A wholesaler is a company that earns money by buying large quantities of goods then selling in bulk to smaller businesses. A wholesaler acts as a middleman in the supply chain. Wholesalers can sell their products for lower prices because buying in bulk reduces the time it takes to get products and the cost of production.
The most common example of a wholesaler is a company that purchases completed products from manufacturers then distributes these products to retailers. After those steps, they then sell smaller quantities of the product to the end-user.
Some wholesalers might also buy from or sell to other wholesale companies. For example, a national wholesaler might purchase products from a manufacturer then distribute these goods to regional wholesalers.
Here are the types of wholesalers and what they do:
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Specialty wholesalers: Focus on a specific industry or product line
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Specific product wholesalers: Focus on buying and selling one particular product
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Discount wholesalers: Focus on supplying discounted goods that are refurbished, returned or discontinued
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Online wholesalers: Focus on selling products online instead of operating from a specific location
Who could benefit from buying wholesale?
Selling wholesale is a business model that’s become more popular in recent years. Running a wholesale business allows greater control over how you purchase, modify, and sell products. Wholesaling also creates the opportunity to grow relationships with retailers and gain recognition for your brand.
How to become a wholesaler?
Knowing how to start wholesaling requires industry knowledge, financial resources, and an excellent B2B marketing plan. A B2B marketing plan is a strategy in which businesses focus on selling goods or services directly to other businesses.
Here is how to start a wholesale business:
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Decide what you want to sell.
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Choose a business name and entity.
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Write a business plan.
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Get a wholesale license and other permits.
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Apply for an employer identification number.
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Figure out logistics.
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Expand your product lines and service.
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Increase your marketing efforts.
The approach you take for your wholesale business depends on the customers you want to reach.
How to get a wholesale license?
Whether you have a brick and mortar store, an internet company or a home business, you’ll need a wholesale license to buy from a wholesaler. The terms of requirement for wholesale licenses depend on the state your business is in. This license may also be called a seller's permit, a resale ID, wholesale ID, retail ID or a reseller’s license.
While the applications and fees for a wholesale license can vary from state to state, the basic process for obtaining a license are:
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Register your business. Contact the IRS to apply for an EIN, also called a Federal Tax Identification Number. You cannot conduct business or hire employees until you have an EIN.
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Obtain a sales-tax license. Your state’s tax office can help you with your application. Applications and fees differ depending on your state.
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Apply for a state tax ID number. This will allow you to charge taxes to your retail buyers, pay your state taxes, and pay your employees.
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Now you can get your wholesale license. To apply, contact your state’s tax or revenue office. Like the sales-tax license, how to apply and the fees for applying will vary from state to state.
Obtaining a wholesale license is an IRS requirement and the most important thing you can do to help ensure your retail company does business in a responsible and legal manner.
How to buy wholesale?
In addition to figuring out which items to buy, you’ll need to calculate how much you need to buy. Don’t be afraid to negotiate the price of goods when you need to.
The general process for buying bulk items for wholesale is:
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Find a wholesaler
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Contact that wholesaler
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Show wholesaler your business license
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Sign legal agreement with the wholesaler
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Place your order with the wholesaler
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Determine your desired prices
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Place your bulk orders as needed
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