4 Secrets to Running a Successful Wholesale Distribution Business

November 18, 2015 / Reading: 2 minutes

The wholesale distributor acts as the middle man between the manufacturer, who makes the product, and the retailer, who sells the product to the consumer. It is a position that requires foresight, business acumen, people skills and salesmanship.

The first two years running a wholesale distribution business are often the formative years, spent learning and developing your skills in the business. Lots of wholesale distributors have come before you, with sage advice and inspiration that can help you to succeed.

1. Establish a Credit Policy and Stick To It

It’s so important to establish a competitive credit policy, and then stick to it. One major mistake a wholesale distributor should avoid is overextending credit to customers.

Another mistake a wholesale distributor should avoid are allowing one customer to owe too large a percentage of your receivables, leaving you overexposed. Avoid these and other potential problems from arising by establishing firm payment terns and credit limits, being clear and diligent in explaining your terms and checking credit references for new customers, reviewing your customers’ accounts biannually, and sticking to your terms.

2. Geographic Focus

Understandably, shipping is a huge part of the distribution cost model. The closer a distribution facility is to customers – in most cases, retailers – the more money the distributor saves on shipping charges. In some cases, it would be cheaper in the long run to build a new distribution facility in a far away city or region, rather than pay the exorbitant fees to ship products there all there time.

3. Establish Good Business Relationships

Because the wholesale distributor’s job is to transfer products from the manufacturers who make them to the retailers who sell them, it is vital to establish healthy, thriving business relationships. In particular, no distributor can succeed without establishing a firm network of active retailers. Your revenue is directly tied to your network of retailers, its size and the success of each individual retailer. In turn, the strength of your retailer network will attract a well established and diverse team of manufacturers.

4. Salesmanship

The successful wholesale distributor purchases products with specific retailers, or groups of retailers in mind. Or he has exceptional skill at convincing retailers to sell his product. With knowledge of successful markets and products, with the expectations of your retailers in mind, you can make an informed sales decision.

Good salesmanship also means having the foresight and business acumen to forge new, specialty markets. By following what’s selling and taking note of what people are willing (and not willing) to pay for, successful distributors can often dictate what niches will be burgeoning and what trends are budding on the horizon.