Become the Master of Wholesale Distribution
You may call them third-party logistics companies. You may call them public warehouses. Whatever it is you’re calling it, the wholesale distribution business is nothing to be sniffed at. The wholesale distributor sales in the U.S. in total are at around $3-3.5 trillion, making up about 7% of the country’s gross domestic product. Since the late eighties, wholesale distribution has consistently made up that impressive chunk of the country’s GDP, and the business sees similar success around the world.
So exactly do you get into this lucrative business? Wholesale distributors are the crucial link between retailers and consumers, so there’s plenty of room for entry. You just need to keep a sharp eye on many of the key elements of a successful wholesale distribution business model.
There are very few companies in this field who are basically a mishmash of several types of product service. That is to say that most budding wholesale distribution business owners will tend to choose a specific type of product in which to specialize. This is a very good place to start. You might specialize in books, dry foods, electronics, or cosmetics. There are loads of different types - and this isn’t just in relation to the type of product. You’ve got to decide if you’ll lean more towards merchanting, discounts, online, or drop ship. Read up on more of the different types!
Getting the space
When people think of wholesale distribution, they think of warehouses. A commercial warehouse facility, to be precise. You can lease warehouses, which may be the better option if you’re starting out, though buying a warehouse outright can offer you more freedom. (It’s certainly more of a gamble, however.) The type of product you sell will determine what type of warehouse you need - for example, if you’re dealing in food, you’ll need a warehouse that can safely store food and has an easily-controlled temperature. If you want to get some additional space at a relatively low cost, you can look into temporary buildings sold by businesses such as Aganto.
Dealing with inventory
The size of your warehouse will, to an extent, determine how much inventory you can stock at one time. In any case, you need to decide if you’ll run things with a low inventory or a high inventory. This is a sensitive matter in this field, and both strategies and benefits and negatives. Low inventory reduces short-term costs. However, you run the risk of not having what a particular individual or business wants. Overstocking, as you may know, can result in great losses if you find yourself unable to unload that stock as quickly as you thought.
This is, perhaps, the most important factor of your business strategy to consider. Being in wholesale distribution places a whole new importance on inventory. A successful wholesale distributor will “turn” their inventory several times a year. (To turn inventory is to sell it all then restock.) If you think an item will end up sitting around in your warehouse for more than ninety days, then it would be unwise to stock it.
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