A Bird’s Eye View of the Retail Supply Chain
March 28, 2011 Amazon MarketingIf you haven’t already noticed with the retail supply chain is that the closer you are to the product manufacturer the higher your profit margins. However, regardless of your place in the retail chain, everybody in the chain plays an important role in getting products to market.
The Chain Gang
The Retail Supply chain is made up of 3 entities that all play a critical role in the retail supply chain:
· The Manufacturer is the first step in the supply chain as they are responsible for creating the products. Manufacturers are set up to sell large quantities of their product through a select group of wholesalers who then would resell the products to an assortment of retailers.
· The Wholesaler is the next step in the supply chain as they are responsible for providing services to the manufacturer as well as the retailer. Wholesalers generally acquire a large quantity of product and distributed it through their huge network of retailers.
· The retailer is the last step in the supply chain as they are responsible for getting the products into the hands of the end users.
Get In Where You Fit In
A typical Retail Supply Chain generally looks like the diagram below:
Manufacturer→ Wholesaler→ Retailer→ End User
Retailers often relinquish some of the profit margin of many products as extra people get added to the supply chain, as seen below:
Manufacturer→ Wholesaler→ Middleman→ Retailer→ End User
The reality is that many middlemen open up shop between the wholesaler and the retailer by positioning themselves as wholesalers when in actuality there are not. These middlemen simply mark-up the prices from legitimate wholesalers and eat away the profit margins that are normally left for retailers. If you want to find legitimate wholesalers, you should contact the manufacturer is order to acquire a list of their authorized dealers
How to Work with Wholesalers
If you want to grow your business and explode your profits as an online retailer, then you have to make sure that you are working with a credible wholesaler. You must have your business structure in place in order to open an account with a wholesaler. This includes acquiring a legal business name and Tax Identification number. Please do not skip this step as it will only limit the progression of your business. If a prospective wholesaler tells you that they do not need your Tax Identification number, please be aware that you are not dealing with a legitimate wholesaler. Real wholesalers will have competitive wholesale pricing that will allow all retailers to make a decent profit.
Overall, the retail supply chain consists of 4 components that are critical to the process of getting products to the end consumer. By better understanding the supply chain, potential retailers will have a better understanding of how to maximize their role and steer clear of sneaky middlemen that prey on the profits of misinformed businesses.
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