The ultimate wholesale UK guide: who can buy from wholesalers and suppliers, and how?

Ever wonder where companies get their products?

Maybe you have, maybe you haven’t, but one thing you should know is that when you do start taking an interest in how and where items are produced, the wholesale process tends to be shrouded in mystery – with business owners gatekeeping all the industry secrets and their resources in an attempt to prevent others from getting ahead.

Well, with us being in the midst of the pandemic, the Brexit struggles, and the current stresses of rising inflation and the cost of living crisis – we thought we’d help to make your life easier by busting all the secrets of the industry wide open for you today.

A wholesaler is a manufacturing or holding company that sell products for other companies to buy in bulk for discount rates, which they can then resell for profit.

White labelling: When a manufacturer creates a ‘blank canvas’ line of products that companies can then rebrand with their logos and styling to make it appear as if they had been made in-house.

Wholesalers, suppliers and manufacturers: what’s the difference?

You could argue on semantics that:

Wholesalers: A company that sells goods in large quantities at low prices, typically to retailers.
Suppliers: A person or organization who manages the sales of the goods needed by retailers.
Manufacturers: A person or company that makes the goods.

However, for the purposes of this article, we will be referring to and treating them all as the same thing.

Why buy wholesale?

Here are some compelling reasons for buying wholesale:

• Great price points and wide variety – Wholesalers tend to have lots of stock and lots of choices at undeniably good prices.
• Brand familiarity – Wholesalers sell branded goods at a fraction of the cost, so you can stock up on the branded goods your customers want with a greater profit margin.
• Personalisation, white-labelling, and your own empire – These days wholesalers are collaborating more and more with the dropshipping industry in that you can get your own supplies made. This would be excellent for those starting out and wanting to spearhead their own white-labelled brand.
• Lower shipping, delivery or collection costs – Shipping, collection or delivery costs will be significantly reduced when you buy in bulk from one wholesaler (instead of multiple over longer periods of time).

Wholesale products are typically aimed at retailers, industry workers or those engaged in professional business. However, thinking that wholesalers will only trade with established, large businesses is a common misconception.

The reality is a lot of micro-businesses don’t buy wholesale because despite a typically large discount, wholesalers only sell in bulk – and there’s only so much space in your house for 4000 boxes of macaroni and cheese.

As of 1st January 2021, additional charges for things like customs duties, import VAT, and handling fees are likely to be added on top of items ordered online from EU-based retailers. Whether you’ll be charged depends on the ‘consignment value’ of your order, which effectively means the perceived value of your order. For instance, a package of cosmetics would be perceived as higher value (and therefore have a higher handling fee placed upon them) than a pair of slippers.

These additional charges and costs affect the process of ordering wholesale, but also your customers if their orders end up totalling over £135 in any circumstance. It’s a good idea if you have a business website where you’re intending to sell goods, to perhaps mention the possibility of this at checkout or on your website’s product pages so it isn’t a total unwelcome surprise for them that may affect their purchasing decisions with you in future.

The laws on Brexit are still pretty unstructured and uncertain so far, with a lot of changes and U-turns expected along the journey for stable regulation in this area.

On the 15th March 2021, The UK Government announced a £20 million SME Brexit Support Fund, as well as a plan of other actions and methods intended to help smaller businesses with changes to trade rules with the EU. But beyond that, we can only continue watching this issue closely to see how it all develops.

Choose a supplier who can meet your needs

Once potential suppliers have been shortlisted, it’s important to establish whether they can deliver what you want, at a price you can afford.

You should definitely ask questions, and make sure all your concerns are answered before the big order, for example:

• Does your chosen manufacturer provide samples?
• Will your manufacturer agree to the numbers you require?
• Will there be any additional costs?
• How much will shipping be?

Remember that your supplier, especially if you’re commissioning personalised products with dropshipping, is at the mercy of your input. If you don’t supply full specifications you increase the chance that the first sample or product delivery will not meet your expectations.

Trade credit is a type of commercial financing in which a customer is allowed to purchase goods or services and pay the supplier at a later scheduled date.

In simple terms, trade credit is a ‘grace period’ suppliers afford to businesses before calling for payment in a bid to attract new customers and keep existing ones. For example, you could have 15 or 60 days after purchase to pay for your items (known as “net 15” or “net 60”, respectively.)

It is well worth the effort to build up a good relationship with your wholesaler to open up the chance of being offered credit and even discounts, especially if you are intending to make large orders in future. Trust is very important to wholesalers, so when you find a reliable supplier, it is worthwhile to stick with them for the long haul to become a valued customer.

“Most wholesalers of a reasonable size will arrange credit for their customers where applicable,” says Richard Grady, Director of Consult QRD Ltd. “Obtaining credit from a wholesaler is really no different from obtaining credit from anywhere else. I would recommend trading with the supplier for a few months on a ‘payment with order’ basis, as this will build your relationship and also allow the wholesaler to see how much money you are likely to be spending.”

Once you have an understanding with your wholesaler, it is then simply a case of requesting a credit account and filling in the necessary forms. The wholesaler will probably run some checks into your credit background and that of any business partners, much like when you take on a traditional bank loan.

Some suppliers will delve deeper into your past and ask for references from other wholesalers. It is therefore best to leave on good terms, both financially and personally, with all your previous suppliers.

If you are in a position of trust with your supplier, you are in a position to negotiate better terms than initially offered, too. This is particularly important when you are first starting out and money is tight. Cashflow can be improved no end if you can secure better terms on credit.

If you’ve chosen your supplier well, you will hopefully be dealing with them in the future, so emphasise this to them in order to secure better credit terms early on.

Alternatively to a grace period, your supplier may offer credit in the form of a percentage discount on your invoice if you pay within a fixed period such as ten days.

Credit may also be offered by way of quantity discounts, equipment loans or consignment sales ( i.e. payment only on sale of the goods).

Warranty: A written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.

Most reputable wholesalers will offer exchanges or refunds for faulty items and would be happy to replace faulty stock, although, legally, they are not bound to do so, unlike high street stores.

There is no one specific warranty that wholesalers use as a standard internationally, and while shops are now duty-bound to give refunds or exchanges for faulty goods by the Sale of Goods Act 1979, wholesalers are not. The goods you buy however will usually have a manufacturer’s warranty which will be passed to you from the supplier once the transaction is made (unless you buy untested goods from a clearance warehouse, as they will have no warranty at all.)

Wholesalers are also able to demand that you prove the products were inadequate when you first bought them, so that’s something to keep in mind – it’s best to have as much evidence as you can when confronting these kinds of issues.

Conclusion

Ultimately, working with a wholesaler is a very fine and viable business model that anyone can start pursuing and have great success with, starting today.

It’s an easy way to get your production process started and to begin building a brand and product line that will have your consumers excited and bringing in profit to you every day. That said, fail to prepare and prepare to fail! You need to put in the initial effort to research an excellent wholesaler, then go on to brand and price your products effectively.