broken down the entire wholesale terms and conditions contract into
subcategories. We will go one by one in detail.

1. Minimum Order Value

You should always define the minimum order value for your retailers. My
suggestion would be to keep it in between $300 to $600. Of course,
depending on the individual products you have to keep the minimum order
value number.
A good template would be:
For first time customers of Ross & Paul the minimum order value is $600.
New customers will be placed on Proforma until such time that total orders
invoiced is over $1500. Once customers have reached the $1500
expenditure they will be placed automatically on 30 day net account
providing they have completed a credit application form and have been
approved by Ross & Paul.
2. How to place an order
Explain how your customers can place an order. List all possible ways to
order from you.

Mention online site, if you provide online orders

Mention the phone numbers and working ours if you support
phone
Give your best email to get orders

An example:
You can order through our general shop using both of the coupon codes
(which we will email you) to place your order with no upfront charges.
Upon receiving your order, we will send you a digital invoice for the total
charges. If you prefer to send us a list of SKUs and quantities, that works
too!

Another example:
Submit your order via our wholesale site

You must be a registered user to view this site. If you have not yet
registered please go to the website, click on “Log In” then “Create New
Account”. Follow the prompts and submit your information.

Call our customer service representative toll free (800) 3xx-xxxx.

Please have an order form or the web site available when calling so that you
can reference item numbers.

Fax your order to (800) xxx-xxxx. We can provide an order form to you via
fax or email.

3. MSRP
Let the retailers know the MSRP you are willing to go for.

An example:
Products or goods purchased from Ross shall only be sold at the
manufacturer’s suggested retail price (MSRP). In the event the Wholesale
Account chooses to place the products or goods for sale at a discount, the
Wholesale Account shall not discount the products more than 15% below
MSRP. Permission for special sale events beyond the 15% discount by the
Wholesale Account must be requested in writing to Black Helmet Apparel
and will typically be granted on a semiannual basis.

4. Wholesale Pricing
Discuss the pricing advantage.
An example:
All prices are listed in US dollars. All authorized retailers will receive 50%
off the MSRP, plus the cost of shipping. Trade clients (interior designers,
architects etc.) will receive 20% off the MSRP, plus the cost of shipping.
Prices are subject to change without notice. We will cover 50% of the
shipping costs for any orders over $500. We cover the cost of postal
insurance for any shipments through USPS.

5. Returns
Returns are the very important when it comes to wholesale business. Please
be very clear about your return terms.
Make sure you discuss the number of days, waiver, shipping cost. Make it
as clear as possible.
A typical wholesale returns term would look like this:
Returns must be made in writing directly to Head Office within 7 days of
delivery date quoting invoice number and reasons. No returns are
acceptable without Ross & Paul prior approval and delivery instructions for
transport. Shipping will be charged.
For any goods returned as ‘unsuitable’ there is a re-stocking charge of 15%
plus shipping chargeable to customer

Please email us with details of the product prior to returning it.

6. Payments
Please make sure you have listed all the modes of payments.

An example:

Ross and Paul accept credit card (MasterCard, Visa, Discover, and
American Express) and EFT payments.
All credit card payments currently do not incur a merchant fee.
If paying via EFT, please fax to 073xxx xxxx or email us through
remittance advice as proof of payment.

7. Net 30 Terms
This is a tough part, let your customers know about NET 30 terms if you
are willing to go for it. Our suggestions are to make it a minimum cap of
$10k onwards.

An example:

You may also apply for credit terms with us by filling out an application
form with at least three credit references. You may also get a credit
application by request via our Contact Us page or by calling toll free (800)
xxx-xxxx after a minimum transaction of $10,000
Checks returned due to insufficient funds could be considered fraud and
subject the check writer to prosecution and fines. However, we understand
that usually there is no criminal intent and in these circumstances, we will
only charge the customer a reimbursement for bank fees and other incurred
costs.
8. Delivery Window
How long does it take to deliver the orders to their warehouse? Please make
a typical delivery time, you can keep it flexible.

An example:

Please allow at least 10-14 days from the time of your order for completion
of items. Larger orders may require more time; please contact me for
information about availability.

9. Shipping
How do you intend to manage your shipping costs?
Whether you are willing to pay for shipping or your customers should pay
for shipping or is it mutual 50-50 benefit. Be careful writing these terms,
sometimes shipping could take away all your profits.

An example:

Shipping is not included in the cost of goods. On all orders freight will be
charged on each invoice at a rate of 7% per invoice total, a minimum charge
of $25.00 will apply.

Orders over $1500 are FIS

10. Shipping International Orders

We do not ship international orders at this time.
We have experienced too many customs and shipping complications to
make this worthwhile for the customer.
Other Influencing Terms & Conditions

Other important factors you may have to consider while preparing

wholesale terms and conditions contract are below.

11. Shipping insurance

12. Shipping Errors, Returns, & Warranty

13. Exclusivity – Talk about exclusive deals if you have any.

14. Private labeling – If you provide private labeling, please specify the
terms or minimum order value for private labeling.

15. Backorders
Conclusion

A wholesaler is a company that buys products in bulk from manufacturers

and sells them to retailers.
The most common type of wholesaling is between manufacturers and
retailers.
Purchasing from a wholesaler lowers the cost of doing business due to
economies of scale.
The product supply chain between wholesalers and manufacturers can vary
depending on the business type.

Finally, a new wholesale distributor will need to obtain the licenses or

permits that are required by all levels of government. Municipalities may
require a business license for companies doing business within the city
boundaries. These licenses are fairly easy to obtain, requiring only a
straightforward written application and payment of a fee. The fee may be
based on anticipated business revenues. States may require wholesale
licenses to purchase goods from manufacturers for resale exempting them
from paying sales tax on the initial purchase. And certain types of goods or
products may require federal licenses to purchase or sell in bulk.

Wholesale business thrives purely only on hard work and knowledge.

You can’t stop learning in a wholesale business, there are a lot of things,
terms and ways that could help in making your wholesale a success.