Pros and Cons to a Wholesale Approach After a Crowdfunding Campaign

After a successful Kickstarter or Indiegogo campaign, there are many decisions to be made about the future of your business. Will you sell your product online? Open a brick-and-mortar store? Sell on Amazon? Offer your product wholesale? Go through a distributor? Some combination of the above?

There’s much to consider here; below we’ve outlined some things you may want to think about if you are going the wholesale route.

Pros of Wholesale

Wholesale is a great option if you can mass produce a product and get it to market efficiently. Reasons to consider selling your product to other retailers include the following:

• You won’t have to deal with customers directly. This will save you the headache of dealing with customer service issues, and will likely also save you the cost of hiring someone to handle customer service or customer management.
• You’ll be able to outsource your B2C marketing, giving you one less thing to have to worry about managing or paying for. You will still have to market your product to wholesalers or distributors, but this is very different than marketing to consumers. You also won’t have to pay for in-store marketing and other overhead costs.
• Working with retailers provides social proof. If you are building a business from scratch, it will take time to build up a customer base who trusts you to offer a good product. However, if you get into stores where your target audience is already shopping, it’s much easier to gain their trust, and thus their business.
• Forecasting sales and revenue is often easier when working with retailers or distributors, because you can set minimum orders. As you forecast, it doesn’t matter how much product they will sell to consumers, only how much you can sell to them. Essentially, when you go this route you will sell large quantities of your product at once to vendors, and then these vendors will sell them to individual consumers.

Cons of Wholesale

Even with all these benefits, there are drawbacks to this method of business that need to be considered:

• Your cash will be tied up in inventory. You’ll need to sell inventory directly to the retailer; you can’t rely on pre-orders here.
• While you won’t have to manage customers, you will have to manage logistics on a large scale. Keep in mind that you’ll need to make sure that product gets shipped to the right location, and you’ll also have to manage the manufacturing process and perhaps also maintain inventory. What’s more, with all this to manage, fulfilling orders on a tight timeline is difficult.
• You’ll need to do a bit of research. When you sell directly to consumers, you can sell to anyone interested in your product. However, when you sell to retailers, you’ll need to do a bit more vetting. You’ll want to consider their trustworthiness on both the wholesaler side and the consumer side, so you’ll have a better idea of whether they will pay you on time and whether your customers are likely to purchase your product from them.

A Note About Distributors

If you decide to go the wholesale route, you may be interested in working with a distributor. In some cases, this is your best bet. For example, if you hope to get in department stores or large chains, you’ll likely want to go through a distributor. Just keep in mind that having a distributor doesn’t guarantee placement in your desired stores, and you likely won’t have full control over what stores your product ends up in. If you also hope to be in smaller stores, remember that smaller stores do not typically buy through distributors, so you’ll still have to sell to them directly, and some independent stores may drop your product if they feel you are too mainstream and not unique enough. Additionally, know that distributors can be expensive.

Have more questions about how to successfully sell your product and increase your revenue? Get in touch today and request a quote!