Most entrepreneurs underestimate the benefits that a wholesale channel can bring to their eCommerce business or that brick and mortar wholesale businesses are better suited to implement wholesale pricing.
However, any eCommerce business, big or small, can sell wholesale to both consumers and retailers.
As opposed than selling only at retail price, the standard price at which a consumer will purchase your product, adding a wholesale channel will lead to:
- Sales increased and costs were reduced, resulting in higher profits and growth
- Increasing trust in your brand
- Customer retention is higher
- Increased market share
We’ll go into more details later, but first, a quick definition:
Wholesale prices are discounts you offer to customers who purchase in bulk. It is possible to set a minimum order quantity (MOQ), which is the smallest number of units a customer must order to qualify for wholesale pricing.
Customers who buy from your store at or above the MOQ automatically qualify for the wholesale price.
The Benefits of Adding a Wholesale Price to Your eCommerce Store
Boost Your Sales
When you sell your e-commerce goods at a wholesale price, you will be able to target two additional types of buyers:
- Those who buy in bulk to save money
- Companies that buy wholesale and sell to consumers at a higher price (B2B)
In order to reach your target sales by selling exclusively at retail prices, you’ll need to convert a much higher number of customers. To achieve the same result, you will need just a fraction of this number when selling at a wholesale price.
In 2019, the B2B e-commerce market was worth $12,2 trillion – six times the size of the B2C market. Conversion rates for B2B online transactions range between 6% and 8%, while B2C online transactions are only 3% to 5%.
Wholesale pricing is the way to go if you want to reach your sales targets faster.
Maximize Customer Lifetime Value
The lifetime value of a customer is the amount of revenue generated by a single customer over the period in which they transact with your e-commerce business. A customer who stays with your business longer will bring you higher profits.
Selling at a wholesale price gives you the opportunity to build a solid business relationship with your customers. If you maintain consistent service and product quality, you will be able to sell to the same customer over and over. This will lead to high customer lifetime value.
Consider it this way. If you sell jewellery at a retail price, your main customers are consumers. Consumers are unlikely to purchase the same item more than once.
B2C works like this: the customer gives you money, you ship the item, and you never hear from them again. Selling at a wholesale price, on the other hand, will attract other business owners. They will be back for more of the same product – in bulk – once they realize your product sells well with their customers.
You’ll still need to build meaningful relationships with your wholesale customers. Consider these tips:
- Make sure your customer service and care are exceptional. 61% of customers stopped transacting with a brand due to poor customer service, according to a survey.
- Open lines of communication. Let your customers ask questions or provide feedback easily.
- Customize your communication, including chatbot pop-ups.
- Information such as pricing, company details, and product listings should be transparent.
- Reordering should be easy.
Expand Your Market
As you know, acquiring new customers isn’t easy. Gaining their loyalty is even harder. However, by offering your goods at a wholesale price, you can attract partnerships with established brands in your niche.
This gives you direct access to a customer base already established. As a result, your products will enter new markets without the hassle of introducing your brand to customers who don’t know who you are.
Your brand becomes more aware as your product is sold by more retailers, whether online or brick and mortar. Further, as customers see your product in different stores, they begin to build a relationship with your brand. Eventually, this will lead to more organic traffic for your online store.
- Your eCommerce store should display customer reviews, especially those from retailers.
- Live feeds of the orders you receive from wholesale and retail customers can be posted on the front end of your website.
Lower Your Operating Costs
Successful eCommerce entrepreneurs know that reducing costs is one of the best ways to increase revenue.
Adding wholesale pricing to your eCommerce store creates repeat customers, as I mentioned earlier. Considering that it costs five times more to get a new customer than to retain an existing one, a repeat customer will significantly reduce your overhead costs.
Wholesale pricing will also reduce your marketing costs by shifting the responsibility to the retailer. All you have to do is sell the goods in bulk to the retailer, and they will worry about getting customers.
By doing so, you can focus your time and money on other areas of growth in your e-commerce company. Wholesale prices will also reduce unit fixed costs when selling in bulk. For example, the share of website maintenance costs per unit will be reduced.
Fixed costs have an inverse relationship with sales volume. As sales volume increases, unit fixed costs decrease because they are spread over more units
Calculating Wholesale Prices for Your Products
In order to maintain a reasonable profit margin, your wholesale price should cover your overhead and total cost price.
The most common wholesale pricing strategy involves offering a 50% discount on the regular price of the goods or the manufacturer’s suggested retail price (MSRP).
Your MSRP is your recommended retail price. It should be included in the contract you send to your wholesale customers. The MSRP guarantees that retailers who buy your products at a wholesale price will sell them at a uniform price. A different store cannot offer your product for a lower price than what you are offering.
Using a 50% discount on your wholesale price allows retailers to retain a reasonable profit margin when selling to their customers. Your business will still make a decent profit.
Here’s an example of how to calculate wholesale prices for your online business: If your gross profit margin is 75%, you can offer a 50% discount on wholesale orders and still have a 50% gross profit margin.
The wholesale price X 2 is equal to the recommended retail price.
| Product | Cost Price | Recommended Retail Price | Wholesale Price |
| TABLE | £100 | £400 | £200 |
| CHAIR | £20 | £80 | £40 |
By taking advantage of the power of numbers, you can increase your profitability. For example, you can apply a tiered wholesale discount. Here, the wholesale discount depends on the purchase order quantity; the larger the order, the greater the discount. Your customers, especially retailers, will place larger orders to get a higher gross profit margin when reselling the goods.
One negative of selling to big retailers like Walmart is the high capital required to cover the costs of stocking up for massive bulk orders
Is your store ready for wholesale pricing?
Over the years, e-commerce wholesale has consistently grown. By adding wholesale prices to your eCommerce business, you can experience growth.
We can easily integrate a bulk order section to your eCommerce platform, such as BigCommerce, but not limited to.
Your business will progress to the next level with the right platform (we recommend BigCommerce B2B Edition) and agency (Obviously us haha) supporting you as you explore this gold mine. Additionally, you can tweak your website to accommodate both wholesale and retail customers.