Consumers aren’t the only people leveraging online resources and marketplaces to buy merchandise, businesses are using these tools to purchase in bulk, and at a discount, with great success. Wholesale ecommerce is a huge market that totaled roughly a little more than $13 trillion in 2021 and is expected to continue to grow.
According to the Digital Commerce 360 report, wholesale ecommerce grew 1.17 times faster than all U.S. manufacturing with 15.2% year-over-year growth.
What is wholesale ecommerce?
Wholesale ecommerce is B2B (business-to-business) for starters. Instead of selling products directly to consumers, merchandise is sold, in bulk and at a discount, to other businesses that market those products to distributors or retailers.
Although they use many of the same online tools, there are differences between wholesale and retail ecommerce. The primary difference being that wholesalers deal in bulk, typically sell directly to other businesses, while retail ecommerce sells directly to consumers in much smaller quantities.
Wholesale ecommerce has been around since the early days of the Internet (1990s) and currently sells products very successfully to platforms like Amazon, eBay, Etsy, and others on their individual marketplaces. In fact, wholesale ecommerce businesses were some of the first businesses to establish successful online businesses because they were able to take advantage of lower costs and could address a more robust and global customer base.
How do wholesale ecommerce businesses work?
My first real job as a teenager was working in my dad’s industrial supply business. We sold bolts, nuts, hardware, and tools to construction companies and manufacturers. Most of the places where we bought the goods we sold were from wholesalers. There wasn’t an online venue for buying wholesale goods at that time, but in real terms an ecommerce wholesaler and a traditional wholesaler have a lot in common.
As a general rule, wholesalers are the manufacturers or distributors who sell their products in bulk to retailers. Retailers then sell these same products to consumers with a markup on the prices they purchased at from the wholesaler.
Think of the 2x4 you purchased from Home Depot for your last DIY project at home. Home Depot probably purchased a truckload of 2x4s to have on their warehouse floor so you could purchase the one you needed. They paid a lot less for one board than you probably did, but they had to buy in a much larger quantity than the single board you purchased.
Wholesalers are basically divided into three types of wholesale businesses.
Merchant Wholesalers: These are B2B companies that sell to other businesses. They purchase their merchandise from manufacturers and resell them to retailers. They can also sell directly to consumers, but some of these businesses won’t. My father wouldn’t work with wholesalers who did. These businesses carry large inventories and often offer additional services like shipping, financing, and warehousing.
Agents or Brokers: An agent is someone who is authorized by a manufacturer to sell or distribute the company's products within a given territory. Usually they are self employed. In our business, we called them manufacturer's reps. A broker doesn’t have the same type of relationship with the manufacturer and instead of getting paid by the party they represent, a broker is usually paid by commission.
Sales and Distribution Channels: As a young man I worked with agents, brokers, and merchant wholesalers, but sales and distribution channels are probably more associated with the online world. These channels are how wholesale goods and services wind up being sold at the retail level. Think in terms of Amazon or eBay. In the B2B space, a direct sales force is one third-party channel that offers products direct to consumers. There are also companies that specialize in fulfillment (or getting merchandise delivered to the consumer, rather than sales).
Benefits of ecommerce for wholesalers
Traditional manufacturing companies relied primarily on building relationships with wholesale and retail outlets to handle the sales and distribution of their products. Ecommerce, in many ways, has turned that model on its head and has created a new paradigm with a number of significant benefits wholesalers can benefit from. Here are just five of them:
You can meet buyers where they are: It doesn’t matter where your wholesale business is located any more. The world is your oyster. Wholesalers can reach customers all over the world with a website or social media. I find I’m regularly purchasing retail goods from Europe with seamless transactions and receive goods in about the same amount of time as I would if they were from the East Coast. The research firm Wunderman Thompson reports that 49% of B2B purchases are now made online and 62% of buyers would like to be able to order with a dedicated app.
You have an opportunity to grow revenue: An ecommerce platform lowers the cost of wholesale distribution and will likely allow the wholesaler to increase their market presence.
It compels you to automate your processes: Automating processes not only makes doing business with you easier, it enables employees to focus on other parts of the business that can’t be automated.
Your website can facilitate more data-driven decisions: Website analytics enable a wholesaler to definitively see what products have the greatest traction with their customers. They can not only see what pages they view, but how long they stay, what they click on while they’re there, and what calls to action they respond to the best.
Online doesn’t have to mean impersonal: Online often means customers transact business via their smartphones at all hours of the day or night. This increased access to your company can help build stronger relationships as it makes it more convenient for a wholesaler’s customers to do business with them.
Wholesale ecommerce platforms
Hoang Nguyen Bao, writing for BSS Commerce has compiled a list of what he calls “perfect” platforms for building a B2B website.
Magento: is an open-source ecommerce platform that is free and has a number of useful features including an intuitive interface that allows you to build your ecommerce website without any coding experience.
Shopify: Probably the most popular ecommerce platform in the world.
BigCommerce: The leading ecommerce platform with cloud storage, it has a PCI (Payment Card Industry Compliance) set up to ensure important information is kept safe.
WooCommerce: This open-source platform is designed to make it possible for non-technical users to create an ecommerce presence with all the necessary functionality.
3DCart: A good choice for small- and medium-sized B2B businesses that utilizes templates for optimization to ensure mobile-friendly performance.
PrestaShop: Easy to use store features and a compact interface. This platform is free to use.
SuiteCommerce: A NetSuite property, it will help synchronize data between online and offline stores via a Point of Sale (POS) system and cloud storage.
XCart: Built by a team of ecommerce experts and offers over 1000 applications, more than 120 payment options, and 150 functions to support order management. In addition, 24/7 support doesn’t hurt either.
OROCommerce: Built-in Customer Relationship Management (CRM) software allows managers to track and analyze performance and efficiency metrics so they can attract more customers into the sales funnel.
TradeGecko: A good option for wholesale businesses looking for an omnichannel optimization solution. TradeGecko also enables businesses to integrate into larger platforms.
Tips for success in wholesale ecommerce
To build a successful wholesale ecommerce operation, there are a handful of questions you need to ask yourself; as well as some questions you should be asking potential suppliers. Let’s do the introspection first:
How much and how many different inventory items do you expect to sell each month, each quarter, each year? Forecasting feels like guesswork at first, but it’s important to set milestones and objectives so you understand the scalability of the platform you're considering.
Have you identified your target market? The first question every marketing person should ask is, “Who am I talking to?” It can’t be overstated how important this question is to ask.
What kind of delivery time is acceptable from your suppliers? This will help you determine the type of promises you can make to your customers.
Are you going to drop ship? There’s a big difference between drop shipping from your supplier to bringing merchandise into your location and shipping it out from there. What’s going to work with your business model?
Here are a few questions you should ask any potential suppliers:
Is the product we want to sell available? Does the supplier maintain enough stock to support your sales objectives?
Is there a minimum order quantity? Are there price breaks or brackets for purchasing specific amounts? (1-49 at $5.00 or 100+ at $4.00, for example)
What is the turnaround time from the time an order is placed and what payment terms are expected? Cash upfront? COD? 30-day terms?
What happens if there is a needed return?
There are a few more questions if you’re doing business with someone outside your country.
Is there a representative that speaks our language?
Will your business be open during the time zone my business is open?
Do you have experience with foreign delivers to my market?
The right supplier and the right platform for your business
It doesn’t matter if you’re sourcing a supplier or looking for a platform, what works for one business might not be the best solution for another. Don’t be timid about asking a lot of questions about what you’re looking for to make sure it’s a good fit for you. You should also ask to speak with current customers to gauge what their satisfaction is. Don’t be afraid to ask for names in addition to those featured on their company website. Ask about the things you’re looking for and gauge what they tell you about their experience.
If they won’t put you in touch with current customers, take that to mean either they don’t have customers for you to talk to, or they are all unhappy.