When starting a distribution warehouse you will be responsible for buying products from manufacturers and selling it wholesale to retailers, contractors and merchants. As a wholesale distributor you will be receiving inventory to your warehouse and shipping it out to customers. You will selling only to businesses not the buying public. When starting a distribution warehouse you can sell anything from groceries to furniture. A wholesale distributor should have good negotiating skills, and an eye for new trends. Your job duty will be to buy your inventory at a low price and be able to sell at a low enough price that will be appealing to your clients while still producing a profit for you. Having a sales background can prove to be helpful when starting a distribution warehouse.
Where will you work
When starting a distribution warehouse, an ideal location is an area where buying or renting warehouse space is cheap and affordable. There is no need for you to locate in a pricy shopping area where there is plenty of walk by traffic. However when starting your distribution warehouse you should be located in close proximity to your clients. For example if your wholesale distribution business is selling diamonds and precious jewels; you should be located not too far from jewelry stores. To start off you can decide to run your business from your basement or home (depending on what you are selling) but eventually the limited space will limit your growth.
When starting a distribution warehouse there will be lots of marketing for at least the first two years. You can decide to start your business at home (depending on the products you sell) to reduce costs, but if your business continues to grow eventually you will need a warehouse to store inventory. If you decide to start a home business you first need to check if your local zoning laws allow it. You can also decide to drop-ship your products. Drop shipping is when the manufacturer or company in which you buy your products from ships the products directly to your customers. This way you don’t have to hold the inventory and spend more time and money having the product shipped to you and then shipping it to the customer. Other basic costs when starting a distribution warehouse includes inventory, shipping services such as UPS, DHL, ext., computer, phone lines (more than one), fax. If you will be delivering to just your local area to can decide to use your own delivery vehicle . You should analyze the different shipping choices and find out which is more cost efficient for you. By keeping your costs low you can produce higher profits.
Tips for Starting a Distribution Warehouse
Combat the Consolidation trend- Some industries are being consolidated more than others. For example the pharmaceutical wholesaler industry is one the most consolidated industries. In recent years the number of US companies in this sector had reduced drastically. 80% of the sector is being controlled by just 4 companies. Wholesale distributors have found that specializing in a specific niche or market can give them an advantage and a better chance of success especially when facing fierce competition.
Value- Earn a good reputation. Give your clients good prices while not sacrificing value. Provide clients with valuable information about your products.
Finding a niche- Do your market research to find out what is in demand. You can also concentrate on a specific niche.
Check out Competition- What will your wholesale distribution business have that your competitors don’t? You can try to find the following information from potential clients: Will they be willing to change wholesale distributors? What do they look for in a new distributor? What would they change about their current distributor?
Share advertising costs with manufacturers- You can decide to form a partnership with your manufacturer where they will share advertising expenses. This is known as co-op advertising. You can inquire about this to your manufacturers.
Decide if you will Import/ Export – You can decide to import/ export your goods. Read more in Starting an Importing Business.
Advertising a Distribution Warehouse
When advertising your wholesale distribution business you should search for ways to place highly targeted ads directed at your potential clients rather than the general population. When starting a distribution warehouse you can advertise through the following methods. You can test various forms of advertising and track which ones are the most effective for your business in your location. Keep the advertising methods that are paying off and dump the ones that are not.
- Trade magazines and journals- If you are selling construction equipment, find construction magazines and journals which owners of construction companies are likely to read.
- Trade shows & Association meetings- Look up trade shows and association meetings in your industry. Trade shows and association meetings will give you the opportunity to meet potential customers and network.
- Catalogs- Potential clients will be able to browse through your products with a catalog. You can also have online catalog on your website which can reduce costs in paper and printing.
brochures- Send out brochures to retailers and possible clients.
- Government- the government is also a potential client in need of services or products. You will need to bid for contracts and fill any appropriate forms. This can be a great opportunity if the government decides to do business with you.
- Salespeople- Have salespeople contact potential clients (retailers & merchants) and sell your products.
- Cold calling- call potential clients who may be interested in doing business with you.
- Wholesalers Business Cards- Create business cards and hand them whenever an opportunity appears. Network as much as possible.
- Yahoo Local Searches- If you include your business in the Yahoo Local Searches, when people search for your service in your local area your business will appear in the list. To add your business to Yahoo local search, enter the term “add business to yahoo local search” in Yahoo.com and click on the first link.
- Google Local Searches- Google has a local search as well. To add your business to Google local search, enter the term “add business to google search” in Google.com and click on the first link.
- Website- Having a website is a good idea for a wholesale distributor. Having a catalog online will give clients an easy way to search through your products and will save you money on paper and printing of the catalogs.
- Ebay.com- You can decide to sell wholesale lots on Ebay.com as well. Read more on this on Starting an Ebay Business.