Three Wholesale Hurdles for E-Commerce Startups

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So you’re starting a retail website, and are looking to set up
wholesale relationships with some manufacturers and distributors.
There are going to be a few vendor relation hurdles you’ll need to
overcome. Once you know what to expect, you can plan your product
selection realistically, and manage your growth effectively.

First: If you’re new, you won’t have many corporate credit references.
That’s okay, but it does mean that you might have to set up a credit
account with the manufacturer or distributor in order to process your
purchase orders. Sometimes it just means you’ll have shorter terms,
or the window of time you have to pay for the order after it’s placed.

Second: Unless you’re starting from a brick and mortar shop, you will
have some real trouble breaking into some product markets. There are
a lot of manufacturers and distributors out there that won’t deal with
web-only retailers. There are a variety of reasons they do this. For
example, for them, websites might be smaller accounts, requiring a lot
more work to move the same amount of product. Some vendors prefer to
deal with local shops, being careful not to have two shops that are
too close together both offering the same product lines.

Some vendors shy away from web-only retailers because websites don’t
have a customer area; they compete nationally with everyone. While
you won’t be able to push these big vendors around, you can sometimes
find that one of their smaller distributors might work with you, or
more often some of their competition will. The free market is just
as real for wholesale sales as it is for retail sales.

Third: You will want to find the right inventory model for your
business. You can stock things yourself, where you have complete
control over stock levels, and customer servicing/fulfillment. You
can also dropship, where you send your customer orders to a vendor,
who handles the final fulfillment (but not the customer service!).
You may find a balance of the two models that works for your
particular product lines.

Very expensive items will take a lot out of your coffers to stock,
and might be a good consideration for dropshipping. Inexpensive
and small items take very little resources to stock yourself, and
are often difficult to find dropshippers for anyway. Depending on
the types of products you want to carry, the warehouse space you
have to work with (be it your garage or a 25000 square foot hangar),
and your available capital, you’ll want to choose carefully how you
want to manage your inventory.

Sometimes vendor relations is as much diplomacy as it is
commerce, but knowing what to expect will help along the way.