The B2B wholesale industry is a major force in global business … and prime for disruption. If you’re already operating in the wholesale space, the time to adapt has come. If you’re not, the opportunity is too big to ignore.
U.S. wholesale alone is currently a $8.3 trillion industry, consisting of over 750,000 organizations.
By comparison, B2C retail — consisting of around 3.8 million organizations — made just $5.35 trillion in sales in 2018 with a projected $5.5 trillion in 2019.
What’s more, B2B wholesale will grow 1.9% from 2018-2023 — a much stronger showing than the 0.3% growth the industry experienced over the previous five years.
With only those few data points in mind, it’s clear that operating a B2B wholesale business can be a lucrative proposition for any entrepreneur.
Business-to-business (B2B) wholesale companies sell products in bulk to other companies. The purchasing company, either uses the products internally — typically for production or consumption — or resells the products in smaller quantities to individual customers.
Essentially, B2B wholesale is a subset of the larger B2B market.
Often associated with B2B wholesale is the term big-box retail. This refers to wholesale companies that sell to enterprise chains — like Target, Walmart, and other well-known retailers.
Big-box retailers focus on purchasing large volumes of product via ongoing relationships. When doing business with big-box retailers, there’s often very little flexibility.
Normally, sales are processed using the retailer’s internal system through an electronic data interchange (EDI). EDIs have replaced paper-based purchasing so that orders, invoices, and shipping can be managed digitally.
At the opposite extreme are digitally native vertical brands (DNVBs) — also known as direct-to-consumer (DTC) retailers. DNVB and DTC are used almost interchangeably to refer to “born” online retailers who sell products directly to the end-user. DNVBs also maintain control over their production and distribution.
While this guide focuses on modern B2B processes, we’ll compare them to successful DNVBs, highlight how the two models are influencing one another, and show that neither is mutually exclusive. In fact...
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Because wholesale is all about moving large quantities of product through long-term deal structures, it just makes sense that companies in this industry show significantly higher average order values (AOV) and order volumes.
Its long-term nature also means customer-lifetime value is higher.
Operating further back in the supply chain, gives you additional control over processes related to inventory and fulfillment. B2B and B2C retailers rely heavily on their wholesale suppliers when it comes to production, reselling, and consumption.
Those three avenues put the B2B wholesalers in the supply-chain driver’s seat.
One avenue for wholesalers is to sell their products in bulk to retailers, who then resell to their own customers. This means you can generate brand awareness from new audiences simply by having your products be resold by retail partners.
This leads to more and greater expansion opportunities.
Increased brand awareness, more efficient processes, higher AOV, and higher retention all equal more growth. It’s that simple.
Unfortunately, many B2B wholesalers are also behind the curve, specifically when it comes to the use of technology. This lag presents what is perhaps the greatest advantage to B2B organizations willing to adapt and move online…
Most wholesalers aren’t performing to their highest potential. As a result, their businesses suffer.
Overall, the problem comes down a failure to adopt new and innovative technology. Especially as expectations off B2B buyers are more and more influenced by the ease of B2C buying.
Case in point, McKinsey found the ”digital quotient” (DQ) of the average B2B company to be 28 out of 100, compared to the average B2C score of 35.
To determine a company’s DQ, McKinsey assesses the company’s performance in the following categories:
The average B2B company is often averse to and, in some cases, completely resistant to using digital tools that could have a positive impact on their organization.
As we’ll discuss in the next section, these shortcomings have major implications for B2B wholesalers looking to survive and thrive in the future.
Go deeper into the five elements of wholesale success: