Wholesale E-commerce: What Is It & How Does It Work?

Wholesale E-commerce: What is it?

Wholesale E-commerce refers to the process of selling bulk products to another business, at a discounted price, via online platforms. The current market for wholesale e-commerce is booming and will expand further in the future as well. Researchers indicate that by the end of 2023, e-commerce sales will surpass as much as $1 trillion. 

Looking back at the history of e-commerce, it first started gaining momentum since the introduction of the world wide web in 1990. Compared to its current state, in this highly digitized world, it can be safe to say that we have indeed come a long way. 

How wholesale e-commerce works

Typically, e-commerce wholesale comprises three main players: wholesalers, consumers, and retailers. For the process to be smooth and efficient, all three players must work together. The cycle goes as follows,

Wholesalers are manufacturers of various products sold to retailers. Consumers, in turn, purchase the said products from retailers. In a way, retailers act as intermediaries between the consumers and the wholesalers. They resell the received products from the wholesalers, usually at a much higher price than initially paid. 

The ultimate goal of wholesale for e-commerce businesses is to create an efficient and smooth experience for all players mentioned above. It makes the whole business process much easier to navigate and ensures that each transaction is successful. 

Breakding down the types of Wholesalers

Below are some of the most common types of wholesalers you are likely to encounter while doing business.

1. Merchant Wholesalers

Merchant wholesalers refer to the B2B companies who, after buying products from manufacturers, sell them to other businesses or retailers. Some of the leaders of wholesale B2B e-commerce include Sam’s Club, Costco Wholesale, and BJ’s Wholesale Club, among others. 

These companies usually maintain an extensive product inventory, and their business is not limited to goods alone. They might also offer transportation, warehousing, and financing services. 

2. Agents/Brokers

Agents refer to the representatives of any one party during the transaction between buyers and sellers. A few examples of the same include insurance agents or real estate agents. Brokers, conversely, are intermediaries who facilitate the whole transaction process by bringing them together. Commodities and stock brokers are a few examples of the same. 

3. Sales and Distribution

Sales and distribution refer to how products or goods are delivered to customers. There can be several types of channels for this whole process, such as retailers, online platforms, and distributors, among others. However, the direct sales force is one of the most commonly used channels. It involves a representative or a group of representatives who sell a product or service directly (usually in person) to the customers. 

Each of these channels comes with its unique set of pros and cons. For example, while a direct sales force can be quite effective, it can also be expensive to maintain. Opting for a distributor can be more beneficial since they usually cost less. 

Wholesale vs. Retail for E-commerce

One of the key differences between wholesalers and retailers is that the former deals with products in bulk amounts, usually selling them to other businesses. On the other hand, the latter deals with products on a much smaller scale and sells them directly to the consumer. 

Let’s take an in-depth look at how these two vary.

Marketing

Marketing is one of the most important areas for every business organization. However, when it comes to retailers, the importance of marketing increases manifold. This is mainly because, unlike wholesalers, retailers usually deal with a vast customer base to resell their purchased products. Therefore, retailers must invest a lot of time in developing effective marketing strategies to generate more sales and increase revenue. 

Pricing

Pricing is yet another crucial point of differentiation between B2B wholesale e-commerce and retailers. Since the former usually has to deal with extensive goods and products, they always have to ensure to get the lowest possible prices on each product. A few differences in dollars might not seem like a big concern at first, but given the quantity that wholesalers usually handle, it can result in huge consequences. 

Retailers, on the other hand, enjoy much more flexibility when it comes to pricing since they usually do not have to buy products in bulk. 

Competition

When it comes to the level of competition, the wholesale e-commerce business generally does not have to face as many challenges as a retailer. This is because they are presented with a wide range of products and markets to target. On the other hand, retailers have much less flexibility since most markets are usually saturated with competitors.

Why Wholesalers Need E-commerce

Traditionally, the B2B sales process used to rely heavily on the salespeople to widen their product reach to potential customers. However, ever since the boom of the e-commerce industry, many of these processes have switched to online platforms following significant benefits. 

From lowering associated costs to increasing margins, the list of benefits wholesalers enjoy from e-commerce continues. Overall, wholesale is an extremely crucial part of e-commerce as it enables businesses to develop strong relationships with suppliers, which can bear certain advantages. Some may include exclusive discount opportunities or early access to new products. 

How to choose a wholesale e-commerce platform

Mentioned below are some of the few crucial steps that you, as a business owner, need to follow to find the best wholesale e-commerce platform for your business. 

Separate, password-protected wholesale websites

Maintaining a separate, password-protected wholesale website is one of the most crucial steps for a B2B e-commerce business. As a business owner, it enables you to decide which customers will get access to your exclusive products or discounts. Furthermore, it should also be curated so that adding your products or creating wholesale price lists is simple. This way, you can easily manage the custom pricing lists built for specific customer groups. One fantastic example of the same includes Beard & Blade. 

Good search functionality and catalog browsing

One of the most common rookie mistakes businesses tend to make is ignoring site search capability. Most do not realize that enabling an effective search functionality will lead to better usability and, ultimately, more sales. The likelihood of placing an order on your website depends on how fast and easily customers can find your product. 

Therefore, every B2B e-commerce site must include at least three of the following elements 

• Good search functionality
• Extensive Catalogue for browsing and 
• Clear pricing.

Elephant Pants is one of the many successful brands that have been able to harness the power of these elements to bring in more sales. In fact, almost 80-90% of their customers place their orders through their wholesale channel. 

Integrations and flexible APIs

In today’s age of digitization, every business is more focused on developing a platform that can easily integrate with other software systems. This, in turn, enables a seamless shopping experience, thus resulting in happy and satisfied customers. 

Furthermore, when choosing an e-commerce site, it is also crucial to look for versatile APIs that allow you to integrate the same with your existing business systems.  

Optimized for search and content marketing

Like most other businesses, B2B buyers too harness the power of Google to search for the right suppliers that fit their needs. In such a case, quality-driven content by SEO optimization will make it easy for shoppers to locate your site and make their decisions accordingly. 

How B2B e-commerce helps wholesalers

Mentioned below are some of the top benefits of B2B wholesale e-commerce:

It simplifies the buying process

Contrary to the traditional methods of main-in orders or placing orders via phone, businesses can easily compare prices and place orders online. They no longer have to endure the hassle of negotiating with wholesalers via phone or email. This, in turn, leads to an enhancement of the buying process for your customers and, ultimately, a much stronger customer base. 

It helps automates wholesale processes

The entire process of wholesale involves a lot of different operations and repetitive tasks. It might initially seem too confusing, especially for new players who have just ventured into this field. But with the help of wholesale e-commerce, you can automate the entire process, which means you no longer have to spend days managing your orders. 

It improves the buyer experience

Wholesale e-commerce has made it much more convenient for B2B clients to explore multiple options and purchase through mobile devices. Thus they no longer have to sit for hours on their desktop. 

One example to help you understand the impact of wholesale e-commerce includes the partnership between Tectran and BigCommerce. Ever since Tectran pivoted to e-commerce, they have witnessed a steady increase in their average order value (30%), orders (98%), and revenue (157%). Additionally, they have also managed to gain a much broader customer base, building stronger relationships with their existing customers. 

It increases sales while lowering spend

With the help of an e-commerce platform, you can maximize profits and expand your online presence further while lowering unnecessary expenditures. 

Gone are the days when wholesalers relied only on archaic communication methods. With the emergence of e-commerce, you can easily curate a website design that works best for your business. Furthermore, you will also be able to gather valuable information on customer demands, which you can use later to devise marketing campaigns, product mixes, and pricing. 

It helps enter new markets

Another important advantage of B2B wholesale e-commerce is that it helps businesses grow across new regions and countries. The same might not be possible if you follow traditional methods since the process usually involves intricate marketing and logistical considerations. When selling wholesale to an established retailer, you can use their influence, or existing customer base, to easily venture into a new market. 

How to get wholesale goods as an e-commerce business

In order to get wholesale goods as an e-commerce business, you first need to possess a license, allowing you to buy wholesale goods. It usually goes by different names in different states. While some might call it a wholesale ID, others might refer to it as a reseller’s license.

Nonetheless, it is a very important document for people aiming to venture into this field. It serves as identity proof for the lawful dealing of wholesaling goods and makes you a known entity in the e-commerce industry. 

Pros & Cons of Wholesale E-commerce

Given this long list of lucrative benefits that e-commerce wholesale brings, there are also certain cons. Listed below are a few advantages and disadvantages you must consider. 

Con 1: Website Costs Can Be Expensive

One of the biggest challenges most individuals face in wholesale e-commerce is extensive website maintenance costs. This is especially true when professionals are specifically hired to assist with web development. While the initial stage of setting up a website may not cause much of a financial burden, the later stages of keeping the website up-to-date can demand extended charges.

Con 2: Fraud and Security Can Be an Issue

Fraud is one persistent problem haunting the online business marketplace. When dealing with an online business involving monetary transactions and extensive customer data, it is important to invest in a strong security plan to prevent serious consequences. The lack of a robust security plan can compromise valuable customer data during a data breach, leading to a ruined reputation and legal proceedings against your company. 

Con 3: There May Be Some Physical Expenses Involved

Running an online business does not always mean everything will be done virtually. There might be some physical expenses involved in the form of shipping or handling, especially when you are dealing with physical products. Storage costs are also an important factor to consider, especially for businesses that operate globally.

Pro 1: You Can Bring Down Overhead Costs

Overhead costs typically include rent, salaries, or insurance, among others. Since most of your business will be conducted virtually, you will no longer need to worry about hiring additional staff or renting an office space, thus saving enough money in the long run.

Pro 2: Your Marketing Reach is Unlimited

Your marketing reach is no longer limited to a particular location. Leveraging the unlimited power of the internet, you can now venture out to a wide customer base anywhere around the world with just a few clicks. This is undoubtedly one of the best ways to expand your customer horizon and increase sales. 

Pro 3: You Can Take Advantage of Drop-Shipping

By utilizing wholesale e-commerce, you no longer have to carry any inventory, especially while dealing with physical products. Instead, you can simply forward your customer’s orders to your suppliers, who will ship the goods directly to your customers. 

In this manner, you not only save up a lot of money in terms of storage costs, but you can also prevent any kind of shipping mishaps.

 

Conclusion

Wholesale e-commerce has brought a remarkable transformation to the industry, right from streamlining finances to increasing online presence. However, as more new players enter this arena, the competition is getting tougher day by day. Therefore, in order to stand out from the competition or to at least sustain yourself in the long run, you must create a more personalized experience for customers. The best way to achieve this is by tapping into the power of wholesale e-commerce platforms for your website and business.

FAQs