How does one go about starting a distribution business? Or how do...

How does one go about starting a distribution business? Or how do you become a seller for an international company locally (SA)?

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If you already have a particular product you are thinking of distributing, your best option would be to contact that company and find out what the requirements are to distribute their products. Each company will have different criteria.

Here is some advice however on starting a wholesale distribution business:

So you want to start a wholesale distributorship. Whether you’re currently a white-collar professional, a manager worried about being downsized, or bored with your current job, this may be the right business for you. Much like the merchant traders of the 18th century, you’ll be trading goods for profit.

And while the romantic notion of standing on a dock in the dead of night haggling over a tea shipment may be a bit far-fetched, the modern-day wholesale distributor evolved from those hardy traders who bought and sold goods hundreds of years ago.

The Distributor’s Role

As you probably know, manufacturers produce products and retailers sell them to end users. A can of motor oil, for example, is manufactured and packaged, then sold to automobile owners through retail outlets and/or repair shops.

In between, however, there are a few key operators-also known as distributors-that serve to move the product from manufacturer to market. Some are retail distributors, the kind that sell directly to consumers (end users).

Others are known as merchant wholesale distributors; they buy products from the manufacturer or other source, then move them from their warehouses to companies that either want to resell the products to end users or use them in their own operations.

Three types of operations can perform the functions of wholesale trade: wholesale distributors; manufacturers’ sales branches and offices; and agents, brokers and commission agents. As a wholesale distributor, you will probably run an independently owned and operated firm that buys and sells products of which you have taken ownership.

Generally, such operations are run from one or more warehouses where inventory goods are received and later shipped to customers.

Put simply, as the owner of a wholesale distributorship, you will be buying goods to sell at a profit, much like a retailer would. The only difference is that you’ll be working in a business-to-business realm by selling to retail companies and other wholesale firms like your own, and not to the buying public.

This is, however, somewhat of a traditional definition. The traditional wholesale distributor is still the one who buys “from the source” and sells to a reseller.

Getting Into the Game

The field of wholesale distribution is a true buying and selling game-one that requires good negotiation skills, a nose for sniffing out the next “hot” item in your particular category, and keen salesmanship. The idea is to buy the product at a low price, then make a profit by tacking on an amount that still makes the deal attractive to your customer.

Experts agree that to succeed in the wholesale distribution business, an individual should possess a varied job background. Most experts feel a sales background is necessary, as are the “people skills” that go with being an outside salesperson who hits the streets and/or picks up the phone and goes on a cold-calling spree to search for new customers.

In addition to sales skills, the owner of a new wholesale distribution company will need the operational skills necessary for running such a company. For example, finance and business management skills and experience are necessary, as is the ability to handle the “back end” (those activities that go on behind the scenes, like warehouse setup and organization, shipping and receiving, customer service, etc.).

Of course, these back-end functions can also be handled by employees with experience in these areas if your budget allows.

Setting Up Shop

When it comes to setting up shop, your needs will vary according to what type of product you choose to specialize in. Someone could conceivably run a successful wholesale distribution business from their home, but storage needs would eventually hamper the company’s success.

Starting Out

For entrepreneurs looking to start their own wholesale distributorship, there are basically three avenues to choose from: buy an existing business, start from scratch or buy into a business opportunity. Buying an existing business can be costly and may even be risky, depending on the level of success and reputation of the distributorship you want to buy.

The positive side of buying a business is that you can probably tap into the seller’s knowledge bank, and you may even inherit his or her existing client base, which could prove extremely valuable.

The second option, starting from scratch, can also be costly, but it allows for a true “make or break it yourself” scenario that is guaranteed not to be preceded by an existing owner’s reputation. On the downside, you will be building a reputation from scratch, which means lots of sales and marketing for at least the first two years or until your client base is large enough to reach critical mass.

The last option is perhaps the most risky, as all business opportunities must be thoroughly explored before any money or precious time is invested. However, the right opportunity can mean support, training and quick success if the originating company has already proven itself to be profitable, reputable and durable.

During the startup process, you’ll also need to assess your own financial situation and decide if you’re going to start your business on a full- or part-time basis. A full-time commitment probably means quicker success, mainly because you will be devoting all your time to the new company’s success.

Like most startups, the average wholesale distributor will need to be in business two to five years to be profitable. There are exceptions, of course. Take, for example, the ambitious entrepreneur who sets up his garage as a warehouse to stock full of small hand tools.

Using his own vehicle and relying on the low overhead that his home provides, he could conceivably start making money within six to 12 months.

Operations

A wholesale distributor’s initial steps when venturing into the entrepreneurial landscape include defining a customer base and locating reliable sources of product. The latter will soon become commonly known as your “vendors” or “suppliers.”

The cornerstone of every distribution cycle, however, is the basic flow of product from manufacturer to distributor to customer. As a wholesale distributor, your position on that supply chain (a supply chain is a set of resources and processes that begins with the sourcing of raw material and extends through the delivery of items to the final consumer) will involve matching up the manufacturer and customer by obtaining quality products at a reasonable price and then selling them to the companies that need them.

In its simplest form, distribution means purchasing a product from a source-usually a manufacturer, but sometimes another distributor-and selling it to your customer. As a wholesale distributor, you will specialize in selling to customers-and even other distributors-who are in the business of selling to end users (usually the general public).

It’s one of the purest examples of the business-to-business function, as opposed to a business-to-consumer function, in which companies sell to the general public.

Weighing It Out: Operating Costs

No two distribution companies are alike, and each has its own unique needs. The entrepreneur who is selling closeout T-shirts from his basement, for example, has very different startup financial needs than the one selling power tools from a warehouse in the middle of an industrial park.

Regardless of where a distributor sets up shop, some basic operating costs apply across the board. For starters, necessities like office space, a telephone, fax machine and personal computer will make up the core of your business. This means an office rental fee if you’re working from anywhere but home, a telephone bill and ISP fees for getting on the internet.

No matter what type of products you plan to carry, you’ll need some type of warehouse or storage space in which to store them; this means a leasing fee. Remember that if you lease a warehouse that has room for office space, you can combine both on one bill. If you’re delivering locally, you’ll also need an adequate vehicle to get around in.

The Day-to-Day Routine

Like many other businesses, wholesale distributors perform sales and marketing, accounting, shipping and receiving, and customer service functions on a daily basis.

They also handle tasks like contacting existing and prospective customers, processing orders, supporting customers who need help with problems that may crop up, and doing market research (for example, who better than the “in the trenches” distributor to find out if a manufacturer’s new product will be viable in a particular market?).

To handle all these tasks and whatever else may come their way during the course of the day, most distributors rely on specialized software packages that tackle such functions as inventory control, shipping and receiving, accounting, client management, and bar-coding.

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  • ralph

    I have a factory for the production of perfume which is a copy of the original perfume
    The idea is to measure small perfume placed pocket, And search for agents in Africa and the world

    ralphiprahim@hotmail.com

    • pietpompies

      i don’t think counterfeit perfume is the road to success Ralph. its almost as appealing as the prospect of marketing and selling imitation diamonds…. nobody really wants cheap knockoffs. good luck… you’re gonna need it.