What Is B2B Wholesale? Benefits, Tips & Features
Blog Credit: Austin Caldwell, March 13, 2023, | (What Is B2B Wholesale? Benefits, Tips & Features| NetSuite)
What Is B2B Wholesale?
B2B wholesale involves selling goods in bulk to other businesses (B2B sales), rather than selling them direct to consumers (DTC). Wholesalers typically buy large quantities of products or other goods from producers such as manufacturers. They store the goods in warehouses and then resell and ship them in smaller quantities, at discounted prices, to retailers or other businesses.
By focusing on B2B sales, as opposed to DTC sales, wholesalers can maximize sales volume and average order value. Because wholesalers often supply goods sourced from many different manufacturers, they provide a convenient source for business buyers to obtain much of their inventory. Take the example of a book distributor that supplies retail bookstores, which then resell the books to consumers. The wholesaler offers the books to bookstores at a substantial discount from the list price. The bookstores make a profit by reselling the books to consumers at the list price.
- B2B wholesalers buy products in bulk and resell them to retailers and other businesses.
- Advantages of B2B wholesale, compared to DTC sales, include higher sales volume and average order value.
- Online marketplaces and e-commerce are becoming increasingly important in B2B wholesale.
- Cloud-based ERP software suites can help B2B wholesalers remain agile and competitive in the rapidly changing market.
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B2B Wholesale Explained
Many B2B wholesalers focus on sales to retailers, but some wholesalers also sell directly to large organizations. These companies buy products in big enough quantities to qualify for volume discounts. Wholesalers’ customers include:
- Retailers and other resellers. These companies buy products at wholesale prices and sell them to consumers at a higher price, with little or no modification.
- Government agencies often have bulk purchasing power that commands discounts. They use the goods internally.
- Institutions, such as schools and hospitals, are often able to buy in bulk quantities at a discount.
- Some manufacturers buy goods from wholesalers and transform them into other products. For example, a manufacturer may buy a range of components from wholesalers and assemble them into products for sale.
Wholesalers often specialize in specific industries or product categories, including:
- Home and kitchen products
- Consumer electronics
- Industrial and science
- Health care, including pharmaceuticals
- Beauty and personal care
- Sports apparel and equipment
- Books and stationery
- Automotive products
B2B Wholesale Business Examples
B2B wholesale plays a prominent role in just about every industry sector, from health care and industrial machinery to food.
- Wirsam Scientific distributes a vast range of scientific instruments, from microscopes to X-ray analytical equipment, to labs across sub-Saharan Africa. When unwieldy systems hampered the company’s continued growth, the company switched to an end-to-end cloud-based platform(opens in a new tab) to run its business. By doing so, Wirsam automated management of transactions in multiple currencies and gained a unified view of sales orders, invoicing and purchasing across 20,000 SKUs. The system helped Wirsam cut delivery lead times and reduce IT costs.
- Most pharmaceuticals in the U.S. pass through wholesale distribution before reaching medical professionals and consumers. McKesson Corp. is a key player in that wholesale distribution network. It has built relationships with many leading pharmaceutical manufacturers and makers of medical equipment. The company distributes a wide range of pharmaceuticals and other medical products to pharmacies, hospitals, health systems and clinics. The company delivers more than a third of all prescriptions in the U.S., supplying more than 40,000 customers.
- MRS Packaging distributes food and beverage products across the Middle East. It has led the way in catering to the expanding tastes of consumers in those countries, with products like nachos, hotdogs and flavored popcorn. To support its 300% business growth in just a few years, the company implemented NetSuite’s OneWorld cloud-based ERP system(opens in a new tab). NetSuite helped the company simplify and automate interactions with suppliers around the world, while supporting local taxation rules and multiple languages. Improved supply-chain control eliminated stockouts and reduced inventory by up to a third.
Benefits of B2B Wholesale
The B2B wholesale model offers a range of benefits for companies throughout the supply chain — not only for the wholesalers themselves, but also for manufacturers and retailers.
- Higher average order value. Each B2B wholesale transaction generates much more revenue than individual product sales to consumers.
- Higher sales volume. The ability to sell in bulk means that wholesalers typically enjoy a higher overall sales volume through repeat purchases.
- Broader market access. The wholesale distribution model helps products quickly reach a wider audience. Wholesale distributors can be highly effective in driving business through retailers. As a result, distributing products through wholesalers can help manufacturers quickly achieve market access and visibility that might otherwise take years to develop.
- Specialization. Relying on wholesalers for distribution enables manufacturers to focus their energies on designing and making products. By turning their sales over to intermediaries, they can avoid building and maintaining an expensive sales function. Wholesalers typically build up deep expertise in specific product categories and retail sectors that helps them ensure a steady supply of the products retailers need.
- Warehousing and inventory management. Wholesalers often take on much of the responsibility for warehousing and managing product inventory. That helps manufacturers and retailers keep their costs down.
B2B Wholesale Challenges
B2B wholesale business can be challenging. Wholesalers must maintain operating efficiency while managing often complex relationships with their business customers. They also face new competition from online B2B marketplaces. Some of the key challenges include:
Customer relationship management.
Business buyers usually take longer to make purchasing decisions than consumers — but once they’ve picked a B2B wholesale supplier they may buy from them many times. So, for wholesalers, forging and maintaining strong relationships with customers is very important. B2B wholesalers need to focus on making the most of every step in the customer’s journey, from product evaluation to sales and support.
Because wholesalers have a considerable investment in inventory and sell goods at discounted prices, they must operate efficiently to maintain profitability. Streamlined warehousing, inventory management, ordering and fulfillment processes are critical. Customers typically expect to be able to order online, so it’s important to have an easy-to-use ecommerce presence that’s integrated with inventory management and fulfillment.
Managing cash flow.
Wholesalers often sell on credit, so the ability to effectively track and manage accounts payable is vital to maintaining a healthy cash flow.
Competition from online marketplaces.
New competitors to established B2B wholesale distributors include online B2B marketplaces and online retailers that are shifting into B2B sales.
Some manufacturers are bypassing wholesalers for at least part of their product sales. By selling direct to consumers, the manufacturers aim to increase profit margins and gain greater control over the consumer experience.
5 Tips to Run a Successful B2B Wholesale Business
Running a successful wholesale business involves juggling multiple priorities at the same time — optimizing inventory, keeping customers happy, and managing cash flow and profits. Here are some useful tips:
Focus on efficient inventory management.
The ability to efficiently manage inventory is at the heart of any successful wholesale operation. B2B wholesalers must be able to accurately track what’s in warehouses; replenish inventory, based on demand; and pick inventory efficiently when fulfilling orders. Sophisticated inventory management software can help by tracking inventory throughout the supply chain and automating reordering, based on factors such as current inventory levels and customer demand forecasts. Inventory management software helps increase revenue and profit by ensuring that wholesalers have just enough inventory to meet demand without over-ordering.
Automate operations with an integrated software platform.
Supporting operations with an integrated suite of applications can dramatically boost efficiency, responsiveness and customer satisfaction. Leading B2B solutions enable wholesale companies to automate processes ranging from ordering and inventory management to ecommerce. Technology can make virtually any repetitive task more efficient by automating time-consuming, error-prone manual steps. In addition to making processes smoother and reducing costs, automation can increase customer satisfaction and, therefore, drive more business purchases.
Build strong B2B customer relationships.
Each business customer can generate considerable revenue over time, so it’s important to foster relationships to ensure that customers are happy and continue to buy from you. Getting closer to customers also helps B2B wholesale suppliers better understand customer needs and develop targeted wholesale marketing strategies.
Stay on top of cash flow.
Closely monitoring accounts receivable and accounts payable helps make sure B2B wholesale businesses don’t run into cash flow problems. With large amounts of money tied up in inventory, many wholesalers need to be sure that customer payments arrive and supplier bills get paid on time. Accounting software that provides up-to-date insights into the current status of outgoing and incoming payments can help businesses accurately forecast and manage cash flow.
Carefully manage discounts.
Offering substantial discounts can attract customers — but those discounts also eat into profits. Big customers may add enough volume to justify special terms, but carefully examine each situation to make sure you’re protecting your margins.
B2B Wholesale Platforms: How They Work
Traditionally, B2B wholesale deals have involved person-to-person negotiations between wholesalers and their customers, together with many manual steps to process orders and buy, manage and ship inventory. However, technology is transforming the B2B wholesale sector. Companies can run their entire business on integrated cloud-based software suites that increase operating efficiency and agility.
Technology is also transforming the interactions between wholesalers and their customers. Ecommerce accounts for a growing percentage of B2B sales. Important ecommerce trends include the growth of B2B wholesale platforms, also known as B2B exchanges, which are online marketplaces specifically designed for B2B wholesale transactions. They make money by charging vendors and buyers commissions or other fees for business conducted via the platform.
B2B wholesale marketplaces enable wholesalers to list products for sale. B2B buyers can then purchase them via the platform. The platforms typically provide additional services to support those transactions, such as online payments and electronic communications between buyer and seller.
In some cases, B2B marketplaces have made it easier for small resellers to buy products from wholesalers. Previously, they may have struggled to get the attention of wholesalers; now, they can use a self-service wholesale ecommerce platform to buy the goods they want. Similarly, smaller vendors can enter the B2B wholesale market simply by listing their wholesale products on one of these marketplaces. Many B2B wholesale exchanges focus on specific vertical industries. For example, the Indian website Fibre2Fashion.com focuses on serving the textile, garment and fashion sector.
B2B Wholesale Platform Features
B2B wholesale platforms offer many of the same features as business-to-consumer retail online marketplaces. That’s partly because business buyers now demand the same ease of use and shopping convenience that they’ve come to expect in their everyday purchases as consumers. In addition, B2B platforms may offer additional features tailored to the needs of B2B buyers. Key features of a B2B wholesale platform include:
- Price transparency: Users can see discounts at different quantity levels.
- Product choice and price comparison: Buyers can see products and compare prices from different vendors.
- Information about business partners: Most B2B wholesale platforms require companies to register and provide information about themselves. This helps vendors and buyers gather details about potential business partners up front. For example, one major marketplace displays profiles for suppliers, showing their historical on-time delivery rate, response time, total transaction value and more.
- Product discovery: Search functions enable buyers to find products they might not have known existed.
- Vendor messaging: B2B wholesale platforms allow buyers to contact suppliers directly to negotiate pricing and arrange other aspects of the transaction.
- Reviews and ratings: B2B exchanges may include ratings and reviews based on previous transactions, to improve trust and hold each party accountable.
- Promotions: Vendors can opt to promote products via special offers and time-limited discounts.
- Certification: Some platforms offer wholesalers a “certified” status that demonstrates the wholesaler’s commitment to quality and delivery.
- Escrow accounts: Some platforms provide escrow services that protect buyers and sellers by securely holding the buyer’s funds and releasing them to the seller only when the seller has shipped the goods and fulfilled all other contractual obligations.
How to Manage B2B Wholesale Ecommerce
When it comes to selling online, wholesalers can offer goods through their own website, join an existing B2B ecommerce marketplace or do both.
The advantages of selling through your own website include greater control over ecommerce site design and product presentation and the B2B sales process, plus the fact that you don’t need to pay fees to an exchange. Disadvantages of this approach include having to supply the resources required to build and maintain the website and making the effort required to attract potential buyers.
Participating in an existing B2B wholesale exchange can provide a faster way to reach new customers, since these marketplaces aim to make it easy to list wholesale products, and they have a ready-built audience of buyers. Disadvantages include paying the platform fees and/or commissions. In addition, suppliers have less ability to differentiate the way their products are presented, since platforms typically force suppliers to use a limited set of templates.
Run Your Wholesale Business on NetSuite
Wholesalers need to be both efficient and agile to achieve lasting success in a highly competitive, fast-changing business. With NetSuite’s platform for wholesale distribution, wholesale distributors can increase efficiency and responsiveness with a single, integrated platform they can use to run the entire business, from ecommerce and order management to inventory management and financials. NetSuite gives companies real-time visibility across the entire business, automates operations, optimizes supply-chain management and facilitates omnichannel commerce.
- Demand-based planning helps wholesalers match supply to demand, taking into account historical and forecasted sales, along with seasonality.
- Advanced warehouse and inventory management reduces inventory overheads, improves on-time delivery and automates replenishment.
- Best-of-breed financial management includes real-time visibility into key financial and operational metrics.
- Supply-chain management. All customer and supplier data is managed through a single, centralized system. Supply-chain portals provide an efficient way to work with vendors, customers and sales partners.
- Omnichannel sales. Companies can sell and manage orders through all channels: company-operated ecommerce websites, B2B marketplaces, offline and more. Integration with inventory management, order management and financial systems boosts order accuracy, delivery speed and customer satisfaction. Investment in technology can help wholesale companies overcome these challenges and remain competitive in a continuously changing business landscape.
B2B wholesale continues to play a critical role in the supply chain for nearly all goods. The wholesale sector is experiencing rapid change, due to factors including the rise of ecommerce, online marketplaces and DTC sales. Cloud-based ERP software suites can help B2B wholesalers stay competitive.
B2B Wholesale FAQs
How do B2B wholesale companies make money?
B2B wholesale companies make money by buying products in large volumes at low prices from manufacturers and selling them in smaller quantities at higher prices to retailers or other business customers. They must make enough profit to cover the costs incurred for warehousing, inventory management and other operations.
What is a B2B marketplace?
A B2B marketplace, also called a B2B wholesale platform or exchange, is an online marketplace that connects B2B sellers and business buyers. Marketplaces typically enable retailers and other businesses to buy products in bulk and receive per-unit discounts.
What is a B2B wholesale business?
A B2B wholesale business is a company that generates revenue by buying products from manufacturers and selling them in bulk to retailers or to large organizations that use the products internally, such as government agencies or other institutions.
What is B2B wholesale ecommerce?
B2B wholesale ecommerce refers to sales that a B2B wholesale company makes online. A B2B wholesaler can conduct ecommerce sales through its own website or through an externally managed ecommerce site, such as a B2B marketplace.
What is an example of a B2B business?
A good example of a B2B business is cereal-maker General Mills. Although its products are eaten by consumers, it mostly sells to businesses such as wholesalers and big supermarket chains. Those companies then resell the products to consumers.
What is an example of a wholesale business?
A wholesale business is a company that earns its revenue by bulk-buying goods from suppliers and, in turn, selling in smaller bulk quantities to merchants or other companies. In the U.S., one prominent wholesaler is Sysco, which distributes food, kitchen equipment, tableware and other goods to more than 600,000 restaurants, hotels, hospitals, caterers and other businesses.
Is Amazon a wholesaler?
Amazon is primarily considered a retailer, not a wholesaler, because most of its sales are to consumers rather than businesses. However, Amazon also operates a B2B marketplace that enables wholesalers to sell to other businesses.