7 Challenges You Will Face While Running a Wholesale Business
The term "wholesaling" means to sell products in bulk at a price usually less than what retailers charge. Retailers usually buy from wholesalers to earn profits as they sell the products at the MRP. Every product used in our daily lives comes from the manufacturer and is handed over to the wholesaler and then the retailer. But there are a lot of challenges faced by the wholesale business. For a person who wants to but doesn't know how to start a wholesale business, here are 7 challenges that a person might face in the business, along with some wholesale business tips.
1. Damage to Property
Property damage is one of the most common problems why wholesale businesses go out of business. The core of the wholesale business is the storage house, also called the inventory. The inventory helps the wholesaler to stock products and keep them ready to be sold to retailers.
Property damage is a serious threat to the wholesale industry. Damage may occur due to many reasons, such as a fire breakout, earthquakes, and water flooding due to heavy rain. Damage caused due to these reasons may sometimes be massive enough to overcome. Therefore this is one of the biggest challenges for a wholesale business owner.
Wholesale business tips regarding property for those who want to start but don't know how to set up a wholesale business prioritise property insurance. Insurance will give a backup to the business owner and cover any loss to the property.
2. Problems while Obtaining Supply
Another core aspect of the wholesale business is the product obtained from the manufacturer and sold to the retailer. Therefore any obstruction while receiving the product supply from the manufacturer can lead to a significant loss to the wholesale business owner—obstruction as in transportation problems, fuel prices, etc.
Apart from that, if any situation occurs at the manufacturer's production unit that may damage the products, it may also prove a barrier between the wholesaler and product.
Therefore one of the wholesale business tips for those who don't know how to get into wholesale business is to choose your products and their manufacturer carefully. Also, one must ensure that there is no problem in transporting the product from the manufacturer to the wholesaler's inventory. A wholesaler must also keep a check on the fuel prices and the climate changes as they may also turn out to be a major obstruction while receiving the goods.
3. Penalties
Most people who are inexperienced in business and don't know how to start wholesale enter into contracts with manufacturers hastily. It might sound safe and secure to have a contract, but if the work is not done according to the contract, then the wholesaler might be legally penalised. Whether it is the fault of the wholesaler or not, he has to pay a heavy penalty leading to a significant loss.
Therefore, another tip regarding penalties is that before signing a contract, one must look for a lawyer who will explain all the terms and conditions regarding the contract to be signed. The guidance of a lawyer for the paperwork is necessary as it will save you from penalties. Once you understand all the clauses and are confident enough that you will fulfil everything mentioned in the contract, then proceed with the deal. If you don't like any particular condition, ask the manufacturer to negotiate; if not, go for other competent manufacturers.
4. Liability for the Products
You may not produce the product yourself, but if the customer gets a defective or unsafe product to be used, the retailers and the manufacturers can be held responsible for the product. Therefore, the top priority while transporting the goods from the wholesale storage to the retailers is to ensure the products are in good condition and the quality is preserved until it reaches the retailers.
Ensure protection from various factors in advance before sending the products to the retailers. The factors may be environmental that may damage the goods (for example, heat may cause damage if you are transporting dairy products) or factors such as transportation via rough roads or faulty storage. Therefore it is better to be prepared with a backup plan as a wholesaler if, in any case, faulty or defective products reach the customers, and the retailers blame the wholesalers for it.
5. Thievery
Similar to every business that has a physical storehouse, theft is also common in the wholesale business. Theft is also the reason that leads any business to lose thousands every year. The employees of the wholesale business may do theft. It can be done by thieves when the warehouses are unattained during the night hours or are closed. Thievery can also occur during the transportation of goods from wholesalers to retailers.
Therefore one of the essential wholesale business tips is to ensure the right security. To protect the goods from theft in the warehouses you can install security cameras to look after them. To ensure protection from thieves, you can ensure physical security. Physical security can also be ensured during transportation. Security is the best way to save thousands, if not lakhs.
Another thing to try is to store some of the goods in your home. It will ensure security and provide answers to those who don't know how to start a wholesale business at home. If you are new to the wholesale business and lack a storage house, you can follow the above tip and kickstart your business from home.
6. Deterioration of Equipment
Equipment used in business should always be taken care of. Whether it is the manufacturing industry or the wholesale industry, equipment is necessary for business and should always be looked after. Equipment includes various machinery such as transportation automobiles and freezers for goods which can be damaged due to heat.
Regular checking of the operation of the equipment and troubleshooting any issues related to the machinery is a great way to save the goods from damage. It is also a good way of maintenance that will ensure a wholesaler doesn't incur a loss due to ignorance.
7. Mishandling Data
As one will enter the business, there will be a lot of information to be handled. Information is the number of goods received from the manufacturer, the number of the goods sent to the retailers, the amount paid to the manufacturers, the amount received from the retailers. Therefore storing data in ledgers and sheets may be prone to human interference, causing you to incur losses. Thus, in this digital era, you can take the help of apps to keep the data at your fingertips. One such app is OkCredit, a digital solution to all your problems related to efficient data management.
While capital management is crucial, another critical aspect to be taken care of is the business's employees. Employee payment and attendance require data handling too. You can manage this digitally with the help of OkStaff, an employment and attendance management app.
Conclusion
These are the 7 challenges usually faced in the wholesale business and some wholesale business tips for people who wonder, "how can I start a wholesale business". How to make a wholesale business successful? Look out for such challenges in the business and follow the business tips for solutions to these challenges.
Also Read:
1) How to Start a Notebook Manufacturing Company?
2) How to Start a Gold Jewellery Export Business?
3) How to Get an Ayurvedic Medicine Manufacturer License?
4) OkCredit: All you need to know about OkCredit & how it works.
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FAQs
Q. What are the causes of property damage in a wholesale business?
Ans. Property damage may be due to natural factors like fire, flooding due to heavy rain, and earthquakes. All these factors may lead to damage to property, thereby causing damage to the goods stored inside.
Q. What are the reasons for obstruction while obtaining goods from the manufacturer?
Ans. The reasons for obstruction while obtaining goods may be many such as fire breakout at the manufacturer's production unit, transporting vehicle's break down, cyclones, etc. Such reasons obstruct the wholesaler from obtaining the goods.
Q. What should be done if a customer complains about a damaged good or a product that is determined to be dangerous?
Ans. If a customer complains about a damaged good or a faulty product, then either the wholesaler should inquire into the issue, take responsibility for it by giving a replacement, or contact the manufacturer and explain the defective products.
Q. How can we save equipment deterioration?
Ans. We can save equipment from deteriorating by providing timely inspections and maintenance. It will help to prevent any damage to the goods to be stored or transported.