What Wholesalers Are And Why They Exist
There are tons of people that have no idea what wholesalers or why they even exist to begin with and that is exactly what this post is going to be about.
First thing that I want to do is credit Worldwide Brands for teaching me what I know about wholesaling, drop shipping and e-commerce. They have such a great training program when it comes to learning the drop shipping and wholesaling business – and they have a great list of 100% REAL wholesalers (this is due to the fact that they do extensive research in this area – they spend $100,000 a MONTH on this). Anyone who is in the wholesaling business knows just how important it is to find REAL wholesalers. And I recently made a post on How To Find Real Wholesalers.
You may also want to checkout some more posts I made on drop shipping related subjects such as How to Start in Drop Shipping, How Hard Is Drop Shipping For Beginners?, and How the Drop Shipping World Works.
If you run into a wholesaler who is not real it can cause you success in this business in a heartbeat. If you don’t have access to real wholesalers then your competition is going to have the lower prices and you are going to have an extremely hard time profiting when someone in your niche has better prices. There are tons of wholesalers out there that just call themselves wholesalers when they really are not – these are called middlemen.
These middlemen are the reason why it is so hard to find real wholesalers, and there are lots of middlemen out there. Middlemen basically call themselves drop shippers when they really are not, and they then in turn just sell you products for a higher price. They order the products from real wholesalers themselves and just skim the profits from you. You have to be extremely careful of this in the wholesaling business.
Another thing that you have to be careful of in the wholesaling business is scams (although middlemen are technically considered scams, I am talking about the really big scammers). The real scams are stuff like fake products and even worse stolen products – again be aware of these big time scammers in the wholesaling business.
Now lets move on to the original reason for this post (sorry I just wanted to give some fore warnings and thank Worldwide Brands before we dove in.
A wholesaler is a company that the manufacturer of a product uses to sell their products. There are such things as “master wholesalers” and the just regular wholesalers. Not every manufacturer uses master wholesalers and actually most of them just use regular wholesalers. I will explain the difference between a master wholesaler and a regular wholesaler really quickly so you don’t get confused here.
A master wholesaler is when a manufacturer only uses a select few extremely large manufacturers (usually 4 or 5 in the major parts of the region) and the master wholesalers in turn ship out to about 20 or so regular wholesalers each. So a master wholesaler is above a regular wholesaler – but are not always used by manufacturers – actually they are in the minority and are usually only used for very big products.
So a wholesaler is who a manufacturer uses in order to ship out there products to the resellers (retail stores and such) who in turn get the products to the consumers.
So why do manufacturers use wholesalers, and why can’t we go directly to the manufacturer? Well, that’s what I am going to explain here, the why of wholesaling. And by the way you can go directly to the manufacturer in a select few cases, but it is very rare, but I will touch on that in a little bit.
Wholesalers exist because manufacturers are just not interested in selling directly to the consumer. Why? It is just not cost efficient for them. The manufacturers specialize in one thing and that is MAKING the product – they do not specialize in shipping the products.
Lets think of it this way – If every brand name Manufacturer had to set up their own distribution network, they would each have to do all of the following things themselves:
1) Build, lease, or buy warehouse space all around the country or even the world (if it is a worldwide product) in order to hold their products. They don’t want to do this they just want to make the product and get it out of the manufacturing factory as quickly as possible.
2) Buy a whole bunch of trucks, tractor trailers and even delivery vans.
3) Hire a whole bunch more employees including warehouse workers, local sales people, and store merchandisers.
4) Setup an office and fully staff it – in order to coordinate retailers’ orders and shipping.
5) Many more minor things that add up to major expenses.
If you add all of these things up you can see that it is a WHOLE lot of expenses. And not to mention headaches. Unless your business specializes on shipping out products (like wholesale suppliers), then this process is simply not worth it – and definitely not worth it for the manufacturer. And this is exactly why I said that it is not cost efficient for the manufacturers to ship out there own products to everyone themselves – they simply use select wholesalers and ship out extremely large quantities to them and let them deal with the smaller shipping orders as that is what they specialize in.
So let’s recap on why manufacturers have absolutely no interest in selling directly to the retailers (the people under the wholesalers in the supply chain – like stores):
1) It’s not cost effective for them.
2) It’s not what they are experts in – they are experts in making things and not distributing them.
3) There is already an extremely large wholesale supplier network in place for them to use. Why go and spend multiple millions of dollars on something that is already in place for you?
Now earlier I mentioned that there are a select few cases where you can go directly to the manufacturer – so in what cases are these? You can go directly to the manufacturer when they are a small and new manufacturer such as a local beer brewery who just doesn’t have the advertising power to get their products out to wholesalers.
You see wholesalers have a very limited supply of floor space and their floor space is extremely valuable to them. The quicker they can get products in and out of their warehouses the quicker and more money that they will make. So do you think that they are going to use their precious floor space for “Earnie’s Beer” when no one knows about it?
No, they are not. They are going to reserve their floor space for those beer companies that spend billions of money on advertising, beers that will get out of their warehouses in a hurry. I am talking about beers like Budweiser and Miller. There is no way that “Earnie’s Beer”, a beer that is totally unheard, is going to convince any wholesaler to stock their product until they can prove that they have got huge and successful advertising campaigns in place and rolling.
If you would like even more information on the drop shipping and e-commerce business some more posts on the subject are the following: Drop Shipping Compared to Digital Products and Starting Out In the Drop Shipping World.
And of course there are three great drop shipping programs in Worldwide Brands, Doba and Salehoo.
Also, if you are more interested to learn about general internet marketing rather than drop shipping, there is another company that I recommend for that specifically. It’s essential that you learn internet marketing to succeed in the drop shipping business because a lot of what is learned with general internet marketing is used with drop shipping. So if you are interested in learning about general internet marketing, the company that I recommend is Wealthy Affiliate.
So hopefully this post helps you understand the what and why of wholesaling – and this will help you become a more successful online marketer. See you all next post.
