If you run a product-based e-commerce business, you would be aware of how to obtain goods works. You can choose to create the products by yourself or you can go the traditional way and curate existing products and market them to newer audiences- this is what brick-and-mortar stores have done for years and are known as retailers.
So, if you choose the second option, you’ll realize that working with a wholesaler is game-changing and can skyrocket your e-commerce business towards great success.
Whether you’re new or an established e-commerce business, choosing a wholesale supplier to work with is a decision that would be taken after a lot of thought as a bad supplier can cause a lot of obstacles in your path to success.
In this guide, we’ll cover the basics of everything related to wholesales, what role they play in your business and how to find and choose one that works the best for your e-commerce business.
What is a wholesaler?
Firstly, let’s understand what is a wholesaler.
A wholesaler is a middleman between a manufacturer and a retailer. Manufacturers create stuff but don’t know to sell it, retailers want and know to sell but can’t create any products. Here comes the wholesaler. They purchase from manufacturers, in large volumes and sell it to retailers in various regions.
A wholesaler is an important link in the supply chain that connects retailers and e-commerce businesses with manufacturers.
How can a wholesaler help your business?
A wholesaler keeps your business flowing, preventing your product from running out of stock and helping you save money and space on an inventory of a large volume of products.
Here are other ways wholesale suppliers help e-commerce businesses and retailers:
- Boosting profit margins by keeping your costs down
- Consistent on-time delivery and product availability for customers
- Removing the need to develop items
- Increasing potential for new products and a variety of products
- Helping to compete on price with other retailers
- Making it easier to find products and manufacturers you would otherwise never hear about
What makes a good wholesaler?
Various wholesalers are operating all over the world. Some of them are large-scale- like Alibaba based in China- but most wholesalers are small and local-based.
A good wholesaler has certain characteristics:
- Offering consistent and fair prices that a business owner can work with
- Serves the area or location you operate out of
- Provides quality customer service
- Doesn’t fail to deliver on time
- Can create a healthy relationship with manufacturers
- Works with you to develop a contract that ensures the success of both parties
- Is not operating a retail business of its own on the side.
How to find a good wholesaler
Contact the Suppliers First and Cut Out the Middle Men
Whether you contact a supplier through email or phone, the main thing here is to get in touch with someone who’s able to call the shots. The issue, however, is that some industries have different kinds of supply and distribution systems. So, you might have to find some middleman in the process if you do not talk to the supplier first. Furthermore, the supplier should be transparent with your regarding the other companies they are involved in the process.
And if you are working directly with the supplier, it is the easiest and most efficient way to cut down costs and make a huge profit.
Furthermore, the thing to consider is that the supplier you are approaching is also supplying your competitors.
Also, if you call the supplier and they say that your business is too small for them to collaborate with, you can ask them for recommendations regarding suppliers who might be willing to work with you. They might give you a list of other reputable suppliers that cater to smaller businesses.
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Make Sure That First Contact is Productive
You should establish professional contact with the supplier company. However, it is not an easy task. Sometimes you might be speaking to a different person every time you call them.
Ideally, one or two people from the company should remember your name and the details of your business relationship. This not only expedites the conversation, but you also learn about the supplier more and trust them as the partnership grows.
Thus, the first contact, the first phone call should establish contact with the company and if they fail to provide you with that, you should continue your search elsewhere.
Sure, as your business talks get more serious you might get a person designated to speak to only you regarding your business. You should also follow up with your messages and calls, suppliers are busy companies with busy people.
Ask for Samples
Not all suppliers will give you samples, however, it is common or even a necessity to provide one. This is truer for cheaper products. And the reason you should get a sample is that it is not wise to sell a product unless you’ve seen and tested it out. This way you can also tell your customers and build trust between you two.
Since there are so many suppliers, it makes sense to not go for those who refuse to provide you with samples.
If you are purchasing multiple products and require a batch of a lot of product samples, then they may ask for some sort of payment and most of the time it may just be for shipping.
You can then test out the samples.
Bargain for Better Prices
The only way you can get your supplier to drop the price is to have some kind of leverage to be used as a bargaining chip. Here are some things that you can use to bargain:
- Show that you can introduce the supplier to new markets
- Reduce risk for the supplier
- Consolidate your purchase orders
- Mention the prices offered by the competition
- Ask about incentives besides price cuts
Avoid Dropshipping Arrangements at the Start
The dropshipping model seems to be favored in the e-commerce world but that doesn’t mean it is good for every business. In fact, we recommend avoiding it if you are an upcoming e-commerce business as it is tough to keep the prices on the lower side and deliver the products on time.
Most of the time, you are dropshipping from places like China which can take a long time to be shipped and you cannot control that factor. Furthermore, established companies can expand their sales with dropshipping and won’t have to pay too much. But the same cannot be said for a new business.
However, if you decide to go the dropshipping route, you will have to find a great supplier that also does drop ship. You can set up a dropshipping contract once you make some profit and gain traction.
The Best Platforms to Find Suppliers for Your Online Store
We’d recommend going to tradeshows and doing your own networking, there are certain spots online where you can find and collaborate with reputable suppliers.
Both AliExpress and Alibaba come under the same parent company, but AliExpress is useful for small businesses since you’ll receive wholesale prices, and most of the time, you can buy in bulk.
Other suppliers include:
And if you are looking for dropshipping wholesale suppliers, you can check these out:
Questions to ask potential wholesale suppliers
Once you get a few wholesalers on the phone, you should narrow them down and figure out the suppliers you want to collaborate with. You can cross-check with these questions:
Do you have a retail or drop shipping business, too?
If the answer is yes, then move on to another supplier. A company like this could simply take customers and start selling to them directly. It is wise to work with wholesale suppliers who only do wholesale.
What are your pricing options?
Pricing will vary for each product. A great way to get a sense of the price change is based on volume. If a supplier offers a product for $1.50 per item with a minimum order of size of 10,000, this indicates they cater to big companies. Another wholesaler may offer the same item for $2.50 but has a minimum of 500 pieces.
As a small business, you don’t want to be suffocated by the pressure of managing a massive inventory. It is risky and costly. Thus, opt for a higher per-item cost coupled with a lower minimum.
Furthermore, when you negotiate the terms and conditions for the contract, try to work in a clause that works around a volume ladder where you are promised lower prices at higher volumes if you’re able to grow steadily.
What is your contract process?
You should negotiate several items and pricing is just one of them. For instance, if they agree to delay or spread out payments, it could be a great term. Cash flow is essential so it is preferable for you if you can start selling your products before you have to pay for them all.
Many wholesalers will offer something like a 30-day delay on your payment so you can have a month to produce some revenue before having to pay the wholesaler. You should have some kind of clause like this if you can get it.
What is your return policy?
If a product causes problems for your customers and you realize it is performing poorly in terms of sales, then you will have to work with the wholesaler regarding the return policy.
Will I get a dedicated sales rep?
You should work with the same person on every single call then they’ll learn about your business and understand what you are looking for, making your interactions effective.
After all, relationship as a factor in wholesaling is vital and you should be working with a company that respects this.
How does shipping work?
Along with your wholesaler, you will have to figure out the shipping terms- who will be paying for it? How quickly can they ship if you sell out of a product and require more on an urgent basis? What are the shipping terms and conditions?
How to Spot Fake Wholesale Dropshipping Suppliers
Some retailers disguise themselves as wholesale dropshipping supplier but do not offer wholesale prices. Here’s a list of red flags you should be on the lookout for:
They sell to the general public
Actual wholesale suppliers rarely sell their products to the public directly. Moreover, they usually have an application process to ensure that they are collaborating with legitimate businesses.
They charge monthly fees
The supplier directory may charge ongoing fees but your suppliers shouldn’t. This indicates that you are not dealing with a proper wholesale supplier.
They don’t charge pre-order fees
For dropshipping services, most suppliers will charge a pre-order fee of nominal prices. This is enough to cover the packing and picking of individual products, rather than in bulk. And if they don’t pre-order fees for this, then it could be a fake supplier.
They don’t have minimum order sizes
It is common to have a set minimum order size for a wholesale supplier. Discuss the terms and conditions of the same, and if the supplier is dicey about their minimum order size or does not have one, move on to another supplier.
An address isn’t displayed
It is a big red flag in the case of any business. A business is not legitimate if it doesn’t have a registered address displayed on its website and wholesale suppliers are not exempt from this rule of thumb.
A lack of industry knowledge
If a supplier fails to have knowledge about your niche, then they should be simply avoided as they are running a scam. Every supplier should have the knowledge and the expertise to provide supplies to any business.
Contacting Dropshipping Suppliers
Now that you have shortlisted some potential suppliers, it is time to put them to the test. But before that, you should be prepared to make a great first impression on them.
What to check before you make contact
- Go through testimonials and reviews to understand the reliability of the service and products.
- Look at the way they procure raw materials, and understand their shipping policies and returns policies to see if they fit your business model and the needs of the customers.
- Order some sample products to check the packaging, delivery duration, and product quality in real life.
What to prepare before you make contact
Before you contact your list of potential suppliers, you should do two things:
- Prepare vital information about your business that you can share
- Prepare certain questions for the supplier
Suppliers will want to verify your business and will ask for details of your company’s registration. Then, you can ask them about the products, fee and payment terms, support and technology, warranties, and locations. You should essentially show that you mean business. This way they will be more likely to work with you and can even accommodate certain special requests.
How to make contact
You can start by sending a direct message to check if they respond quickly or do they take time. Next, dial the number and call them. When you speak to a representative, you will understand the business style and services of the supplier. And if things sails smoothly, you can request referrals from current customers.
Payment options for wholesale dropshipping suppliers
The payment method chosen should suit you and ensure a smooth service for the customers and these are the most commonly available options:
- Credit card: It is widely accepted and convenient. Depending on the provider, you can also get rewards.
- PayPal: Preferred by various suppliers, it is a convenient option but you will have to calculate the charges before choosing this option.
- Bank transfer: It is a traditional method of payment and will give you some buffer time to make the payment.
Other considerations in finding your ideal wholesale supplier
Here are some points to consider when finding your ideal wholesale supplier:
On one side, you should want to spend enough to get the benefits of working with a wholesale supplier but do not go all-out on a product that has not been market tested.
Understand fee structure and look out for additional costs so that you aren’t caught by surprise. Membership fees are available and are the norm, but ensure that your supplier is open about its terms and conditions.
Non-conventional ways to find wholesale suppliers
You can use the wholesale supplier marketplace to connect with suppliers but it is not the only way. You can go for other options to find wholesale suppliers, like:
- Visiting an industry trade show to connect with wholesale suppliers in person
- Joining social media groups of your niche and chatting with other merchants on these platforms
- Joining trade organizations for your product and see if any names come up
Meeting and greeting in person is ideal for a business need. Some people will work better in person and can easily build a business relationship face-to-face that can lead to a deeper trust and cheaper prices down the line.
And once you have found a wholesale supplier that fits well with your business requirements, it is time to reach out and move forward.
What to ask when contacting a potential wholesale supplier
Ensure to have the crucial business documents in hand, when you ring up the supplier, like license, tax documents, etc. Without these documents, you may not be able to place an order at some companies or even get their attention.
Wholesalers often have a special product license which means that they legally aren’t allowed to do business with customers and can only work with other businesses.
Remember to ask these key questions when you call them:
- What are the minimum order quantities?
- What is the cost per unit?
- What does your return policy look like?
- What is the lead time/ delivery duration?
Asking direct, straightforward questions will ensure you receive proper answers and this can help you make your business decisions wisely.
And remember to negotiate with wholesale suppliers and do not hesitate to push back if the number they quote won’t work for your margins.
Now, let us look at how you can confirm that you have found the right wholesale supplier.
Final checks before you sign on the dotted line
Now that you have done your work and are almost at the point of signing the agreement with your choice of wholesale supplier, remember to check a few more things that cannot be changed once you sign on the dotted line:
- Do they have liability insurance?
If they do not have one, then be careful. Essentially, this insurance is to protect you in case anyone is injured by a damaged or faulty good that you sold to them.
- Ask for references from other customers.
If the company is unwilling to share this information with you, it is a major red flag.
- Are the numbers valid?
Do not overextend your business just because the offer made is exciting. Especially if you are new to dropshipping, the best strategy is to purchase what you need. You do not want to be left managing inventory of a surplus stock if your hoped product doesn’t perform well.