why do wholesalers undercut their retailers?

[learning as I go]

Hi, brand new to all this and am struggling to find wholesalers who are offering products at viable prices.

I don't understand why they would suggest a retail price and then undercut it by selling it to end users themselves. The prices I would need to compete against don't allow for any profit once you add VAT.

So frustrating and also strange as it is a conflict surely? :|

 

[kulture]

Yes, but it does not stop them.

 

[TotallySport]

Then when you stop ordering from them, they struggle to realise why, nothing as odd as suppliers.

When they do figure it out, you have moved on to another supplier, and its to late

 

[GraemeL]

Hi, brand new to all this and am struggling to find wholesalers who are offering products at viable prices.

I don't understand why they would suggest a retail price and then undercut it by selling it to end users themselves. The prices I would need to compete against don't allow for any profit once you add VAT.

So frustrating and also strange as it is a conflict surely? :|

Having run a very large wholesale business, I can assure you that a wholesaler does not sell to end users. If they do, then they are not a wholesaler but a distributor.

Unfortunately 'wholesaler' is used incorrectly by some to infer to potential customers low prices not available elsewhere.


G

 

[Esk247]

Having run a very large wholesale business, I can assure you that a wholesaler does not sell to end users. If they do, then they are not a wholesaler but a distributor.

Possibly. But they do call themselves wholesalers on the website and letter head and then you find they have an Amazon presence, and an eBay shop, where they sell exactly the same products for you at £1 or more less than the RRP they tell you. So you're already at a disadvantage and they have control of the stock, so they can outsell you over time anyway.

Bit of a daft way of doing it if you ask me. We're just setting up a wholesale company now and will try not to offer the same products on both retail/wholesale.

It can be difficult to do though. Where do we place our best selling lines? in to the retail where we sell them at max profits for us or in to wholesale so our wholesale customers are happy? argh!

 

[learning as I go]

I've learnt something already. I thought a distributor was a wholesaler. The undercutting I'm talking about, using one example, is not by a £1 but by £30 on a £70 item! I can't make a profit when they are selling at my cost price from them, before I even beginning adding my costs.

 

[Esk247]

I've learnt something already. I thought a distributor was a wholesaler. The undercutting I'm talking about, using one example, is not by a £1 but by £30 on a £70 item! I can't make a profit when they are selling at my cost price from them, before I even beginning adding my costs.

You're not alone. I was talking to someone who owns a small gift shop in Scarborough and they say their supplier/wholesaler has actually opened up just a few streets away. They're undercutting them and they're stuck in the situation of having a shop full of stock from that supplier that they're struggling to shift.

Have you had a look around at other suppliers? i'm guessing your products aren't budget items by the £70 RRP. How about dealing directly with manufacturers on bulk orders?

 

[GraemeL]

is not by a £1 but by £30 on a £70 item! .

Wholesalers cannot afford to do this as the margins are too slim. What is surprising to me is that you have been able to buy at the high price and still sell it.

But they are silly really. If they are buying the product at £20 and selling to you at £70, they make £50 per sale with low handling costs. If they sell at £40 (ie £30 less) they are making £20 per sale, so need to sell at least 3x more to make the same profit. (2.5 x more, plus some extra to pay for extra internal costs in handling more volume)

Suggest you seek the source of your suppliers product, which may well be a wholesaler.

G

 

[learning as I go]

Esk247 - that sounds like a nightmare situation.
It sounds like you have the right idea, having separate products for retail & wholesale.

I've tried a few distributors & they all seem to be at it.

I think approaching the manufacturers direct might be the way to go.

 

[learning as I go]

Graeme I've not bought any products yet as the numbers don't add up. The manufacturer won't deal with me as they have an exclusive deal with the distributor. I'm still searching!

They are shooting themselves in the foot as their retail customers will try to compete & won't do as well. The better the retailers do, the more products they'll sell. I would think.

In a way it's a comfort that it's not just me that is having this problem!

 

[Young Recruit]

Hi, brand new to all this and am struggling to find wholesalers who are offering products at viable prices.

I don't understand why they would suggest a retail price and then undercut it by selling it to end users themselves. The prices I would need to compete against don't allow for any profit once you add VAT.

So frustrating and also strange as it is a conflict surely? :|

This is called disintermediation or 'cutting out the middle man'. You are the middle man!

Does the wholesaler you talk about sell online? The internet is changing the dynamics of supply chains, enabling wholesalers to sell directly to consumers. Because we are in a state of change some wholesalers are a little unclear as to who their target market is, consumers or retailers.

Your right, this could be in conflict but the wholesale organisation might not have a clear strategy yet and consequently frustrate customers like yourself.

What market are you in?

JA.

 

[learning as I go]

Hi Young Recruit, yes they are selling online, on their own website & on Amazon & Ebay. I've come across this in a number of cases. I'm trying to sell bicycles but not much luck so far. I'm learning though so that's progress in a way