Editor’s Note
This article provides a clear definition of a wholesale distributor, explaining its role in sourcing products and supplying them to retailers at a reduced cost.
A wholesale distributor is a business that creates its own products or buys products from a manufacturer. The distributor then resells products to other retailers in bulk and at a lower cost than the recommended retail price (RRP).
- Decide what wholesale niche and products you want to sell
- Research your target market
- Calculate startup costs and profit margins
- Obtain the necessary licenses
- Understand legal and regulatory requirements
- Identify suppliers
- Negotiate supplier terms and minimum orders
- Build an online presence with a wholesale ecommerce website
- Implement inventory management systems
- Launch and market your wholesale distribution business
Are your products something other retailers would want to sell to their customer base—something they could work into their existing product selections? Is your product line cohesive enough to attract retailers? These are questions you should ask yourself when considering wholesale distribution.
Once you’ve chosen your wholesale products, consider what makes them stand out and use that information in your sales pitch when talking to retailers or listing your products on a wholesale marketplace.
Clearly list your products’ benefits on your site and make them the focus of your sales pitch. Perhaps you use a particular method to make your product, or maybe you source all the materials locally—or somewhere unique and exotic. Make sure retailers understand what makes your products worth investing in.
Much like any business model, a successful wholesale distribution company has a business plan that outlines its target market.
As part of your market research, figure out whether you could handle sourcing products to a large retailer like a department store or whether you’re looking for smaller boutique sellers.
If you’re just starting out as a wholesale distributor, partnering with smaller retailers may be a better choice. You can learn as you go with less risk than jumping right in with a large seller.
Similarly, consider which kind of retail stores fit your product best. Would it thrive at a department store, or do you sell a very niche item that would do better in a more specialized store? Keep this in mind as you brand your wholesale offerings and reach out to retailers.
Run the numbers on how much cash your operation will burn, and how the profit margins will look in year one. Startup costs typically range from $25,000 to $100,000, but can potentially go higher depending on your initial inventory, warehouse/distribution setup, equipment, and tech.
Build a simple model to determine your upfront needs:
- Inventory buy-in: $15,000 to $60,000 or more (category and minimum order quantities (MOQs) determine the spread).
- Warehouse/distribution: $3,000 to $15,000 per year, covering racks, scanners, scales, pallets, and setup fees.
- Software: $1,500 to $20,000 or more. Use various software packages or sign up for a unified commerce platform like Shopify that offers B2B and DTC on one platform.
- Licenses, insurance, compliance: Between $1,500 and $5,000.
- $2,000 to $8,000 for inbound freight deposits, cartons, dunnage, and labels.
- Working capital: 1–2 inventory turns to cover net-30 or -60 terms.
Next, determine your wholesale price to calculate your margins. A recent readout from financial data vendor CSIMarket indicates that the wholesale industry achieved a gross margin of approximately 15% in Q2 2025. Aim for anywhere between 15% and 30% gross margin when starting your wholesale business.
Start with your federal paperwork. Get an Employer Identification Number (EIN).
Packaging and shipping large orders can be a significant undertaking—and you need to be prepared for it.
If you’re currently handling all the packaging, consider hiring a fulfillment team as your wholesale distribution business grows. You could hire someone to help you package and ship orders, or even outsource the entire process to a third party.
