In my line of business, I often receive emails and phone calls from people who are just starting their online retail businesses and searching for wholesalers who can give them competitive prices on the latest merchandise from the most popular brand names. While it’s understandable that one would want to sell the latest merchandise from the highest quality, most popular brand names, it’s often an unrealistic goal unless you have a substantial amount of capital to invest in your business.
This is not to say that every prospective entrepreneur with the dream of establishing an online retail business should just throw in the towel – quite the contrary. Prospective online retailers need to understand the reality of the consumer goods industry, the abilities that they have based on their capital investment, and then design their business plan accordingly. In my next article, I’ll discuss some excellent options for prospective entrepreneurs with limited capital.
But first, let’s look at how some of the most successful companies in the consumer goods market operate their distribution channels. Companies with highly popular brand names have worked hard to establish these brands. Understandably, in order to protect the reputation of their brand names, they often establish strict controls in their distribution channel to ensure that their name is not compromised by association with a sub-standard retailer.
Many of them directly control their distribution channel and only sell their products to authorized retailers who have met their application requirements. Their requirements for authorized retailers often include:
1. A substantial minimum sales volume
2. A physical presence, not just an online storefront
3. An established history of retail sales and an exemplary credit rating
4. Strong recommendations from other vendors with whom a business has dealt
Some brands don’t allow private retailers to resell their products at all. Companies who operate in this manner may own their own retail shops and online retail websites. This is rare, but there are still some companies who operate like this, not allowing any independent retailer – large or small – to carry their products.
Many brands don’t directly control their distribution channels, opting to allow wholesalers to handle distribution to retailers. However, even if they don’t directly control distribution, they still may establish policies that their wholesalers must follow. These policies may be very similar to the policies often employed by brands that directly control distribution, employing one or more of the following requirements:
1. A substantial minimum sales volume
2. A physical presence, not just an online storefront
3. An established history of retail sales and an exemplary credit rating
4. Strong recommendations from other vendors with whom a business has dealt
Companies who operate their distribution channels with any of these levels of control will most likely not allow small volume wholesale purchases, eliminating distribution to start-ups with limited capital. The best advice that I can give to a prospective retailer is to pick up the phone and do your research directly with the source. Call the company’s sales or public relations department and inquire about their distribution policies before putting forth a lot of effort searching for their products through wholesalers. You’ll potentially save yourself hours of wasted time. Not to mention, if you happen to meet the requirements for establishing a direct relationship with the manufacturer, there is no better place to obtain your products.
In my next article, I’ll look at options that are available for the majority of prospective online retailers, those who don’t have an endless source of investment capital that would allow them to meet the reseller requirements of any manufacturer. For those businesses, the newest merchandise from the most popular brands may not be an option. However, that doesn’t mean that the dream of owning an online retail store is out of reach. Until then, do your research by calling manufacturers to inquire about their distribution policies, and, as always, good luck in all of your business ventures!
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About The Author
Kirk Larson has worked for over 15 years in business as a writer, personnel manager, and most recently for the last 4 years as a successful entrepreneur. To learn more about Wholesalers, visit http://www.wholesale-suppliers.net
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This article was posted on August 08, 2005
