Selling goods to other catalogers or retailers can be big business, since a reseller is likely to buy a lot more from you than an individual consumer will. Yet if your primary business is selling to end users, your operation may not be equipped to fulfill larger orders. “You need to have a system in place that supports the differences of the three main channels — direct, retail, and wholesale,” says Bob Betke, vice president of Richmond, VA-based fulfillment consultancy F. Curtis Barry & Co. “You can’t handle a wholesale order as you would a retail or direct order.”
What’s more, your product packaging may not meet resellers’ needs. Wholesale customers may prefer to buy items not only in mass quantities but in set quantities as well, such as in boxes of 12 units or in case packs of 24 units. At the retail level, products may need to be packaged to go with a point of purchase display.
How companies handle such fulfillment challenges depends on the product line and on their customer’s needs. For instance, Milwaukee-based Brady Corp., a $675 million manufacturer/marketer of industrial signage and safety products, sells signs, labels, and labeling software to Grainger, a Lake Forest, IL-based business-to-business cataloger of industrial maintenance, repair, and operations supplies.
Because the $784.5 million Grainger in turn resells the merchandise to manufacturers and contractors, it regularly needs Brady to custom-package significant quantities of signage, says Mark MacDonald, Brady’s central region sales manager. Grainger regularly requests special skid sizes for delivery and also has specific labeling requirements for three types of packaging — sell packs, ship packs, and master packs. Brady ships most of its material to Grainger and other wholesale customers from its largest distribution center, near its corporate offices in Milwaukee.
Although Edison, NJ-based toiletries manufacturer/marketer Caswell-Massey is best known for its stores and consumer catalogs, it also sells to more than 2,000 wholesalers, says president/chief operating officer Ed Coleman. In fact, about one-third of Caswell-Massey’s revenue comes from wholesale customers, which include Vermont Country Store, Anthropologie, and 1-800-Flowers.com. Caswell-Massey will create special packaging for some of its wholesale clients. “We will create a ‘packout’ that is exclusive to that particular customer if so requested,” Coleman says. For example, the company will create “feel-better gift baskets” containing unique combinations of Caswell-Massey soaps, skincare products, and spa items.
As for fulfilling such orders, “we have crews set up in each of our distribution centers that are responsible for such specific product and packaging requests,” Coleman says. Caswell-Massey also serves as a drop-shipper for both 1-800-Flowers.com and the Army & Air Force Exchange Service.
The 6,500 wholesale customers of York, ME-based Stonewall Kitchen accounted for 54% of its 2004 revenue, says Natalie King, vice president of sales and marketing. The specialty foods manufacturer/merchant’s direct business and six stores made up the rest. This year, King notes, wholesale should account for a slightly smaller percentage of overall sales, as the company is opening two additional stores later in 2005.
Stonewall Kitchen packages its products in case packs for its wholesale customers. “How we package certain items really depends upon the products’ size, weight, and price point,” King explains. “With jams, for example, our 13-oz. jars are packaged 12 per case, while 4.5-oz jams are packaged 24 per case, and our specialty jam collection — which has two jams in a gift box — is packaged six per case.”
Products for wholesale are packed by the case at the end of the manufacturing production line before they’re shipped to Stonewall Kitchen’s 100,000-sq.-ft. distribution center. “Then the products are ready to go to the wholesale clients or to be picked to restock the retail pick area,” King says. Stonewall Kitchen ships merchandise to retailers, consumers, and its stores from the one distribution center.
Wholesale orders at Stonewall Kitchen are taken by a dedicated b-to-b sales staff. Unlike other employees, members of the wholesale team must learn how to process electronic data interchange (EDI) orders and handle freight orders, among other specialized tasks. “But most [wholesale] orders are managed and processed through the distribution center by the same staff processing other orders,” King says. The company, whose wholesale clients include Crate & Barrel, Williams-Sonoma, and Whole Foods, drop-ships items on a very limited basis. “Our largest drop-ship customer is L.L. Bean, located only about an hour north of us,” King says.
Different strokes
Although it only represents roughly 7% of its roughly $755 million in overall sales, San Francisco-based The Sharper Image has a sizable wholesale operation. Clients include Staples, Federated Department Stores, and Bed, Bath & Beyond.
According to Sharper Image’s senior vice president of marketing Roger Bensinger, products sold to wholesale customers do not get packaged any differently than those sold retail through its own stores and catalogs. The company’s product box designs, which feature a photograph of the product on the front of the package as well as photos of the item in use and sales call-outs, “seem to work equally well in the wholesale environment.”
Nor does Sharper Image provide drop-shipping services for any of its wholesale customers, says Bensinger. Wholesale orders are bulk shipped from The Sharper Image’s stateside warehouses or fulfilled directly from its operations in China.
But most catalogers selling to resellers find that they do have to tweak their operations for optimum efficiency. Whereas orders for consumers, which generally consist of only a handful of items, can efficiently be picked by individuals, automated systems are usually best for picking the larger quantities and cases of wholesale orders, says Paul Sobota, another vice president with F. Curtis Barry & Co.
And not all warehouse management systems can handle the picking, packing, and shipping differences between wholesale and end-user fulfillment. Among the software manufacturers that produce systems capable of managing direct, retail, and wholesale fulfillment, says Sobota, are Natick, MA-based CommercialWare and Delray Beach, FL-based Ecometry Corp. Enterprise resource planning (ERP) systems are also suitable for wholesale, he notes, but they tend to be expensive.
Sobota also stresses the need to evaluate freight carriers on a regular basis to make sure that you get the best deal on any parcels you send: “It’s important to remember that not everybody in the wholesale business ships using DHL, FedEx, or UPS.” And while most shipping contracts last between 12 and 24 months, Sobota advocates continually looking out for the best deal possible.
You might also consider LTL or “less than truckload” options for wholesale orders. This method allows you to consolidate and ship products along with another company that is bound for the same destination, says Sobota. “If you can’t fill up a 50-foot tractor trailer with your order, LTL is a cheaper alternative.”
Wholesale changes
Considering expanding into wholesale? Here are a few questions to answer before targeting the b-to-b sector:
-
How are you going to bulk-package and price your products. Will a case consist of a dozen widgets or two dozen? Will you offer discounts to customers who order six cases at a time or 12 cases? Will you allow wholesale customers to buy half-cases or to mix-and-match SKUs per case?
-
Will you provide custom labels and packaging? If your customers are retailers, will you provide point-of-sale fixtures and signage?
-
Will you create special bundled products — say, a specific widget-and-flange combo — for individual customers?
-
Will you need to automate your distribution center or buy additional equipment such as conveyors belts or forklifts to pick and convey the larger orders?
-
Can your warehouse management system handle wholesale orders?
-
Will you provide drop-shipping?
-
Do you need to contract with freight carriers in addition to your current package carrier?