Running a successful wholesale business can seem a daunting prospect, particularly considering the stiff competition. Every decision you make, whether it is between wire shelving units or pallet racks, or between member or non-member sales, can affect the likelihood of your success.
Because there are so many areas that can affect your success, there are also many ways to help improve your business. Practical matters such as storage and inventory management should be addressed, as well as areas like customer service. It is also important to look at the success of some of the most popular wholesale retailers and learn from them.
1. Define your operations
A clear business plan will affect every decision you make for your company. With the vast number of businesses competing in the wholesale market, it is not enough to simply define yourself as a wholesale business.
Determine the type of operation you wish to run. This will help you find similar businesses that have experienced success in this area. You can also trim areas of your operations that do not fit into your ideal business model.
You may choose to operate as a merchant wholesaler, selling directly to consumers, or as an order service. Additionally, you should determine whether you wish to sell a broad range of items or specialize in one particular area.
2. Familiarity with stock
For day-to-day wholesale efficiency, familiarity with your stock is vital. Even if you have a wide range of stock and a large storage facility, you should know exactly what is in your inventory.
Good storage systems are particularly important for this factor. A well-planned warehouse layout, with racks or shelving that allows you to organize your inventory, can help you keep track of everything efficiently.
If your employees spend too long trying to find items in your inventory, you will waste time and money. Consider investing in a professional warehouse design service to help.
3. Automated storage systems
Modern consumers generally expect fast order fulfillment. If your picking and fulfillment process takes too long, you will lose out to services known for their speed such as Amazon Prime.
An automated shelving unit can save a tremendous amount of time. Trays or drawers are moved up and down to collect various products from the shelves, then brought to an employee who continues the fulfillment process. The employee can remain at one station, instead of walking across the warehouse to pick items.
As well as offering additional speed, an automated storage unit allows you to monitor your inventory. The software will update your current inventory records every time an order is fulfilled, saving time and effort.
An automated system can also provide helpful feedback. For example, you can easily determine which of your products are frequently ordered together, allowing you to optimize your slotting.
4. Prioritizing popular stock
Keeping track of your stock means you can prioritize the most popular items. This does not mean you will sell these exclusively, but you can use them to entice customers to your business.
A bulk purchased popular product can be offered at low prices, which will drive traffic to your store or your ordering service. A good example of this is seen at the wholesale retail chain BJ’s. They have been raising the number of customers through the door by offering an increased range of fresh foods. Customers then purchase other goods while at the store.
5. Use of new technology and software
In order to keep up with other wholesalers, you must be open to the use of new technology and software. New developments are being made all the time for products such as delivery management software, or new types of storage units.
Make sure that at least one member of your staff is tracking new technological developments. These are often mentioned in technology reviews and journals when they are first released.
To take advantage of new developments in technology, you must be aware of where your inefficiencies lie. For example, there may be a delay in the communications between your financial department and your warehouse. You could then look for new management systems that allow the integration of accounting and inventory software.
6. Move inventory fast
With the surge of online delivery services, you must be able to move your inventory quickly. Perform frequent checks of your throughput process to ensure there are no stalling points.
Your choice of storage can also help. For example, you may find yourself using valuable time to organize a “one in, one out” strategy, trying to keep old stock from building up. An easy solution to this is to use carton flow trays. The tilted roller trays allow loading from one end and picking from another. As soon as one carton is removed, the next rolls forward to take its place.
7. Allow easy picking
A slow picking process can cost hours of labor. Make sure you have designed a picking area to allow items to be reached easily. The design you should use will vary depending on the nature of your business.
For example, if you stock drums of liquid, ensure your aisles will allow easy access to forklifts. You could also invest in portable drum racks for fast removal.
If your products are being picked by hand, either by employees or customers, ensure they are readily accessible. For example, you can stock smaller products on light wire shelving, which makes the products easier to see.
8. Purge inventory frequently
Keeping out of date or dead stock will waste space, and therefore waste money. Making the most out of your storage is vital to the success of a wholesale business.
A frequent inventory check is very important. You might use an automated system for this or perform the checks manually. Either way, make a note of any stock that has not moved in a while and remove it.
This can be of special importance to a business that relies on seasonal sales. Removing out of season stock to make way for new stock allows better use of your space. If you can sell the out of season stock in the following season, try separating long term storage from the high-flow areas.
9. Limit current inventory
While it can be tempting to offer as many products as possible, this will slow your systems down. Fewer stock items mean faster inventory turnover and allow you to streamline your supply chain.
This principle is championed by Costco, one of the most popular wholesale retailers in the world. Compared to other large retail chains, Costco offers relatively few products. However, this enables the supply chain to operate at maximum efficiency.
This practice means Costco has the freedom to exclusively stock products that can be offered at a discount. This helps ensure customers are guaranteed savings every time they shop at a Costco store.
10. Limit inventory format
As well as limiting the types of products you offer, it is also advisable to limit the formats available. Selling too many variations or sizes of a single product can raise the time and cost of your processes.
For example, it can be far easier to optimize your shelving or racks when all containers or packages are of a similar size. Multiple sizes may mean wasted space or additional purchases of industrial shelving.
Offering a limited number of product formats works well with a wholesale business model. Bulk purchases are generally the goal for most wholesalers, as they allow prices to be lowered. If customers only have large format items to choose from, the bulk buying system is supported at all stages.
11. Know your target market
A key feature of many successful wholesalers is a targeted business strategy. This is one of the reasons it is so important to refine your business plan as early as possible. You should Know who your ideal customers are, and which other companies may be competing with you. Also focus on finding a gap in the market, to avoid having too much competition.
Sam’s Club, the nationwide wholesale retailer, used this to its advantage when starting out. The warehouse stores were designed to appeal to those living in large urban areas. Accordingly, there was little competition with Wal-Mart, which was usually based in small towns.
Later on, as Sam’s Club expanded, the company’s focus on defined target markets remained. They made efforts to reach specific markets such as daycare centers and restaurants. This meant selecting inventory specifically for these markets, as well as targeted advertising materials such as industry-specific catalogues.
12. Use a pre-sale system
If choosing new products or lines to buy, you may be concerned about the risk of investment. This is a particular problem if you want to try out something different from your existing stock. The danger of a failed purchase may be experienced by speciality wholesale businesses that rely on a specific customer base.
To avoid the risk of a failed investment, try offering a pre-sale option. For this to be viable, you must have a strong relationship with your customer base. They must trust your choices. If they are willing to pre-order from your stock, you can make your first purchase with greater peace of mind.
13. Prioritize customer service
Possibly the most serious challenge to the current wholesale market is that of online retailers. If Amazon offers similar products to you, your customers may choose the popular option of online ordering.
However, the vastness of giant retailers such as Amazon means they cannot compete with personalized customer service. Building relationships with your buyers can be one of the best ways to guarantee continued business and rising sales.
This requires an investment of time and money on your part. Your employees must be trained in customer service principles. You must also be willing to bring the needs or complaints of your customers to a satisfactory conclusion. While these investments do not necessarily see a direct return, they are vital when competing with large but anonymous competitors.
14. Maintain manufacturer relationships
Wholesaling can be seen as a middle ground between manufacturers and customers. While maintaining good customer relationships is essential, you should not neglect your relationship with suppliers.
Your relationship with suppliers can have a direct impact on your business. They should be able to rely on you to meet their expectations.
15. Make reasonable promises
Wholesale businesses are, by design, as simple as possible. Your customers will want to know what to expect from your business and have their expectations met.
To cement your business position, you must determine the promises you are making to your customers. At the same time, you must ensure these promises are reasonable. Customer satisfaction will be higher if a smaller promise is met, rather than an unrealistic promise going unfulfilled.
For example, always give an accurate estimate for delivery times. While a shorter fulfillment process is desirable, do not offer a time frame, you have little hope of meeting. Disappointed customers are unlikely to return.
16. Do not overextend credit
A big mistake to make as a wholesaler is overextending credit to your customers. This can be an easy error to make. Credit lines are often an added appeal for repeat customers or wholesale club members. You may offer extensions in order to win new customers.
However, if too many of your customers have been extended credit, this can place an enormous strain on your cash flow and your entire business can be affected.
You may also unintentionally damage your relationship with suppliers. If you are waiting on payments, you may be unable to pay manufacturers or order new stock.
17. Informed purchasing
Never purchase new stock without reviewing your current inventory first. Doubling up on purchases means wasted space, and possibly wasted stock. An automated system can help with this, as it can use purchase data to predict what needs to be ordered.
Your customers will often make their purchases according to current trends. This means you must anticipate trends whenever possible, in order to have stock ready. Pay attention to industry forecasts and analytics before making any new stock purchases.
This is another reason to ensure you are optimizing your storage space, so you will always have space available for new stock.
18. Optimize your supply chain
Generally speaking, the more stops your stock makes, the less your profit will be. Optimizing your supply chain means the stock will move as smoothly as possible between your initial order to the point of sale.
Integrating your supply chain into a single cross docking facility is ideal. The stock should travel from your receiving to your shipping areas in as few steps as possible. Make sure these areas are operating smoothly.
For a warehouse store, the formatting of the product is important. Stopping the chain to split cases into smaller formats will slow the process. Whenever possible, the items you order should be the ones you sell.
At Shelving + Rack Systems, Inc., we make space work for you. Whether you are designing a new space, expanding an existing facility, or upgrading or automating your equipment, our team can help you every step of the way, from procurement to installation and even permits. Please call 1-800-589-7225 (RACK) or complete our online contact form to discuss your warehouse material and handling needs.