How to Start a Wholesale Distribution Business

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You already have a successful trucking company serving many parts of the USA. You’ve been operational for a few years. You’re considering reconfiguring your business venture and maybe add a new but not so different operation. You could maximize your existing assets, especially the big trucks buy selling them and getting smaller ones.

Since you already have some of the fix assets, including warehouse facilities and people, you’re thinking of adding to your operation a wholesale distribution business. You already know a little bit about the company, but you still need to get more knowledge on how it’s operated. For example, how does one identify manufacturers or what sort of reverse logistics platform is necessary when one is just starting?

The following discussions provide a general idea of how to start a wholesale distribution business:

Industry Background

The annual total sales of the wholesale distribution industry are estimated at $3.2 trillion. The sector is composed of various segments that include grocery, food-service, and furniture & home furnishings wholesale distributors. These segments alone combine for a total of $473.4 billion in revenues.

Even a tiny slice of that pie would be significant for a start-up company.

What Wholesale Distributors Do

wholesale distributors

Products are created by manufacturers and retailers to sell them to customers. Dairy companies produce milk in cartons. End customers buy these milk cartons at grocery stores. It is the job of the distributors to move the milk cartons from the manufacturer’s plant to grocery stores or other market locations.

The distribution operations, however, vary. Retail distributors supply goods directly to end customers. Wholesale distributors sourced their products from manufacturers and then sell these goods to other companies, e.g., grocery stores, who will then resell the goods to end customers.

The wholesale distribution business is an example of a business-to-business or B2B operation.

What You Need

Here are some focus areas if you want to enter the wholesale distribution business:

  1. Skills. The main activity of the business is “buy and sell.” Naturally, your sales skills, including the ability to negotiate, are crucial. The goal is to buy low and sell high. You need to have, however, excellent people skills as well, like your ability to listen. Organizational and financial skills are necessary to succeed.
  2. People. You will be hiring more than drivers. People who will oversee the inventory in your warehouse. People who will track large sums of payments and receivables. People who will implement the relevant technology to keep your operation efficient and profitable. Make sure that you hire all the right team members by performing due diligence and a thorough search during your hiring process.
  3. Investing in the right technology. Get rid of the clipboard, pen, and paper approach in managing your shipment and inventory. Mobile devices and robust applications will make your operation run more smoothly. This also includes committing to an e-Commerce platform.
  4. Manage your money. You need to have a steady and positive cash flow all the time. Be diligent in your collection efforts from customers. Delayed payment could spell the difference between being in business or completely shutting down your operation.

You need to provide proper training for people. You need to provide high-quality service to customers. There are several items still down the list. But these core ideas can help you understand what the initial steps are.

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