Manufacturers Selling Directly to Consumers
How the internet is changing how wholesalers do business
For decades, wholesalers made up an entire industry by serving as the middlemen between manufacturers and consumers. They would purchase items in bulk from the makers at a set price, then sell it to consumers at a higher rate, often doubling or tripling their output. Manufacturers continued this business model for years because it was the only way to get their products in front of customers. Wholesalers provided the manpower, infrastructure and retail space that the manufacturers just couldn't afford on their own.
However, with the rise of the internet and small businesses leveraging websites, that business model is evolving rapidly. Manufacturers are increasingly skipping wholesalers altogether and are selling products directly to their consumers.
Traditional wholesalers and retailers, such as big-box stores, malls and brick and mortar shops, are obviously concerned. This gives them unprecedented competition, often at prices they can't match without losing money.
Why have manufacturers begun selling directly?
In the old model, manufacturers made only small profits compared to wholesalers' profit margins. Because the direct sale was their only option, manufacturers didn't have much power to challenge the system. But with the internet's ability to connect them directly with people who want their goods, manufacturers can take the wholesalers' profits for themselves.
Previously, companies needed interested wholesalers to be viewed as a legitimate company.
They needed the validation of an established retailer to get in front of customers and make sales. But with sites like Amazon and Etsy, it's obvious that customers no longer buy just what's available; they are willing to seek out very specific items to meet their needs and interests. Companies of every size have made millions selling completely online, often shipping from private homes and garages.
By skipping retail space costs and wholesaler fees, they can also afford to sell the products for less than the manufacturers, making them all the more attractive to consumers.
This is an ever-evolving industry that is changing how we shop and do business. With same-day shipping and overnight service, getting a special item or garment can be done from the comfort of a couch, making it more difficult for traditional wholesalers and retailers to attract customers.
What Can Wholesalers Do?
For wholesalers, the industry is changing, but that doesn't mean you're out of work. It just means you need to adapt to this new environment too.
Wholesales will still be a big business; it just may look different than it does today. Many manufacturers don't have the staff, or the desire, to handle internet sales or direct sales. They don't have the space or the expertise to sell directly to customers. This is a perfect opportunity for a wholesaler to make money.
By shifting to selling to online retailers or by managing sales themselves, wholesalers can manage that end of the business instead of manufacturers and reap major profits. This can be as simple as setting up an Amazon or eBay account or as elaborate as working on exclusive agreements with major sites, but it can be scaled to meet your business goals.