You have selected a grocery wholesaler and are ready to start placing orders. What’s next? Before going into those details, let’s go over some basics.
What Exactly Does Buying Wholesale Mean?
Here’s the difference between buying wholesale vs. retail. Wholesalers act as liaisons between manufacturers and retail vendors. They purchase goods directly from a manufacturer, then sell them to retailers at a higher price (aka markup).
Retailer vendors then add a certain percentage to the product price and sell those items directly to their customers at a price that will earn a profit. This price is called the list, or retail price. Essentially, if you buy wholesale (which does require that you order large quantities of product) you get a better deal.
How Wholesaling works:
- The retail vendor contacts a wholesale supplier.
- Both parties agree to an acceptable discount price for the products so both the wholesaler and the retailer make a profit.
- The retailer places an order.
- The wholesaler ships the order to the retailer and collects payment.
- The retailer markets the products to customers.
The wholesaler remains involved to handle any problems with shipments, items that need to be returned, or if the retailer wants to order more products.
What is Wholesale Pricing?
Grocery wholesalers receive a discount for buying products in large quantities (aka bulk). Their profits come from the difference between the wholesale price and what you, the retail vendor, can sell the products for.
How does this benefit manufacturers? The greater volume of purchases sold at a discount price per item makes up for the loss of revenue. Manufacturers also save money by usually having minimal storage and marketing costs.
While there isn’t a specific formula for determining a wholesale price, there are general industry-standard ranges.
What is a Profit Margin?
A profit margin is a difference between the retail and the wholesale price. Retail prices depend on the business’ pricing strategy, which determines gross profit. Gross profit is the revenue you make off of any given sale.
Pricing, Pricing, Pricing
Always keep gross profit in mind when purchasing from a wholesale food distributor. If the wholesaler’s prices are too high, that will have an impact on your overall profitability. The same goes for setting retail prices for your customers. Make sure what you charge is compatible with your market. The right pricing will keep you competitive and foster customer loyalty.
Pricing is also an essential part of the wholesale industry. Food distribution companies usually have a minimum order requirement to ensure they reach their revenue targets. Minimum order is the smallest amount of products a retailer can purchase from a wholesaler in order to do business. It makes sense to order your most popular (and profitable) items from a wholesaler since you’ll need to buy a large amount to meet the requirement.
Other Things to Know About Partnering with Food Distribution Companies
Calculate Your Reorder Points
Figuring out how much of a product to order can be a skill you develop over time, but there are resources that can help. This free calculator is a useful tool to keep you from under or over-ordering.
Keep Your Storage Space Organized
Having labeled (as well as enough) shelves, will make finding inventory go much more quickly.
- Work With Dependable Grocery Store Distributors such as Atlantic Dominion Distributors, serving Virginia, North Carolina, and South Carolina. Even in an industry as large as food distribution, word gets around, so make sure to ask around and research online for reviews. Never work with people you can’t rely on, and prevent this situation by doing your homework before selecting a wholesaler. The ideal company will sell quality products and can adapt to your business needs as you grow.
Looking for Wholesale Grocery Distributors in Virginia, North Carolina, and South Carolina?
We know reputation is everything. Atlantic Dominion Distributors is known throughout the Southeast for its expertise, professionalism, and quality merchandise. We’ll always take the time to have a conversation with our customers, and answer any questions they might have about what we carry.
Contact Us to get in touch with us. We look forward to working with you.