Struggling brick-and-mortar retailers are working quickly to shift their business models to e-commerce and other options like wholesale sales.
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by Katherine Gustafson
Katherine is a writer specializing in creating content related to tech, finance, business, environment, and more. Sh...
Updated on: April 5, 2023 · 3 min read
The uncertainty caused by the coronavirus pandemic is placing a lot of stress on retail businesses. Many are doing whatever they can to stay afloat, including switching from retail to wholesale sales or supplementing retail sales with wholesale.
One of the main advantages of transitioning your business to wholesale is that wholesale offers high-volume sales to other businesses that market your products to their customers. But there are many factors to consider in contemplating whether to switch or to supplement with wholesale sales.
The first instinct of many brick-and-mortar retailers right now is to move online, considering that e-commerce sales are skyrocketing while foot traffic is plummeting.
"Most brick-and-mortar establishments, having operated under strain these past few months, are at a point where they understand they must adapt to reflect changes in consumer behavior in order to survive," says Nishank Khanna, chief marketing officer at Clarify Capital. "Wholesale comes into play by augmenting their efforts and increasing revenue streams," he adds.
But succeeding online isn't easy, and maintaining digital infrastructure adds another layer of difficulty to businesses that are already short on time and cash.
Wholesale sales are an entirely different animal, and focusing on this option allows businesses to avoid some of the headaches associated with depending on e-commerce for survival.
"Wholesale makes more sense for brick-and-mortar retailers because they can sell their products and increase the visibility without having to invest in their own online store," says Khanna. "It's essentially an efficient and timely way for retailers to share a piece of the e-commerce real estate and reap benefits from the surge in online sales."
Switching to wholesale allows retailers to tap into a new and vast universe of customers, providing much-needed security through diversification.
"If you're primarily retail, you're reliant on your own setup and channels continuing to be effective for sales," says Abir Syed, CPA and digital marketing consultant at UpCounting. He advises that, "If you switch to wholesale, you can diversify through a larger client base."
How you transition from retail to wholesale will depend on the specifics of your business. If you source small quantities of relatively expensive products, for example, it won't be easy to shift to the volume of sales necessary for wholesaling.
"In general terms, you'll need a large variety and quantity of inventory, and the ability to acquire inventory at a low enough price to make the economics of being a wholesaler work," says Syed. "You'll also need a thorough distribution process," he adds.
Besides having a large inventory and a distribution process in place, there are other elements you need to consider.
Shifting from retail to wholesale is not something you should take lightly, as it will represent a large change in how you operate and who your customers are.
Syed advises that transitioning businesses follow a three-part plan:
"It's not easy to know which channels will work and what retail will look like in the coming years," says Syed. "So diversifying through many customers as a wholesaler can compensate for the risk associated with that uncertainty," he adds.
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