Streetwise Advice: Wholesalers & More

A Great Solution

Distributors who may go out and actively sell your products, as opposed to wholesalers who typically only passively wait to receive orders, can really get your business going! Be sure to determine the distinction between the two when approaching potential distributors and wholesalers. If you are looking for a distributor, try to judge how enthused they are about pushing your product.

When a very small firm or a larger firm is branching out into ancillary markets, such as a secondary domestic market or a foreign market, distributors can provide a great way to successfully traffic merchandise. For example, when I was starting my book publishing company, one the earlier books we published was a humor book about golf. So we sold it through our usual network of wholesalers and retailers via our independent book trade sales reps. We also took on a specialized distributor to sell it to sports shops and golf shops. The high discount they required seemed prohibitive at first, but the time and diversion it would have required for us to try to sell into a whole new industry would have been huge. In the end, the distributor sold a ton of our books and we made a lot of money in the process.

Clarify Roles

Make sure that all parties understand who is responsible for which territory in terms of both geographic area and category of goods. Get it in writing! Make sure that you won’t need to give much notice if you decide to cancel an exclusive agreement, in the event that sales are disappointing.

Wholesaler Promotions

Most wholesalers work on extremely tight margins and are constantly under price pressure. Not only are they challenged by their competitors, but also their own clients often threaten to buy direct from the manufacturer if certain prices can’t be met. As a result, many astute wholesalers have turned their ancillary services into important profit centers.

Many wholesalers require that you spend a certain level of advertising money, generally expressed as a percentage of net purchases, on their promotional programs. If you don’t comply, they won’t stock your product. Unfortunately, these advertising programs aren’t always worth the money they cost.

Small firms in particular are reluctant to participate in these advertising programs. However, if you feel this way and make a fuss, you are being shortsighted. The ill will generated could very well result in the wholesaler refusing to stock your merchandise. Although the advertising program may not seem by itself to be worth the expenditure, the wholesaler is, after all, selling your product at very, very thin profit margins and deserves to make some money. So, just participate with a smile. Ultimately, it’s worth it!

If you carefully choose which advertising program you want to participate in and write your own copy, you might find that the promotion actually does you some good. Despite popular wisdom to the contrary, I have found that wholesalers’ co-op programs can pull in a lot of sales.

Sales Reps

Even if you have your products stocked at every wholesaler in the country and are utilizing all of the advertising programs these wholesalers offer, you still need the services of a sales representative to call on your accounts. That is, unless you are using a distributor that actually sends its own sales reps out to aggressively push your products.

If your line is very simple, consisting of only one or two products, you may get away with telemarketing. But if your line comprises half a dozen products, you need an in-person sales representative to get initial orders, at the very least, into the wholesaler’s hands. And the logical place to start is putting together a group of independent sales reps.

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.