Most people have a basic understanding of how businesses make profits by providing products to customers for prices that are above the cost of manufacturing them. However, many businesses face a dilemma when selling their goods. They may be unable to physically transport their products to the people who want to purchase them because they are producing such a large quantity of those products. As companies grow larger, they will thus often work with a wholesale distributor. To demystify this model of operating, we’ll explain how wholesale distribution works.
The overall supply chain that carries sizable amounts of goods from the initial manufacturers all the way to buying customers is usually made up of three types of businesses. They are the manufacturer, the wholesale distributor, and the retailer. The manufacturer creates the items that customers want and the retailer is in charge of selling these items through direct contact with customers in stores. But how do products make it to retailers in the first place? This is where wholesale distributors come into the picture.
Wholesale distributors take care of concerns related to transporting goods via trucks, boats, and planes. They may also handle other tasks, such as repacking and kitting, so that the products are in the final form that consumers will see before making their way to retailers. To do this, wholesale distributors can make use of multiple warehouses to carry out such operations and lower the time and cost of moving goods to the appropriate distribution centers and retailers. Wholesale distribution is a necessary component of the supply chain because manufacturers often do not have the means to sell and ship a high volume of their goods to retailers or customers by themselves.
Now, we can get into the general process behind how wholesale distribution works. At the start, wholesale distributors buy goods from the original manufacturer for a lower price than the goods would go for if they were individually bought by a consumer. This is possible because they purchase products in bulk, which means that the manufacturer can charge less for each unit of the product. Lower prices are achievable, since the amount of the product that the manufacturers are selling makes up for their own operating costs and still allows them to turn a profit. After moving the items via transportation vehicles and storing the goods in their warehouses and distribution centers, the distributors connect with retailers. They sell those goods to retailers at a slightly higher price in order to gain a profit for themselves. The wholesale distributors then move the items to the retailer’s locations. From there, it is up to the retailers to offer the products to their customers.
Whiplash is a leader among wholesale distribution companies and we provide end-to-end logistics solutions across the nation. We’re committed to making the process of getting our clients’ products into the hands of customers as smooth as possible.