Branching into wholesale?

07 January, 2011

In the independent sector, the line between retailing and wholesaling is blurring all the time. If your products are interesting enough to sell to private customers, then presumably they’re of interest to restaurants and pubs.

OLN found that 73% of independents are involved in wholesaling, and that such activity accounts for about a quarter of their turnover. The research excludes merchants who are primarily wholesalers, and sell to the public as a sideline.

Selling wine to businesses is not the same as selling to the public, and there are some obvious cash flow issues to consider. Private customers do not often require invoices and they do not usually demand 60 days in which to settle their bill. They generally collect their wine when they pay for it. Businesses, on the other hand, want the wine to be delivered, accompanied by paperwork for their accounts, and will square up with you when it suits them.

In the current climate, in which pubs and restaurants are struggling, any new on-trade client has to be considered a potential risk. Be careful about being too generous with your credit terms before you’re convinced about the client’s ability to pay. If the pub always seems empty, or is in poor repair, approach with caution.

Equally, a restaurant which is not packed out on a Friday or Saturday may well be in difficulties – and wine suppliers are regularly listed among the creditors when eateries go under.

As one retailer puts it: “We’re now asking for cash on delivery with most pubs – we’ve had to get very tight on credit. Alarm bells ring when we get a new customer enquiry because you wonder why they aren’t still dealing with their old supplier.”?One of the biggest issues for a would-be wholesaler is how much stock to carry, and where to store it. Some larger businesses are able to import their own wines and use the services of a bonded warehouse, although it’s probably not worth going to that sort of effort unless you find wholesaling is becoming a major part of your turnover.

Other independents, particularly in far-flung parts of the UK, sometimes act as a sort of satellite for a major importer. They will buy from the importer’s portfolio, in pallet-sized orders, that can be sold on to pubs, clubs, restaurants and hotels.

Storage is, again, a key consideration, and although lock-ups can sometimes be relatively cheap, they need to be watertight, not prone to overheating in the summer – and, most importantly, secure.

Restaurant clients have a horror of seeing a wine on their list sold more cheaply in an off-licence or supermarket, and so many wholesalers have a policy of having separate retail and wholesale lists – or at least different labels for the same wine.

One independent says: “We do have certain products that will be purely for wholesale. If you’re a small retailer it’s not such a big issue, but for a company with several stores it’s not a good idea to be selling a fantastic Sauvignon Blanc to a restaurant and then promoting it in your window at £4.99.”?Independents who are starting out in wholesaling should bear in mind that all of their potential clients are already sourcing their wines from somebody else. Why should they switch to you? Price is part of the equation, but so is convenience. Will you be able to supply the wines the client wants, when they want them? Not every retailer is in a position to give such guarantees.

What other services can you provide? Perhaps you can offer to run a one-hour training session for staff, so that they understand and enjoy the wines they’re selling. Maybe you could use your customer’s pub or restaurant as a venue for a tasting, or themed dinner.

You could certainly help with the client’s wine lists, and help match wines in your portfolio to the menu – these might not be things the current supplier has considered.

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