Selling products in vast quantities at a cheaper cost for someone to put up the price and market them for retail is known as wholesale. In general, B2B promises great profits, so it’s important to remember that this sales approach has some distinct drawbacks, even in eCommerce. Below are the top 7 disadvantages of wholesalers that you might need to consider before putting up a B2B eCommerce store.
Minimum & Maximum Product Quantity
Table of Contents
FIND OUT more about B2B eCommerce in this article. Usually, distributors place quantity restrictions on products like minimum or maximum quantity of specific products per order. A wholesale order often has a certain amount that must be added to the cart for the order to proceed.
Since wholesale order tends to have a large quantity, the shipping and delivery fee can be pretty expensive for manufacturers and distributors. By applying the amount restricted, they can ensure the profit of each order is enough to reach a certain level that can cover the cost of shipping and fulfillment.
However, this method limits the buying ability of wholesalers, especially the small ones without significant capital. Since most wholesalers also apply this restriction to their customers, the overall profit margin can shift down by a considerable gap.
Wholesale Product Price
Product price can also be one of the disadvantages of wholesalers in specific circumstances. Usually, wholesale customers have lower product prices because of bulk order placement. However, because of the lower price, B2B business, without careful calculation beforehand, might be unable to achieve a considerable profit margin and undoubtedly struggle.
Production Cost
High production cost is a limitation that only happened with wholesalers that produce goods by themselves or D2C manufacturers. Manufacturers often have to raise their output and distribution levels as wholesale products are sold. If unprepared, this circumstance might lead to high expense and even huge debt after a short period. The higher the production volume, the more the cost can be.
However, this limitation isn’t much of a problem for usual wholesalers that only distribute goods and services.
B2B Price Effectiveness
ALSO, CHECKOUT the best B2B eCommerce platforms to build your website HERE!
When a product is purchased in bulk, it is difficult to determine a fair price. It’s recommended that B2B business should make market research for the appropriate product price and try to negotiate with customers around that determined price. This is to prevent confusing customers by overpricing and underpricing.
Production Consistency
There is a greater need for continuity in supply as wholesalers grow large over time and take on more consumers than before. It means they’ll either have to find new sources of production or produce more goods by themselves if by any chance they’re also a manufacturer of their goods.
Ensuring consistency should be a must in these cases, yet it might lead to unwanted increasing production costs with a high risk of redundant inventory.
Product Storage
Because of the massive amount of products, having ample storage is a requirement and one of the disadvantages of wholesalers.
The wholesaler should have adequate storage capacity, notably if their products weren’t sold as targeted in an extended period. Moreover, it’s important to remember that ample storage doesn’t come free. Storage full of redundant products might cost a fortune!
Wholesale Refund
Products with a short lifespan, like foods, for example, fishes, are non-refundable and require quick selling before they become rotten. You might need to take extra care of these products to retain their freshness.
That said, it’s important to point out that most distributors don’t like and don’t allow refunded wholesale orders because of the high shipping and packaging costs. If products weren’t sold as expected, wholesalers might have no choice but to lower their prices, which means lower the profit margin.
Conclusion
In conclusion, while wholesalers play a vital role in the distribution chain, it’s important to acknowledge the disadvantages of wholesalers. Hope you can get more useful information from top 7 most popular limitations of wholesalers we mentioned on the post.
