Expanding to wholesale as a multichannel merchant is a great way to increase GMV, move large amounts of inventory, increase brand awareness, and get your product into more people’s hands. Larger sales volume means larger purchase orders, and with larger POs you can often negotiate for better payment terms and pricing. However, if the wholesale channel expansion is not carefully planned out, the benefits of economies of scale can be negated by the increased operational and administrative overhead costs. In this article, we’ll cover some of the most important functionality that you’ll need to consider to manage your wholesale customers, place their orders, and get the product to them.
Managing Wholesale Customers
To start, it’s important to understand that managing wholesale customers is very different from an average D2C customer. Specifically, wholesale customers will typically have payment terms, price lists, and quantity breaks that they have access to, that an average customer won’t.
Payment Terms: Payment terms outline the time frame in which the wholesale customer is expected to pay for the goods that they will receive. Unlike a D2C customer who pays up-front, sometimes wholesale customers will enjoy longer payment terms, like Net 15, Net 30, or longer, which means that their payment will be due that many days after the invoice date.
Price Lists: Price Lists allow you to have different prices for the same product, and typically need to be hidden from one customer to another. Also, your wholesale price will likely be lower than your retail price as your wholesale customers need room for their profit margin. For example, if the retail price for a product is $10, the wholesale price might be $8.
Quantity Breaks: Also known as ‘tiered pricing’ and ‘volume discounts’, this is a method of discounting that encourages and incentivizes customers to place larger orders, by offering a lower price for a product once a certain quantity threshold is reached. Continuing with the above example, the wholesale price with Quantity Breaks could be $8 for 1-99 units, $7.50 for 100-499 units, and $7 for 500+ units., buy 1 x product A for $10, or buy 10 products for $80 ($8 ea).
Finally, if you have a product that often sells out, or was only produced in a limited quantity, it may make sense to consider limiting the quantity available to wholesale customers as a whole, or for each individual customer. This will ensure that you don’t sell all of your inventory through the (lower-margin) wholesale channel, and maintain some inventory for D2C sales. Check out our other article for more information on Inventory Management as a multichannel merchant.
Taking Wholesale Orders
Now that you’ve established the information that you need to communicate to your customers, the customers need a way to actually place orders. While often merchants will start by taking wholesale orders over the phone or by email, which can work with a smaller number of wholesale customers, this is not a scalable process as the number of customers grows. Instead, there are 3 main ways to consider taking wholesale orders:
Separate Website: With Shopify Plus, you can offer a separate, password-gated storefront for your wholesale customers. For non-Shopify merchants, you can also consider setting up a completely separate website to take wholesale orders. However, this can lead to additional challenges with maintaining separate storefronts, especially with tracking inventory and fulfillment across multiple platforms.
Wholesale Marketplace: There are also several wholesale marketplaces like Handshake (by Shopify) and Joor where you can list your products for wholesale buyers. While this can be an effective way to quickly and easily set up your wholesale store, you’ll be subject to platform fees and policies which can eat into your (already reduced) margin. Additionally, marketplaces can be competitive, and it can be difficult to stand out and attract customers among the many other sellers on the platform.
Dedicated Software: Finally, the most scalable way to establish a wholesale offering is to use a dedicated software platform that’s designed for wholesale merchants. However, it’s important to ensure that this platform is natively integrated with your inventory management and fulfillment software, and that it can satisfy the requirements outlined in the previous section for managing wholesale customers. Fulfil’s Wholesale Portal offers exactly that, with a dedicated login for wholesale customers where they can access prices, live inventory counts, and see the status of open orders, updated in real time by the WMS as they go through the pick/pack/ship process.
Whether a separate channel, marketplace, or dedicated portal, Fulfil can help centralize this information using the Channel integrations. Whichever method you choose, it’s important to ensure that the wholesale customers have visibility into real-time inventory levels, to avoid extraneous communication. Without this visibility (if you were taking orders via email, for example), it would be very easy for a customer to buy more inventory than you have, or buy an out of stock product, which is a poor customer experience and would lead to additional back-and-forth required between you and the customer.
Fulfilling Wholesale Orders
For brands that want to have long term relationships in the wholesale industry, the customer experience of a wholesale customer is just as important as a D2C customer. Therefore, it’s important to have a plan and process in place to manage the fulfillment of these orders.
Because wholesale orders are typically much larger in size, the standard pick/pack/ship workflow will likely not be practical for the wholesale channel. Instead, we recommend to split these orders into a separate workflow using Batching Templates and Automation Rules, which can follow a separate fulfillment process. This can be accomplished using a manual workflow from a warehouse manager, but using a software like Fulfil can make this simple to set up, and fully automated. Depending on the size of your product, and the size of the wholesale orders, you may need additional equipment in the warehouse in order to be able to pick these larger sized orders, such as larger totes and/or picking carts. Additionally, for merchants who are operating the wholesale channel at scale, a separate picking team may also be required.
Finally, you will need to ensure that you have clear and accurate communication with your wholesale customers throughout the fulfillment process, so they are aware of the status of their orders and any potential delays or issues. Ideally, this will be established through automated email that are sent out as the order moves through the fulfillment process.
While adding a wholesale channel to your arsenal as a multichannel merchant can be an appealing opportunity, there needs to be careful consideration applied to the way that it is launched. By following the recommendations outlined in this article, you’ll be able to communicate effectively with customers, take their orders, and fulfil them in a way that will result in a positive customer experience.
To get a demo of Fulfil’s wholesale portal, or to learn more about how Fulfil helps multichannel merchants profitably scale, book a demo with our team! In future articles, we’ll cover the nuances of large wholesale buyers, who often require the usage of EDI.