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How to Run a Wholesale and Distribution Business in Australia

Wholesale distribution is booming thanks to e-commerce. Take advantage by learning how to run your wholesale distribution business effectively.

Wholesale distributors make products accessible to end consumers by bridging the gap between manufacturers and retailers.

There are around 59,000 wholesale trade businesses in Australia with combined annual revenue of $430 billion—equalling about $7.3 million per business.

Out of all the wholesaling industries, the top three are petroleum, motor vehicles, and telecommunications & electrical goods.

However, these aren’t the industries with the highest margins.

The top spots belong to the tobacco (27%), kitchen and dining (7%), and jewelry and watches (6%) industries.

Regardless of the industry you are in, wholesale and distribution businesses are important components of the Australian economy.

Three ways to improve your business

Before you dive deeper into running your wholesaling business, there are three things to implement to improve your business immediately.

They are:

  • Carve out a niche: Choosing a niche for your business will help you forge long-term relationships with manufacturers and suppliers. It will also position your business as an expert within the industry.

    The four major industry segments are food and beverage, healthcare, high-tech, and industrial. However, there are many smaller niches such as clothing, paper products, and footwear.

  • Negotiate contracts with manufacturers and suppliers: The prices you get determine your profit margins and how much you have to charge your customers. By learning how to negotiate better prices, you give yourself more of a chance to succeed.
  • Offer additional services to your customers: Wholesale distributors are now offering additional services to stay competitive in their niches. For example, you could provide installation, maintenance, or other services related to your product.

You can position your business as an authority, increase your profits, and compete against other wholesalers by implementing these strategies.

Consistent market analysis

Industries are constantly changing, so you need to keep tabs on your competitors and industry trends to ensure success.

When doing competitor research, you should ask yourself questions like:

  • What are they doing well?
  • Is there anything that I can learn from them?
  • Are there things that customers don’t like about them?
  • What products or services can I offer to differentiate my business?
  • Have they changed anything about their business recently? Why?

Besides direct competitors, it’s also a good idea to analyze wholesalers in different industries as you can pick up some valuable information.

To keep on top of industry trends, you can set up Google Alerts for specific keywords, follow industry groups and publications and chat to manufacturers and suppliers.

Alternatively, you can find free and paid industry reports like NuORDER’s The Future Of Wholesale Industry Report.

Equipment cost considerations

Your costs will vary depending on the type of products you sell, the quality of the equipment you buy, and the scale of your operation.

Basic costs include:

  • Smart phone: $300 - $2,000+
  • Computer: $300 - $2,500+
  • Furniture and fixtures: $1,499 - $3,000
  • Warehouse racks: $5,000 - $50,000 (depending on the size of your warehouse)
  • Moving equipment: $400 - $20,000+
    • Pallet jack: $400+
    • Forklift: $4,000 (used) - $20,000+
  • Internet modem and access: $40 - $89+ per month

However, specific industries require specialized equipment. For example, food wholesalers need temperature control equipment like fridges and freezers. In contrast, wholesalers that deal with chemicals will need safety equipment.

Managing your inventory

Managing inventory correctly is crucial for wholesale distributors as mistakes can interrupt other business operations.

Inventory management can be time-consuming since you have to analyze many factors, including product availability, consumer demand, expiration dates, and more. And with all these factors, it’s easy to make mistakes.

That’s why it’s a good idea to invest in inventory management software that will automate this analysis. Software like Shipfusion can give you real-time updates on stock levels, suggest ways to improve your stock and freight management.

Building costs

Building costs will vary depending on the type of products you sell, your location, and how many products you need to store.

If you’re starting a small clothing wholesale distribution business, it’s possible to begin operating from home if you have a few spare rooms or a large garage.

However, if you’re operating on a larger scale one, you’ll need to invest in a warehouse.

In Brisbane, for example, you’d pay between $95-$125 per square meter of storage space, with similar prices in other major cities. Alternatively, you can contact businesses like Coghlan who can store your products for a fraction of the price you’d pay for a whole warehouse.

Goal setting

Goal setting gives you a roadmap to follow and determines whether your actions have been successful. However, you’ll need to consider your specific situation because your niche, location, and experience will determine a reasonable goal.

Here’s a goal-setting example using the well-known SMART framework:

  • Specific: I want to add five new profitable product streams within the next year by researching 50 products.
  • Measurable: Five new profitable products by testing 50 products.
  • Achievable: There are 240 working days in one year. If I take 50 working days to research products and 20 working days talking to manufacturers, I have 170 days to test suitable products.
  • Relevant: This goal is appropriate because I want to grow my business.
  • Time-bound: There is a time constraint as I aim to do this within one year.

By setting SMART goals for your wholesaling business, you always know what you have to do next to achieve them.

Marketing

Marketing is crucial for finding new customers, and the digital space is where most of this happens. Since you’ll be targeting other businesses, your marketing will need to showcase your authority and expertise in the products you sell.

You can do this by:

  • Sharing valuable content: Create blog posts and case studies around products you wish to promote. These can focus on the benefits of selling your products or how retailers can benefit from working with you.
    • Attending industry events: Industry events in your niche attract retailers, consumers, and manufacturers. You can set up a booth and make an effort to chat with as many people as you can.
      • Building an email list: Email gives you a direct line to your customers where you can share sales, new products, and industry news.

While there are tonnes of marketing strategies out there, it’s essential to focus on the few that make a difference for your business. However, the only way you’ll know this is by testing them one-by-one.

Financing

There are several financing options for wholesale distribution businesses in Australia. Whether you use one or a combination, make sure that your choice is best for your growth.

  • Grants and programs: You can find many different grants and programs around Australia. You can even search for state-specific ones, like these grants in Queensland.
    • Equity: Giving up a percentage of your business in exchange for cash. Venture capital is a part of this, but you often need to have a relatively successful business first.
      • Crowdfunding: You may be able to crowdfund for new product lines that you aren’t sure will be successful. This strategy is typically used for DTC brands, but you may be able to get regular clients to pre-order small amounts to trial the product.
        • Bank loans: Bank loans are the usual way to raise funds in Australia. And since your business is operational, you’ll have a much easier time getting the capital you need.

While bank loans remain the typical way to raise business funds in Australia, some alternatives may better suit your situation. Do your research and choose the best one.

Hiring employees and training

Running your wholesale distribution business alone is definitely possible if you make use of third-party warehousing solutions. These companies often take care of receiving, managing, storing, and even shipping products to customers. However, these services do come at a cost.

Once you outgrow third-party warehousing, these are the staff you may need:

  • Accountant: Once your finances become too challenging to manage, you’ll need to hire an accountant. Accountants will take care of compliance, record management, general finances, taxes, and more. You’ll typically need to pay between $65k - $80k per year for a full-time accountant.
  • Warehouse worker: If you have your own warehouse, employing laborers for it is essential. Warehouse workers are needed for handling your products and preparing them for dispatch. You’ll typically need to pay between $45k - $55k per year for a full-time warehouse worker.
  • Office administrator: Your administrator will take care of client communications, paperwork, and other ad-hoc duties. You’ll typically need to pay between $50k - $60k per year for an office administrator.
  • Marketer: Marketing is crucial for maintaining a steady flow of business and promoting new products and services. You’ll typically need to pay between $60k - $80k per year for a marketer.
  • Warehouse manager: Once your warehouse grows large enough, you’ll need a dedicated warehouse manager. Warehouse managers plan operations and direct warehouse workers and other staff. You’ll typically need to pay between $60k - $100k per year for a warehouse manager.

When hiring employees, it’s best to start with where you need the most help. For example, if you’re moving into your own warehouse, you’ll likely need a warehouse worker first. That way, you can focus on marketing, admin, and customer service as these jobs are of higher value for your business.

Staff benefits

Staff benefits help to retain employees and make working at your company more attractive. However, some benefits are non-negotiable.

These are:

  • Superannuation (pension): The current legislated minimum is 10%, with maximum employer contributions of $5,432 per quarter. However, this is subject to change so check with the Australian Tax Office.
  • Paid time off: All part-time and full-time employees need to receive 20 paid holidays each year.
  • Long service leave: Employees receive an additional 8.67 weeks of leave for ten years of service.

Besides these mandatory benefits, businesses in Australia offer a range of benefits like:

  • Maternity and paternity leave
  • Sick leave
  • Insurance
  • Paid education
  • Company cars
  • Health stipends
  • Workplace gyms

Whichever extra benefits you decide to offer your employees, ensure that they’re competitive with those in your industry.

Deciding to sell

There are many strategies you can use to exit your business. For example, selling the company to family, outside investors, or even the general public through an IPO.

But, regardless of which option you choose, it’s essential to:

  • Schedule an approximate exit date
  • Understand the intricacies of valuing your business so that you can maximize your return
  • Regularly evaluate and edit your exit plan as business conditions can change
  • Learn how to negotiate a business sale so no one can take advantage of you
  • Know what you want to achieve with your exit


Megan Kelly

About the author

Megan is the Content Manager for Dynamis and researches and writes for BusinessesForSale.com. She is an expert copywriter and content marketer.

@Be_theBoss

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