For over a century, the wholesale distribution industry has been an integral part of the economy and plays a big part in the general movement of goods, but recent market-wide changes have threatened to disrupt this, we will be discussing this further below.
At Dropee, we interact with distributors and wholesalers of all sizes on a daily basis, and we know first-hand about the problems they are dealing with. The struggles are real, and we would like to highlight some of the most pressing issues in addition to giving insights into how they can tackle these problems.
1. Inventory Tracking Issues
One of the biggest issues for wholesalers and distributors is probably to effectively keep track of the inventories in the warehouses, this is especially the case when the stock is constantly on the move.
Some companies tackle this issue by investing in radio frequency identification (RFID) tags, but this method can be extremely expensive and may not fit all companies in general. Alternatively, inventory management or enterprise solution software can provide a much more efficient and cost-effective solution.
These cloud-based solutions allow businesses to track inventory on multiple devices in real-time. This simply means that changes made will be updated on an online database, so that anybody in your business can access them, regardless of where they are.
By centralizing your inventory using such a system, it can help prevent unwanted confusion or miscommunication resulting from multiple databases.
You should look for solutions that can allow you to predict if you have too much or too little inventory so that you can better manage demand and avoid shortages. Dropee’s enterprise solution could well be your answer.
2. Narrow Margins
Ideally, a product’s wholesale price should be 50-60% off the retail price, or higher. But according to an article published by Bizfluent, it is typical for wholesale distributors to attain a gross margin of only 25% in most cases.
So when retailers start buying from manufacturers, wholesale distributors are forced to keep their prices competitive and offer more value-added services to keep their customers.
With that said, you will need to keep your business as lean as possible in order to run a profitable wholesale distribution business on smaller profit margins. In other words, you only want to have as much inventory as you can sell to make sure that you do not end up with dead stock.
In order to optimally figure how much inventory to stock, it is important to know how much are your customers ordering every month. Here is where business intelligence comes into play.
With business intelligence, you can study the buying patterns of your wholesale customers over time and provide suitable value-added services to them based on that data to improve business relationship.
For example, if your retailer usually places an order at the end of every month, you can ensure that your warehouse has enough stock for them ahead of time so that they can receive their products faster. This can increase customer loyalty to your business.
3. Centralized Buying
Instead of allowing stores to buy regionally, most purchases are now handled by company headquarters, providing them with greater leverage over suppliers plus potentially streamlining the whole delivery process.
This kind of centralized purchasing will be in favour of large distributors who are able to deal in large volumes and accept a lower price, hence putting many smaller scale regional distributors at risk of elimination.
4. New Technology
One needs to adapt to new technology in order to remain competitive in the wholesale industry. However, resistance toward acquiring and learning these is prevalent among wholesalers and distributors due to how expensive it can be to enjoy the benefits of these technological advances.
But the good news is that not every piece of new technology is as costly as RFID tags to implement. Though RFID tags allow sellers to accurately track inventory without the need for manual key-ins, they can cost up to a whopping $50 each, yes, each!
You can start with small steps when it comes to adapting to new technology which will make it easier for both you and your wholesale client. For example, you may get a cloud-based inventory management software as a start.
With the cloud-based software in place, anyone who requires the data to do their job can access the information needed just by logging in, like in the case where your sales reps who need to check existing inventory levels before they confirm a customer’s purchase order.
Alternatively, you can also choose to set up a B2B eCommerce platform that enables you to sell wholesale to your customers. All they need to do is to log in to their account on your B2B eCommerce store, and they will be able to browse for products with prices that you have set specifically for them. If this is synced with your inventory levels, you will be able to track your stock movement updates in real-time.
5. Retailers Demanding Faster Delivery
As some big-box retailers (like Tesco and Aeon BiG) expand their product offerings, they are also tightening delivery deadlines and are imposing more stringent penalties on late shipment from distributors.
One local snack distributor revealed to us that in their case, some retailers charge a 20% penalty from the purchase order’s total price if the order arrived later than what was agreed
Wholesalers and distributors may also be fined if they provide inaccurate product information.
Hence, in order to meet the new standards, many companies have invested in technology upgrades and additional training for employees.
Keeping Up With the Growth
Fortunately, despite these challenges, there are no problems that cannot be solved. As a matter of fact, the answers are already out there for the most part, and they almost all lie with embracing new technologies.
Distributors and wholesalers who are able to evolve and adapt to the ever-changing market may find themselves in a better position than before.
Now, the underlying question is – are you ready to embrace new technologies to grow your business?