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Wholesale Ecommerce: What Is It & How Does It Work?

August 12, 2022

The wholesale ecommerce industry is booming, and there are more opportunities than ever before to get involved. In fact, experts predict that ecommerce sales will surpass $1 trillion for the first time in 2022.

Whether you’re looking to start your own wholesale ecommerce business, or you’re just curious about the industry, this guide will explain:

What Is Wholesale Ecommerce?

Wholesale ecommerce is the sale of goods or merchandise in bulk quantities at a lower price per unit than what is typically charged at retail outlets.

Wholesale ecommerce businesses sell their products direct to consumers through online marketplaces, such as Amazon, eBay, or Etsy, or through their own branded websites. The majority of wholesale ecommerce businesses are based in China and the United States.

The history of wholesale ecommerce dates back to the early days of the world wide web in the 1990s. Businesses selling products in bulk were some of the first to establish an online presence, as they were able to take advantage of the lower costs and reach a global audience. 

Today, ecommerce for wholesale is a booming industry with businesses of all sizes selling products to consumers around the world.

There are a few key factors that have contributed to the growth of wholesale ecommerce:

  • The rise of online marketplaces: Online marketplaces, such as Amazon, eBay, and Etsy have made it easier for businesses to reach a global audience of potential customers.
  • The growth of social media: Social media platforms, such as Facebook and Instagram, have given businesses a way to connect with potential customers and create a community around their brand.
  • The rise of mobile commerce: Mobile commerce refers to the buying and selling of goods or services through mobile devices, such as smartphones and tablets. The growing popularity of mobile devices has made it easier for businesses to reach a mobile audience.

How Wholesale Ecommerce Works

Wholesale ecommerce involves three main types of players: wholesalers, retailers, and consumers.

Wholesalers are the manufacturers or distributors who sell products in bulk to retailers. Retailers then resell these products to consumers, usually at a higher price point than what they paid the wholesaler. 

Consumers are the individuals who purchase products from retailers. In the context of wholesale ecommerce, consumers can also be businesses who purchase products in bulk from wholesalers for resale purposes. 

The wholesale ecommerce ecosystem relies on all three of these player types working together. 

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Wholesalers need retailers to sell their products and reach consumers, while retailers need wholesalers to provide them with products to sell. Consumers need retailers to provide them with products they want or need.

The goal of wholesale ecommerce is to create an efficient and seamless experience for all three player types. 

Online wholesalers should be able to easily find and connect with retailers, and vice versa. Retailers should be able to easily find and purchase products from wholesalers. And consumers should be able to easily find and purchase products from retailers.

An efficient and seamless wholesale ecommerce ecosystem benefits everyone involved by making it easier to do business and increasing the chances that each transaction is successful.

Types of Wholesalers

All wholesalers are not created equal. Here are some of the most common types of wholesalers you may do business with.

1. Merchant Wholesalers

Merchant wholesalers are B2B companies that sell products to other businesses. They usually buy products from manufacturers and then resell them to retailers, but they can also sell directly to other businesses.

Merchant wholesalers typically have a large inventory of products and may offer services such as financing, warehousing, and transportation. Some examples of popular merchant wholesalers include Costco Wholesale, BJ's Wholesale Club, and Sam's Club.

2. Agents/Brokers

Agents and brokers are both intermediaries that can facilitate transactions between buyers and sellers. An agent is a representative of one party in a transaction, while a broker is an independent party that brings together two other parties who wish to engage in a transaction.

Common examples of agents include real estate agents and insurance agents, while common examples of brokers include stockbrokers and commodities brokers. 

While agents and brokers both play important roles in facilitating transactions, there are some key differences between the two. One major difference is that agents are typically paid by the party they represent, while brokers are typically paid by commission. 

Additionally, agents are usually more specialized than brokers, as they usually only represent one party in a specific type of transaction. Finally, agents are typically more involved in the actual transaction than brokers, as they often provide advice and guidance to their clients.

3. Sales and Distribution

Sales and fulfillment or distribution channels are the mechanisms through which goods or services are delivered to customers. There are many different types of sales and distribution channels, each with its own advantages and disadvantages.

The most common type of channel is the direct sales force, which involves representatives who sell products or services directly to customers, usually in person. Other common types of channels include distributors, retailers, and online platforms. 

Each type of channel has its own strengths and weaknesses. For example, direct sales forces tend to be very effective at building relationships with customers and providing personalized service, but they can be expensive to maintain. 

Distributors, on the other hand, typically have lower costs but may not provide the same level of service or attention to detail. Ultimately, the best sales and fulfillment/distribution channel for a given product or service will depend on the needs of the customer base and the resources of the company.

Wholesale vs. Retail for Ecommerce

There are a few key ways that wholesale and retail differ, the most important being pricing, marketing, location, and fulfillment.

When it comes to pricing, wholesale is generally much cheaper than retail because the middleman is cut out of the equation. Retailers have to mark up their prices to make a profit, while wholesalers sell at a lower price point and make their money on volume.

Marketing also differs between the two types of businesses. Wholesalers typically rely on word-of-mouth and referrals to grow their business, while retailers invest more in advertising and marketing to reach new customers.

Location is another key difference. Wholesalers are often located in industrial areas or near major transportation hubs, while retailers are usually in more visible locations like shopping malls or high-traffic streets.

Finally, fulfillment differs between wholesale and retail. Wholesalers typically ship their products to retailers, who then handle the customer order fulfillment. Retailers also often have brick-and-mortar stores where customers can come to pick up their orders.

Why Wholesalers Need Ecommerce

Wholesale is important for ecommerce businesses because it allows them to source products at a lower cost. This can help them to increase their profit margins and to compete more effectively with other businesses.

In addition, wholesalers often have access to a wider range of products than retail businesses, which gives ecommerce businesses a greater selection to choose from.

Wholesale is also beneficial because it allows ecommerce businesses to build relationships with suppliers. 

These relationships can lead to better terms and conditions, such as exclusive discounts or early access to new products. Strong relationships with suppliers can also make it easier to resolve any issues that may arise.

Overall, wholesale is an important part of ecommerce because it helps businesses save money, compete more effectively, and build strong relationships with suppliers.

Pros & Cons of Wholesale Ecommerce

Ecommerce for wholesale distributors isn’t without its flaws. If you plan on operating in this niche, it’s important to realize them before you start. Below are some pros and cons of wholesale ecommerce to help you make an informed decision.

Con 1: Website Costs Can Be Expensive

There's no denying that website costs can be expensive. While the initial investment may not be too bad, the costs of website maintenance and upkeep can quickly add up. This is particularly true if you hire a professional to help you with your website design and development.

Additionally, if you want to add new features or make changes to your existing website, you may need to shell out some extra cash.

Con 2: Fraud and Security Can Be an Issue

When you're dealing with money, there's always the potential for fraud and security issues. When you're running an online business, it's important to make sure that your website is secure and that your customers' information is safe.

There have been plenty of cases where online businesses have been hacked and customer information has been compromised. This can not only ruin your reputation, but it can also result in some serious legal trouble.

Con 3: There May Be Some Physical Expenses Involved

While most of the costs associated with running an online business are virtual, there may be some physical expenses that you need to consider.

For example, if you're selling physical products, you'll need to factor in the cost of shipping and handling. Additionally, if you may have to factor in storage costs if your operation expands worldwide.

Pro 1: You Can Bring Down Overhead Costs

One of the biggest advantages of running an online business is that you can bring down your overhead costs. Since you won't need to rent office space or hire additional staff, you can save a lot of money in the long run.

Pro 2: Your Marketing Reach is Unlimited

Another advantage of running an online business is that your marketing reach is virtually unlimited. With the power of the internet, you can reach customers all over the world with just a few clicks of a button on an ecommerce landing page. This is a great way to expand your customer base and boost sales.

Pro 3: You Can Take Advantage of Drop-Shipping

If you're selling physical products, you can take advantage of dropshipping suppliers. This means that you don't have to carry any inventory yourself. Instead, when a customer orders a product from your website, the order is forwarded to your supplier who then ships the product directly to the customer.

Not only does this save you money on storage costs, but it can also help you avoid shipping delays and other issues that may arise.

Choosing a Wholesale Platform

Now that you know some of the pros and cons of running an online business, it's time to choose the best wholesale platform for your needs. Here are a few things to keep in mind.

First and foremost, you need to consider what type of products you're selling. If you're selling physical goods, you'll need to make sure that the platform you choose can accommodate your needs.

On the other hand, if you're selling digital products, you won't need to worry about shipping or storing inventory. This means that you'll have more options when it comes to choosing a wholesale ecommerce platform.

Next, you need to consider your budget. Some wholesale platforms can be expensive, so you'll need to make sure that you choose one that fits within your budget.

Don't forget to factor in the cost of any additional features or services that you may need. For example, if you're selling physical products, you'll need to factor in the cost of shipping and handling.

Another important consideration is your experience level. If you're a beginner, you'll want to choose a platform that's easy to use and doesn't require any technical knowledge.

On the other hand, if you're more experienced, you may be able to take advantage of a platform that offers more advanced features.

Finally, you need to think about your long-term goals. Are you looking to build a sustainable business? Or are you just trying to make some quick and easy sales? Your answer to this question will help you narrow down your options and choose the best ecommerce solution for your needs.

Final Thoughts: Wholesale Ecommerce

Wholesale ecommerce not only helps online stores deliver remarkable products to their customers, but it also helps to stimulate the economy. Eventually, wholesale ecommerce will become the status quo.

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