eCommerce is a big business. Think about how often you shop online, then multiply that by billions. Trillions of dollars of online purchases are made each year, with people shopping online at the giant companies that are household names and also making purchases at smaller, boutique online stores. This is no small wonder with how easy and convenient online shopping is. Being able to browse products, compare prices, purchase goods and have them arrive on your doorstep all from the comfort of your couch or bed is truly a modern luxury.
But what is behind the success of eCommerce? Several industries support this booming business, including freight and logistics, because goods must be shipped to businesses and customers. Website development and hosting is another, as is wholesale suppliers in Australia and across the world. This informative article will focus on how wholesale distribution helps eCommerce flourish. Read on to learn more.
What is Wholesale Distribution?
Wholesale distribution is how eCommerce retailers purchase their stock, usually from a company known as a wholesale distributor. An eCommerce company buys bulk goods direct from the wholesaler at a discounted price. The larger the order, the bigger the discount, in most cases. The eCommerce store then sells the goods at the recommended retail price (RRP), higher or lower, if they run a sale or promotion. Each entity involved in the supply chain makes a profit at each step. The manufacturer makes money when the wholesaler buys their goods, and the wholesale distributor makes a profit when an eCommerce store buys goods to then sell at RRP for their profit margin.
How Wholesale Distribution Helps eCommerce
Now we’ll spend some time describing how wholesale distribution benefits eCommerce entities.
Product Sourcing and Variety
Wholesale distributors act as intermediaries between manufacturers and retailers, providing a wide range of products in large quantities. No matter the product, a wholesaler can obtain large volumes of goods, often entire shipping containers full of pallets of product. eCommerce businesses can leverage their relationships with wholesale distributors to access a diverse selection of products, enabling them to offer their customers a more extensive product catalogue. This increases competition in the market, which is always a positive. It also allows eCommerce businesses to generate more revenue, as a more comprehensive selection of products will appeal to a more significant customer base. For instance, look at the product variety available on eCommerce giants like Amazon, Alibaba, Target and eBay.
The exception to this may be an eCommerce business that has a niche product offering, such as hobby supplies, photography equipment or medical items. These businesses will still purchase from a wholesale distributor but will focus on their niche market – in some cases; they may even have a monopoly on the market.
eCommerce Businesses Can Leverage Cost Savings
By purchasing products in bulk from wholesale distributors, eCommerce businesses can benefit from economies of scale and lower per-unit costs. This cost advantage allows them to price their products competitively in the market, attracting more customers and driving sales. An increased profit margin means that the company performs better, which has flow-on benefits to staff, who gain wage increases, and society at large, as the more profit a business makes, the more tax it pays. Taxes fund essential services, infrastructure and defence initiatives, which benefit the general population.
The Benefits of Streamlined Logistics
Distributors have established supply chain networks and standing relationships with various manufacturers. They also have expertise in handling logistics – or getting the product to where it needs to go. Partnering with wholesale distributors helps eCommerce businesses streamline their order fulfilment and shipping processes, ensuring timely and efficient customer deliveries. They may also maintain partnerships with various wholesale distributors, ensuring they have a steady supply of stock on hand. If you’ve ever been frustrated at items being out of stock, the eCommerce business is just as frustrated because they’ve lost sales due to low or depleted stock levels. With a variety of distributors to work with, they can reduce the amount of time items stay out of stock, driving sales and profit.
Risk Mitigation
Relying on wholesale distributors for product sourcing and fulfilment helps eCommerce businesses reduce their exposure to certain risks. No enterprise is without an element of risk, but a relationship with a wholesale distributor can mitigate some of the risks associated with selling goods online. For instance, distributors often handle quality control, warranty issues, and returns, freeing up eCommerce companies from these responsibilities. The company can act as the intermediary between the customer and the wholesaler, sending faulty items back for return and replacing them when the distributor sends replacement stock. In some cases, the eCommerce retailer can claim refunds from their distributor for faulty or damaged goods, enabling a speedy refund process that ensures positive customer relationships and positive reviews and testimonials.
Economies of Scale
As an eCommerce business grows, its demand for products also increases. Naturally, the more sales it makes, the more stock it needs to meet customer demand. More sales equals growth, which means the company can keep more stock on hand and sell more goods, and drive its profit margin higher. Wholesale distribution offers a scalable solution, ensuring a steady supply of products to meet growing customer demands. Plus, this scalability can be reversed during a downturn, so the eCommerce company will make smaller orders to adjust to decreased demand. This can occur during periods of inflation when consumer spending is reigned in due to the increased cost of essential goods and services such as groceries, fuel, medical expenses and energy bills.
Wholesalers & International Expansion
Working with wholesale distributors can facilitate cross-border trade between nations, enabling eCommerce businesses to expand their reach to international markets. Businesses can overcome international trade complexities and access new customer bases by leveraging distributors with global networks. The wholesaler can manage the customs, import tariffs and taxes, and other global supply chain complexities. An eCommerce business can use this advantage to tap into substantial international markets. For instance, if they sell a unique product that solves a problem, they can generate massive amounts of sales in a new country where there is no competition for the product.
A Wholesale Summary
So there you have it – a closer a look at how wholesale distribution can help eCommerce businesses in a variety of ways, such as increased product variety, sales volume growth, cost savings, streamlined logistics and risk mitigation. Furthermore, wholesale distribution can help eCommerce business scale up or down as required and facilitate international expansion into new markets.
