The Importance Of Repeat Business In The Wholesale Business

Many businesses are set up to capture one time, or at least infrequent, sales. These businesses include real estate firms and construction companies.

Although they do realize that the customer might come back to use their services, they also know that in reality the same customer will usually use them only once every few years.

They set their prices according to the realization that their earnings from that customer will only take place once every few years.

Wholesalers need to follow an entirely different business approach.

For starters, because of the intense competition in the wholesale business, profit margins are very low.

Any time you deal with a commodity, price will be the determining factor.

So flea market vendors, dollar stores, and eBay sellers will only buy their wholesale merchandise from the lowest priced seller.

There is no advanced skill required in the wholesale business, unlike in the real estate and construction business.

Because of this there are plenty of wholesale businesses starting all the time.

So how do you run a successful wholesale business when wholesale profit margins are so thin?

You need to focus on building repeat business. As a wholesaler you want to have wholesale customers who are continuously reordering from you.

The earning power of a wholesale business does not reside in the profit per unit, but in the mass volume that leads to cumulative profits.

In order to achieve a steady growth in profits, which is required to obtain large wholesale volumes, a wholesaler needs to increase his number of repeat wholesale customers.

The flip side of this equation is the following.

Only offer special wholesale pricing to customers who are willing to give you repeat business.

If you sense that a customer will only buy from you once, do not feel compelled to give him your lowest prices.

I do believe in sacrificing short term profits for long term success. But this idea only woks if your wholesaler customers plan on giving you more business.

One important thing to remember is that you never know which customers will turn into repeat customers, so treat them all fairly and give them the benefit of doubt.

Offer your wholesale customers the best pricing, but reserve your lowest wholesale pricing for those customers who come back.

Donny Lowy is the CEO of http://www.closeoutexplosion.com, an online wholesale and closeout business.

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