Starting an Online Wholesale Business? Complete This Checklist First

Running an online wholesale business has some major benefits compared to other e-commerce fields. You get to deal with business owners instead of consumers, which some people find easier from a customer service standpoint. You also get to ship a few large orders instead of many small ones, which can reduce certain logistical challenges. Another potential benefit of wholesaling is that it makes the pool of competitors smaller because there are many more retailers than wholesalers in the world.

No matter what type of online business you start, though, you’re going to encounter challenges. Running an online wholesale business has its benefits, but you’ll face some potential difficulties as well. Set yourself up for success with this checklist.

Choose Your Niche

Wholesalers typically operate within specific niches, and you’ll need to choose yours carefully. Remember that the ideal type of product to sell online is something that you can sell successfully and profitably, which may not necessarily be the type of product that you personally find most interesting. On the other hand, though, it’s helpful to have genuine product expertise because it can be difficult to operate a business in a field that you don’t thoroughly understand.

To determine the ideal wholesale niche, you need to research two things carefully.

The Addressable Market

If your online wholesale business is successful, how many customers can you potentially attract?

If you’re in the United States, the U.S. Census Bureau can help you determine how many businesses currently operate within the niche.

Is the niche growing?

If the niche is growing, it means that more retail businesses are launching. It might be easier for you to capture these businesses as customers because there’s a great deal of friction involved in getting a potential customer to change an existing wholesale relationship.

A keyword research tool can be helpful for determining a niche’s trajectory because most good tools track historical monthly search volumes. Check the keywords that business owners would likely use if they wanted to find wholesalers in your prospective niche. For example, a vape shop owner might search for a keyword phrase like “disposable vapes in bulk.” Check the search volume histories for as many relevant keywords as possible, and you’ll have a good idea of the niche’s trajectory.

The Competition

Do you have a good chance to land on the first page?

You also need to know as much as possible about your potential competitors when choosing a niche, and your keyword research will be very helpful there. You should know exactly what keywords you’ll want your online wholesale business to rank for – so search Google to find out who appears for those keywords currently. If the first pages are full of well-entrenched brands, competing will be very difficult. If you’ve never heard of most of the businesses that you see, though, you may have discovered an untapped opportunity.

Choose the Right Supplier

An online wholesale business needs to get products from somewhere, and it’s valuable to know who your supplier will be before your business launches. Depending on the niche you choose, it’s likely that you’ll be buying from an overseas supplier because that’s how you’ll get the best possible prices.

There’s a major challenge in ordering products from overseas suppliers, though, in that you need to know who you’re dealing with. In most cases, you want to order products directly from the manufacturers because you’ll get the lowest prices that way. It also ensures that the products will be authentic. China is the primary source of all imported consumer goods. China is also the primary source of most counterfeit products. That’s not a coincidence. Make sure you’re buying from an official source.

Understand Your Price Structure and Margins

Before you launch your wholesale business, you need to have a complete understanding of what your price structure is going to be. Are you sure that you’ve found the best possible prices for your inventory? If you can’t work directly with the manufacturer of a given product, ask who their recommended distributors are. Remember that every time you add a middleman between you and the original manufacturer, your price goes up. You want to get as close to the source as possible.

Calculate your wholesale prices and expected expenses and add a realistic profit margin to the total. Next, find out how your proposed prices compare with those of your competitors. Can you make it work? Remember that if you can’t price your products competitively, there’s no point in even getting started. Before you give up, though, try negotiating with the supplier(s) for better prices. Suppliers’ prices are rarely set in stone, and prices are often negotiable if you’re willing to buy in higher quantities.

Know How You’re Going to Compete

Unless you’ve managed to identify a completely new market, there will be existing wholesalers already doing business in whatever niche you happen to select. You need to know how you’re going to compete, whether it’s by convincing wholesalers’ existing customers to switch to you – which, as we said above, involves a lot of friction – or by winning customers who open new businesses in your niche.

The best way to win new business as an online wholesaler is by having a strong differentiating factor. You need to offer something that your competitors don’t have, and you need to put that message front and center in your marketing material to ensure that people can’t possibly miss it. Some powerful differentiating factors for wholesalers include:

• Better prices than the competition. It’s easy to win new business if your customers know they can be more profitable by buying from you.
• Better shipping terms. Can you find a way to fulfill orders faster or more cheaply than your competitors? Focusing on regional customers is one way to accomplish this.
• Smaller minimum order quantities. Some new business owners have difficulty ordering thousands or hundreds of units at a time. You can attract those customers by offering terms they can afford.