Selling online is a great opportunity to grow your business, especially if you’re a wholesaler looking to expand your customer base. However, if you’re planning to accept payments online through a payment gateway like TradeGecko Payments, you need to be careful before you accept payment by credit card, especially if you’re dealing with someone new.
An unscrupulous business can dispute an authorized charge with their credit card company and escalate this to a claim, leaving you in the red due to the loss of items and payment. This is why you need to know your customers and do your due diligence around new customers before you agree to any transactions with them. According to Investopedia, “due diligence refers to the care a reasonable person should take before entering into an agreement or a financial transaction with another party.”
As a wholesaler, you’re selling items in bulk and dealing with high-value sales orders, so doing your due diligence around prospective customers is extremely important. Here are some key points to consider when it comes to knowing your customer, so you’ll be able to grow your business alongside your best retailers.
The first step when it comes to doing your due diligence is to determine how big the company is.
A big company is likely to have stable revenue streams across different markets and be less volatile, hence offering more reassurance when it comes to matters of trust and security - particularly if it’s a well known retailer. However, some big retailers may insist on trimming profit margins to the minimum so they may request the lowest prices available and longer payment terms.
Dealing with big retailers also means you need to ensure your production side can handle the volume of demand from these companies, which translates to increased warehouse space needed to store inventory. They may have other requirements such as strict product traceability to ensure all affected items can be accounted for in the event of a recall. Getting an inventory management system like TradeGecko can help you stay on top of larger volumes of inventory while keeping track of your product batches.
On the other hand, small to medium-sized retailers are more subject to fluctuations and may come across as less reliable than big retailers when it comes to brand reputation. For these retailers, you may want to be careful around the first few orders you receive from them until you get a clearer picture of their cash flow situation. In addition, you should also consider setting a minimum order quantity to ensure you’re dealing with customers who truly value your product.
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Once you have a feel for your prospective wholesale customers, you may choose to ask them for sales projections so that you can better gauge your revenue, profit, and margin trends - and know what to do if they’re unable to meet these numbers by a large margin. Better yet, you may want to reach out to other wholesalers who are currently dealing with the same retailer about their experiences.
By knowing your retailer’s business trends, you’ll be in a better position to choose the right shops and avoid bad accounts that are slow to pay. If you’re able to visit your retailers in person, you’ll also be able to ensure that your products are merchandized well, while getting a better idea of what kind of products the retailer stocks. After all, the last thing you want is to have your products dragged down by being displayed alongside cheaper competitor products.
Ultimately, as a wholesaler, you need to understand your customer to ensure you have a clear idea about which retailers you want to stock your product with. According to Sarah Wilkinson, founder of Melbourne-based fashion and jewellery label SanCerre: “Economically, things are so tough now, so a lot of it comes down to how people pay.”
Although vetting new retailers can be a time-consuming process, it’ll help you to avoid the pain of late payments and credit card fraud that leave you without money and products.
While you won’t know whether they have a questionable credit record and history, you can look out for red flags when you’re evaluating retailers for your wholesale brand. For a start, you should be wary of any retailers who are unreasonably reluctant to follow your requirements (minimum order quantities, requiring advance payment before you ship the order, etc.).
As mentioned above, dropping by your prospective retailers’ stores also gives you an idea of whether they’re a good fit for your brand - along with some insight into the kind of foot traffic you can expect, and whether this matches their sales projections. If you’re selling to eCommerce businesses, tracking web traffic and sales volume can be a little trickier. For evaluating web traffic, you can use website traffic estimators like SimilarWeb or SEMrush, both of which can give you an idea of how many visitors are entering your retailer’s website through organic search. If your retailers are willing to share their eCommerce conversion rates with you, it’ll be pretty easy to decide if the odds are in your favor. However, if they’re uncomfortable committing themselves to a specific sales volume, you can use general conversion rates from research data (2.95%) to help you make an educated guess.
You should also remember to find out as much about your retailers as possible. For example, if it’s a new, relatively unknown retailer, you may want to be strict on your requirements even if you’re tempted by the prospect of quickly locking in a sale. On the other hand, even if it’s a well-known retailer, you don’t want to be risking your revenue and profit margins just so you can be stocked on their shelves.
Now that you know your customer and you’ve set some benchmarks to help you determine who’s a good fit for your business, it’s time to start selling! With TradeGecko Payments, you can send online payable invoices to your wholesale customers. You and your retailers will enjoy transparent fee structure, with frequent and flexible payout schedules. And the best part? TradeGecko Payments fits seamlessly into the wholesaler’s workflow. Once your wholesale customers decide on the products they want to order, all you need to do is send the finalized invoice over, so they can pay by credit or debit card.
One last thing: You don’t have to use the B2B eCommerce Store to make TradeGecko Payments work for your business (although it does help to simplify the ordering process).
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