Being a distributor is a line of business that poses no limitation to any personality. No matter what you are currently doing or what you’ve done in the past, there’s room to know how to start a distribution business.
Starting a distribution business offers you the opportunity to make profits almost daily through the selling of products to customers.
This’s different from other careers or means of livelihood where one waits till a month ends to get income.
Also, as a distributor, you’ll stand as the wholesaler of the products you sell. Wholesalers are the people that manufacturers give the distributorship to their products.
As a wholesaler, you’ll purchase products directly from the manufacturers in large or bulk quantities and sell them to the retailers. This makes you a mediator between the manufacturers and the retailers of the products.
Also, through your direct interface with the manufacturers, you will get their products at a lower price.
You may also get special discounts from the manufacturers. Your distributorship is easier when you start a distribution company.
What is a distribution Company?
Running a distribution company has always been one of the oldest ways of trading. You understand that the manufacturers are the people that produce products.
The retailers sell the products to the final consumers. A distributor is a middle man between the manufacturer and retailer.
There are two forms of distributorship that you can operate. The first is to become a retail distributor, where you can sell directly to the consumers or end-users.
The second is as a wholesale distributor, where you sell to retailers or other companies. This second form of distribution requires that you run operate distribution company.
You just have to decide on the best distribution business you can run effectively. Therefore, a distribution company is a company that sells products which it sources directly from manufacturers to other companies or retailers.
Owning a distribution company is a great step on how to run a wholesale business.
Based on the type of products which you intend to trade, excellent negotiation skills are quite an added advantage in your business operations.
Both with the manufacturers and retailers, negotiating skills put you on a higher level and boost your profits on the products.
In this article, we’ll take you through the steps on how to start a distribution business. This also involves how to set up a distribution company that will enable you to run your wholesale business effectively.
Steps on how to start a distribution business
1. Decide on the type of distribution business to operate
Having understood the two types of distributorship, you can select the one that suits your ideas and plans. As a retail distributor, you purchase and trade on smaller quantities of products. Also, you will be selling directly to final customers.
You decide to engage in a home distribution business where you make your suppliers to the homes of your customers. When you decide to go for wholesale business, you’ll be operating on a larger scale of your products.
In this distribution business, your major customers are the retailers. You can also be a distributor to the government. But you can only get the opportunity through a lengthy procedure of bidding.
2. Choose the product(s) of your interest to distribute
When you’re considering starting a distribution business, the first step is to select the products you intend to trade.
Not every product will be easy for you to market. Therefore, understanding which products are trendy or what lots of people are interested in is a good clue for a start.
A fast-selling product must offer a solution to a need. I believe you don’t want to invest in something that will just trap your money. You have to look for lucrative products that will flow very well for distributors.
Also, you must ensure that you have an interest and good knowledge of the product. There’s no way you’ll be marketing what you don’t even understand or familiar with.
Having an interest and a good understanding of the product will help you to speak boldly about it. Sometimes, your environment or location can influence your choice of product.
However, with the use of the internet, you can surmount that particular challenge.
While deciding on the products for your brand, it’s also advisable to go for products that don’t easily perish. That would eliminate any problem if you didn’t sell off all at once.
When you’ve finally decided on the product to pick, use the following as a check:
- The peculiarity of the product – this will distinguish the product and makes it unique both in providing a solution and in selling capacities.
- The authenticity of the product – this will be one of the selling points for the products. A fake product will tie up your capital and scare off retailers or other customers.
- A distributor advantage – the essence of going into a wholesale business is to make a profit. If you’re not getting any preferential consideration as a distributor of your chosen product, it has no great value for your business.
3. Find a source or manufacturers of the products
Choosing or selecting a product to start a distribution business precedes finding a source for them. The two are like the sides of a coin.
Based on your choice of product, you will research the possible manufacturers or reliable sources.
You must also bear in mind that any source you’re settling for must be one that you’ll leverage to earn more profit. Here are some of the places you can source your products:
If you decide to use China for your product source, you can check the following site for your products:
This is one of the largest sites that display a huge number of Chinese-made products.
The prices offered in Alibaba are also low, and it’s easy to source any form of product from this site.
This is similar to Alibaba, except that it’s more suitable for people who deal with small quantities of products.
So it’s recommendable for startups of how to start a distribution business. The prices of goods are quite fine, though not as low as in Alibaba.
This is another eCommerce site that Chinese companies display their products. It’s known as JingDong or JD.com. It’s Alibaba’s biggest competitor and is also a good marketplace to source your products.
This site focuses on Chinese and Chinese-speaking clients. Its range of products is outstanding.
The prices are great, so you can easily select your products if you understand the language perfectly.
This displays Korean products and is quite large. The management of this site is by a government agency of the Korean country. It helps to link the interested buyers to its citizens who deal with several products.
Where you decide to source from other western countries, you can use the following site:
This is a restricted marketplace that permits only registered subscribers access to the site.
It displays varieties of products for both buyers and sellers to explore.
This site is commonly known as TWF, and it’s a discussion platform that connects most wholesalers that have common visions.
You can get advice and guidelines as a beginner in wholesale on how to start a distribution business from TWF. The forum also engages in product reviews and other information to improve the businesses of the members.
BigBuy is a wholesaler that deals in diverse dropshipping products. Its delivery comes with both the name and image of the distribution company that buys from them.
It means that BigBuy can customize products to suit your distribution company on demand. Its product catalog is in more than 24 European languages.
Though BigBuy is not a direct manufacturer, its prices are very competitive with most manufacturers.
This remains one of your last resort to source most products when other platforms can’t meet your needs. The site is a convenient help for most SMEs and provides most products that distributors crave.
The only challenge for this platform is navigating complexity sometimes. You can use the following point to seal off the sourcing of your products from a supplier:
- Reliable supplier – it’s always advisable to deal with a reliable supplier. This will help you not to get issues in the quality and quantity of products you purchase.
- Credible supplier – the credibility of your supplier matters a lot. This stands as his/her integrity because the consequences of dealing with a dishonest person are better imagined than experienced. Where the integrity of your supplier is loose, you can get faulty or fake products in the supply.
- Mark the minimum number of products per shipment – there’s bound to be some fluctuations in every business. The number of products to purchase in each order may differ according to your customers’ demand. Get an understanding supplier and agree on the minimum of products you can purchase.
- Understand the supplier’s shipping modalities – as you decide on which supplier to purchase from, you must ensure to understand the company’s shipping procedures. This will help you avoid unnecessary eventualities during shipment.
4. Get retailers or other companies to market your supply
It’s one thing to choose a product; it’s another thing to sell the product. Without connecting to retailers or other sub-distributors as your customers, your distributorship is as good as nothing.
These retailers are the ones that will sell to the final consumers. When you’ve concluded where to source your products, the next step is to find where to sell the products.
In locating your customers, you can decide to use some marketing or advertising approach that you deem suitable for your products. Some of the approaches include:
- Personal meetings with sales outlets and shop owners – You can decide to go to shops where your chosen products are sold to final consumers. Direct interaction with the retailers can be more convincing as you’ll get the opportunity to explain the products one-on-one.
- Online advertising and marketing – The world is becoming more digital through the use of the internet. You can advertise your products using social media like Facebook, Instagram, Twitter, etc. This makes it possible to reach out to more potential customers as retailers for your products.
- Search engine optimization (SEO) – This is another form of digital advertising through which to capture google users. You can create articles and blogs that are fully optimized to push your ranking high. This creates more traffic to your adverts which may likely convert to customers.
5. Research on your competitors
Your competitors are those who are doing the same thing you do, in this case, other wholesale distributors. The best way to excel in any business is to be ahead of your competitors in every aspect.
Being profitable in any line of business is not limited to the bargain between your cost and your selling prices.
Also, the way you sell your products is as important as the type of product you sell. So it’s not all about WHAT; you will also consider HOW.
Having more knowledge of the products that you trade can set you on top of your competitors. For instance, in the pencil analogy, it’s very easy and simple to sell the traditional pencil.
However, if you have more education and knowledge, you can easily sell the mechanical pencils that need refilling.
With your knowledge, you can explain the technicalities in the refill to your customers, who will, in turn, relate to the final consumers.
Thus, your customers will understand not only the operations of the pencil but its benefits as well. This can distinguish you from other distributors and convince more retailers to stick with you. There are always competitions in every type of market, especially in distributorships.
You can discover ways to add value to your customers/retailers by creating superior and unique services on your products above your competitors. Through such services, you’ll become more flexible and strive to develop more in your business.
This involves your ability to understand your customers’ needs, which may mean adding more products to your distribution lines. Hence, there’s room for diversification in your business.
6. Start your distribution company
For you to operate effectively and legally, either a retailer or wholesaler distributor, you’ll need to start your distribution company.
If you’re wondering how to start a distribution company, the first step is to select a suitable name for your distribution company.
You can make this very simple by using the initials of your name or your surname and adding ‘distributors’ to it.
Make sure your company’s name is in line with your business motives, which is distribution. Also, choose a name that will impose respect on your company.
7. Register your distribution company
The registration of your distribution company is what gives you the legal right to operate fully as a distributor.
It also makes your potential retailers respect and have confidence in you. Before registration, you’ll decide on the form of company you intend to operate. You can run your distribution company as;
- Sole proprietorship – This is a type of business where you will singly operate and control the business.
- Partnership – This is where you intend to include one or more persons in the running of the distribution business. This form of registration requires that the partners involved will share both the cost of operation and profits from the business. The agreed percentage for the partners must be included in their documentation for registration.
- Private Limited Company – This is where you include directors and shareholders in the running of the wholesale business. In this case, the decision-making lies in the hands of the directors.
The proper registration is based on the country registration requirements and processes.
8. Get a good business location
While planning for the distribution company, getting a good and suitable location for the company is of paramount importance. Remember that not every site will accommodate the products you have in mind to distribute.
In some cases where your product size is small, you can use your house to keep your inventory if you have space. However, if you’ve pitched your tent on a much bigger niche, you’ll need a larger space, probably a warehouse for your inventory.
9. Have an estimate of your starting costs
For you to start up your distribution business and operate fully, there are some financial commitments you must make. An estimate of what you’ll require for the business is an essential guide in portioning your budget.
From the distribution company’s registration to sourcing and shipping your products to advertising and getting potential retail distributors or customers, all require cash.
You must also take into cognizant the need for an office for the distribution company and of course the office equipment for its operation.
Also, there’s the warehouse(s) and its equipment for the products to consider after shipment. The advertising aspect of the business, such as social media management, SEO, etc., will require some cash to implement.
Without proper planning and budgeting, a business is already a failure even before it starts. That’s why you must create a conducive atmosphere for your distribution business to grow with less pressure.
10. Plan on how to fund your business
Depending on the type of registration you made for your distribution company, the funding of your products will follow.
Remember, you don’t need to make a large number of purchases from your suppliers when you are just starting. There’s always room to start with smaller quantities and increase as the business grows.
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However, where the cost of your inventory is quite high, this implies more cash. You can go for a loan in your bank to cushion the financial effect on your pocket.
11. Buy your inventory
Like I’ve said earlier, the quantity of your inventory as you startup depends on
- The type of products you decide to trade – If the products are bigger, purchasing more quantity may not be favorable for you.
- The locations of your retailers or customers – Where most of your customers are within the same geographical areas, you can access them more easily. Hence, your purchase on a start-up level can be lower. However, where their locations are quite far apart, you may estimate for more products.
- The frequency of the demands from your retailers or customers – You can understand your customers demanding capacity with time and create room for products to take care of them. Also, there’s the issue of those one-off customers that can spring surprises on you by making demands unexpectedly. Always create room for some spare products besides the normal demands of your regular customers.
No matter what the situation may be, you must be careful not to get inventory that is excessively bigger than your regular retailers’ demand.
This can tie your cash and handicap the flow of other resources in the operation of your business as a distributor.
12. Outline your daily routine
In the wholesale business, distributors are faced with lots of activities in the operation of the business.
Without proper coordination, you can easily get exhausted and lose focus which can drag your business downwards.
That’s why you need to outline, plan, structure, and delegate (where necessary) some of the works for the effectiveness and also the growth of the business. Some of the activities involved in the daily running of wholesale business include:
- Sales and marketing.
- Shipping of inventory and the receiving.
- Customer service.
- Management of existing customers’ requests and complaints.
- Processing of orders.
- Advertising and promotions.
- Market research.
13. Build a reliable team
Going by the numerous activities with running a wholesale business, you’ll agree with me that no single person can cover all effectively. As a distributor who desires to build a lasting business, you’ll need other persons to work with you.
The success of your wholesale business lies in the coordination of a team of workers you have. Thus, you need to build a team that will assist you in managing the density of your wholesale business.
With a reliable team, you can easily track inventory, maintain your stock in your warehouse, and develop new customer relationships. Also, it can help you manage your suppliers and even get detailed financial reports.
14. Create your distribution company’s website and other digital platforms
We are in an internet age where almost every business is using online platforms in its operations. As a distributor, your can’t afford to be left behind.
Once you register your company, create those internet-enabled platforms for the operations of your business. Some of them include Facebook, Twitter, Instagram, etc.
Some of these platforms also serve as a forum to communicate with both your existing and prospecting retailers and customers. You can also relate to your suppliers.
One of the outstanding benefits of the use of these internet applications is that your wholesale business will continue to operate even when you’re not physically involved.
15. Build trust and Distinguish your wholesale business with outstanding service
One of the essential ingredients you will need for fast growth in a wholesale business is trust.
When your customers discover that you’re trustworthy, they will stick to you. Also, building trust in your business cuts across to your suppliers as well.
If supplies are made on credit, your ability to keep to the agreement with your suppliers and remit your payment as at when due gives you leverage in your relationship with them.
Also, when you want to start your distribution business remember that you are not the only distributor running a wholesale business. Customers can easily source the same products you trade on. The only thing that can distinguish you from your competitors is the quality of your service.
The outstanding service you offer to your retailer and customers acts as a spice in the growth of your wholesale business.
So, keeping every other thing constant (pricing and quality of goods), the only thing that will make a customer buy from you is quality service.
Starting a distribution business is a great vision. However, this is a vision that requires adequate preparations before you can progress. Always remember to plan and work on your plans to succeed in your wholesale business.
Also, there’s room for continuous improvement as you strive to build a business that will not just yield profit to you but will last through the test of time.