Most entrepreneurs make the mistake of underestimating the benefits that a wholesale channel can add to their eCommerce business.
Or assume that wholesale pricing is best executed by a brick and mortar wholesale businesses.
But any eCommerce business, big or small, can sell to both consumers and retailers at a wholesale price.
Unlike selling only at retail price, which is the standard price at which a consumer will buy your product, adding a wholesale channel will lead to:
- Increased sales and reduced costs, translating into higher profit and growth
- Higher customer retention
- An enlarged market share
- Increased trust in your brand
We’ll get further into the details but first, a short definition:
A wholesale price is a discounted price that you offer to customers who buy in bulk.
You can set a minimum order quantity (MOQ), which is the fewest number of units a customer needs to order to qualify for the wholesale price.
This means any customer who buys from your store at or above the MOQ automatically qualifies for the wholesale price.
Why Adding a Wholesale Price Is a Smart Move for Your eCommerce Business
1. Increase Your Sales
Selling your e-commerce goods at a wholesale price will target two additional types of buyers:
- Consumers who buy in bulk to save money through reduced cost per unit
- Businesses that buy at a wholesale price and sell to consumers at a higher price (B2B)
Consider this: By selling exclusively at a retail price, you’ll have to convert a significantly higher number of customers to reach your target sales.
But when selling at a wholesale price for bulk orders, you’ll only need a fraction of this number to reach the same goal.
In doubt? Check out these statistics.
In 2019, the B2B e-commerce market was valued at US$12.2 trillion — six times the value of the e-commerce B2C market.
And the conversion rates of B2B online transactions range between 6% and 8% while B2C online transactions are only 3% to 5%.
These numbers are proof that if you want to reach your sales target faster, wholesale pricing is the way to go. And joining a community of like-minded eCommerce store owners will work to your advantage.
Connecting with people who speak your language will catapult your business over any hurdles you encounter in wholesale pricing. You can learn how to market your goods and get the crème de la crème in the retail industry to buy from you.
The eCommerceFuel Community is made up of experienced and high-revenue e-commerce store owners. This guarantees that every interaction you have will be productive and take you a step closer to your goals.
2. Boost Your Customer Lifetime Value
Customer lifetime value is a measure of the revenue generated by a single customer over the period they transact with your e-commerce business. The longer the customer stays with your business, the higher the profit they will bring.
One of the main advantages of selling at a wholesale price is that you get to build a solid business relationship with your customers.
You’ll get to sell to the same customer over and over — assuming you keep your service and product quality consistent. And this creates high customer lifetime value.
Think of it this way. If you’re selling jewelry at a retail price, your main customers are consumers. And they are unlikely to come back for the same piece.
The standard B2C scenario goes like this: the customer gives you money, you ship the item, and then you never hear from them again.
On the other hand, selling at a wholesale price will attract other business owners. Once they recognize your product sells well with their customers, they’ll be back for more of the same product — in bulk.
But you’ll still need to build good relationships with your wholesale customers. Here are a few tips:
- Ensure your customer care and customer service is beyond excellent. A survey indicated that 61% of customers have stopped transacting with a brand due to poor customer service.
- Keep communication lines open. Make it easy for your customers to provide feedback or ask questions.
- Personalize your communication, including chatbot pop-ups.
- Be transparent with information like your pricing, company details, and product listings.
- Make it easy to re-order.
3. Widen Your Market
You already know by now — acquiring new customers is no easy feat. And gaining these new customers’ loyalty is even harder.
But by offering your goods at a wholesale price, you get to attract strong partnerships with established brands in your niche.
And this gives you direct access to an existing customer base.
Your goods will enter new territories without having to go through the hustle of introducing your brand to customers who have never heard of you.
As more of your product hits the stores of different retailers, whether online stores or brick and mortar, this builds awareness of your brand.
In addition, as customers see your product in different stores, they start to build their own relationship with your brand. And this can eventually drive organic traffic to your e-commerce store.
4. Improve Your Credibility
According to the Australian Competition and Consumer Commission, over $8 million was lost through online shopping scams in 2020.
In the UK, there were 10,000 more online shopping and auction fraud cases reported in 2020 compared to 2019.
These statistics show the importance of consistently presenting your eCommerce business to potential customers as legit. You need to consistently prove that you can be trusted.
Adding trusted retailers to your pool of customers through a wholesale price builds your credibility.
When potential customers see that a brand they know and trust is buying from you, they are likely to see your business as legit. They will associate your relationships with these brands as proof of your reliability.
Here are a few ways you can achieve this:
- Display customer reviews on your eCommerce store, especially those from retailers.
- Post a live feed of the orders you are receiving from other wholesale and retail customers on the front end of your website.
5. Lower the Total Cost of Running Your Store
Any successful eCommerce entrepreneur knows that one way to increase revenue is by reducing costs.
As mentioned earlier, adding wholesale pricing to your eCommerce store creates repeat customers. Considering that it costs five times more to get a new customer than to retain an existing one, a repeat customer will lower your overhead costs significantly.
Targeting retailers through a wholesale price will also reduce your marketing costs by shifting that responsibility to the retailer.
All you have to worry about is selling the goods in bulk to the retailer, and they can worry about getting customers.
This allows you to channel your time and money to other areas of growth in your e-commerce business.
Selling in bulk through a wholesale price will also reduce unit fixed costs. This refers to the share per unit of costs like website maintenance.
Unit fixed costs have an inverse relationship with sales volume. When sales volume rises, unit fixed costs reduce because the cost is spread over more units.
How to Calculate Wholesale Price for Your Goods
Your wholesale price should cover your overhead and total cost price while still maintaining a reasonable profit margin.
A common wholesale pricing strategy involves offering a 50% discount on the regular price of the goods or the manufacturer’s suggested retail price (MSRP).
The MSRP is your recommended retail price. It should be included in the contract that you give to your wholesale customers.
The MSRP guarantees that the retailers who buy products from you at a wholesale price will sell at a uniform price. It prevents a situation where your product is available in a different store for a price lower than what you are offering.
Offering a discount of 50% on your wholesale price allows retailers to retain a reasonable profit margin when selling to their customers. And your business will still make a decent profit.
Here’s an example of how to calculate wholesale pricing for your online business:
Assuming your gross profit margin is 75%, you can offer a 50% discount on wholesale orders and still have a 50% gross profit margin.
Wholesale price x 2 = regular price or recommended retail price
|Product||Cost Price||Store Price/Recommended Retail Price||Wholesale Price|
You can increase your profitability by capitalizing on the power of numbers. One way to achieve this is by applying a tiered wholesale discount.
This is where the wholesale discount varies based on the purchase order quantity; the bigger the order, the bigger the discount.
It will encourage your customers, especially retailers, to place larger orders to get a higher gross profit margin when reselling.
That said, the one negative to selling to big retailers like Walmart is the high capital you will need to cover the total cost price of stocking up for massive bulk orders.
You can get the financial support you need plus world-class mentorship that will boost your growth through eCommerceFuel Capital. Our investing partners and mentors include highly experienced entrepreneurs and recognized names in the eCommerce space.
Ready to Try Wholesale Pricing in Your Store?
The global e-commerce wholesale business has been growing consistently over the years. And these statistics from Statista prove it.
Brands like HanesBrands, a Fortune 500 company, have leveraged the growth of the B2B eCommerce sector.
According to Charlie Stack, the company’s Vice President of American Casualwear and eCommerce, the brand has been experiencing double-digit growth by selling to other businesses in bulk.
You too can experience this kind of growth by adding wholesale prices to your eCommerce business.
With the right tools and a community to offer support as you explore this gold mine, your business is bound to progress to the next level. And the best part is, you can tweak your website to adequately serve both wholesale and retail customers.
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