The Consumer Goods Guide to Modern Commerce | Section 2
Wholesale partnerships with retailers form the foundation for many consumer product brands. Wholesale means selling your products in bulk to retailers (from boutique shops to large retail chains), who then sell directly to consumers. This guide outlines best practices for building effective wholesale partnerships, operational readiness, managing logistics, and strategies for scaling your wholesale channel.
Table of Contents
Why Wholesale Matters in a Multi-Channel Strategy
Wholesale significantly broadens your market reach by leveraging established retailers’ customer traffic and credibility. Wholesale complements direct sales and enhances brand visibility, reaching customers who prefer physical shopping or discover products through store browsing.
For most brands, including those that start digitally-native, wholesale is the pathway to reaching scale: over 60% of direct-to-consumer (DTC) brands now also sell through retail channels.
| Company Name | Year Started | Category | Year Entered Wholesale | Retail Partners |
|---|---|---|---|---|
| Glossier | 2014 | Beauty Products | 2023 | Sephora |
| Allbirds | 2016 | Footwear | 2021 | Nordstrom, Dick's Sporting Goods |
| Casper | 2014 | Mattresses | 2017 | Target, Amazon, Costco |
| Dollar Shave Club | 2011 | Personal Care | 2016 | Target, Walmart |
| Bonobos | 2007 | Men's Apparel | 2017 | Walmart |
| Away | 2015 | Luggage | 2019 | Nordstrom |
Retailers are continually looking for innovative and appealing products to attract and retain customers. This creates a significant opportunity for your brand. By positioning yourself as a valuable addition to a retailer’s product assortment, you become a collaborative partner, not merely a supplier. However, succeeding in wholesale involves more than just securing an initial order—it requires preparation, thoughtful planning, and ongoing relationship management.
Establishing Retail Partnerships
Identifying the Right Retail Partners
Not all retailers will align with your brand. Carefully choose retailers whose customer demographics and brand positioning match your product. Target stores where your product can uniquely enhance their assortment or address a specific gap. For instance, premium organic baby foods fit best with natural grocery chains or upscale baby boutiques rather than discount dollar stores. Conversely, broader appeal products, such as baby clothing or household goods, can thrive with major retailers like Target. The ideal retail partner enhances your brand’s credibility, visibility, and reaches your target audience effectively.
Crafting a Compelling Pitch with Data
Successfully approaching retailers involves thorough preparation. Create a persuasive sales presentation (line sheet) detailing your product line, pricing, promotional plans, and clear evidence of consumer demand. Bring product samples, demonstrate compelling branding, and provide metrics like online sales growth, robust social media followings, or positive media coverage. Retail buyers primarily want assurance your product will sell in their stores. Clearly outline differentiators, how your product enhances their category, and your commitment to support its success through marketing and demonstrations. Persistence and professionalism are crucial—you may face initial rejections before securing a retailer’s agreement.
Negotiate Terms and Expectations
Negotiations with retailers can be high-stakes and intense, particularly with large chains that have strict requirements and leverage. While the goal is to reach mutually beneficial terms, these discussions often involve assertive positioning, detailed scrutiny of terms, and pressure to meet the retailer’s specific needs.
Retailer priorities vary. For example, Target often has a strong preference for vendors who support category growth. Whole Foods may focus more on ingredient integrity and sustainable packaging. Walmart is known for prioritizing price competitiveness and high OTIF (On Time In Full) scores. Meanwhile, Nordstrom might be more interested in brand alignment and merchandising aesthetics. Understanding what matters most to each retailer helps you come prepared and position your proposal effectively.
Effective negotiations start with clear preparation. Understand your bottom line on critical issues, but remain flexible where possible to accommodate the retailer’s goals. Be ready to justify your terms with data, such as historical sales performance, market comparisons, or operational capabilities.
The following table outlines common negotiation terms and provides practical examples of contractual language to guide your discussions:
| Category | Term | Definition | Example Clause Language |
|---|---|---|---|
| Pricing and Margins | Wholesale Price | The price at which a supplier sells products to a retailer. | The Supplier agrees to provide the Retailer with a wholesale price of $5 per unit for orders exceeding 500 units per month. |
| Retail Markup | The percentage increase a retailer applies to the wholesale price to determine the final selling price. Typically 40%-50%. | The Retailer agrees to maintain a retail markup of no less than 40% of the wholesale price. | |
| MSRP (Manufacturer’s Suggested Retail Price) | The recommended price for retailers to sell the product. | The Retailer agrees not to sell the Supplier’s products below the MSRP of $199.99, except during approved promotional periods. | |
| Distributor Pricing | The pricing structure when working with a distributor, ensuring profit margins remain viable for all parties. | Distributor pricing shall be set at a minimum of $3 per unit, with a maximum allowable markup of 50% to retailers. | |
| Introductory /Promotional Pricing | Temporary discounts or special pricing offered to retailers for an initial order or product launch. | The Supplier agrees to offer a one-time promotional discount of 20% for the Retailer's first bulk purchase. | |
| Payment Terms | Net Payment Terms | The number of days the retailer has to pay after receiving the goods. | The Retailer agrees to pay all invoices within 30 days of receipt of goods (Net 30). |
| Early Payment Discounts | Discounts offered to encourage quicker payment (e.g., 2% off if paid within 10 days). | A 2% discount shall be applied to all invoices paid within 10 days of issuance. | |
| Prepayment or Deposits | Some suppliers require partial or full payment upfront, especially for custom or large orders. | The Retailer shall make a 50% deposit on all custom orders before production begins. | |
| Vendor Allowances | Additional fees or discounts requested by retailers for marketing, shelf placement, or promotional efforts. | The Supplier agrees to a 5% vendor allowance per order to support in-store marketing efforts. | |
| Delivery and Freight Terms | FOB (Free on Board) Shipping Terms | Defines responsibility for shipping costs: FOB Origin (retailer pays) vs. FOB Destination (supplier pays). | All shipments shall be made FOB Destination, with the Supplier covering shipping costs to the Retailer’s warehouse. |
| Freight Responsibility | Clarifies whether the retailer or supplier pays for shipping costs. | The Supplier will cover shipping costs on orders exceeding $5,000; otherwise, shipping shall be paid by the Retailer. | |
| Lead Time | The time it takes from order placement to delivery. | The Supplier agrees to deliver orders within 14 business days from the date of purchase. | |
| Drop Shipping | A fulfillment method where the supplier ships directly to the customer on behalf of the retailer. | The Supplier shall handle drop-shipping fulfillment within 48 hours of receiving an order from the Retailer. | |
| Returns and Refund Policies | Defective or Damaged Goods | Policies regarding the return of faulty items. Typically, retailers expect full refunds or replacements. | The Retailer may return defective products within 30 days for a full refund or replacement, with proof of damage provided. |
| Unsold Inventory Returns | Some retailers require the option to return unsold stock, particularly for new products. | The Retailer may return unsold items after a 90-day promotional period for a credit of up to 50% of the wholesale cost. | |
| Guaranteed Sales Programs | Agreements where the supplier credits or refunds unsold units after a promotional period. | The Supplier agrees to issue full refunds for unsold units after the agreed promotional period, provided they are returned in original condition. | |
| Restocking Fees | Fees charged when retailers return items to offset handling and processing costs. | A restocking fee of 10% shall apply to all non-defective returns initiated by the Retailer. | |
| Order Requirements and Commitments | Minimum Order Quantities (MOQs) | The smallest number of units a retailer must order to qualify for wholesale pricing. | The Retailer must purchase a minimum of 500 units per order to qualify for wholesale pricing. |
| Order Increments | Defines case pack requirements (e.g., orders must be placed in multiples of 6 or 12). | All orders must be placed in increments of 12 units per SKU. | |
| Reorder Expectations | Specifies reorder frequency and pricing changes based on volume. | The Retailer is eligible for a 5% discount on reorders exceeding 1,000 units within a 6-month period. | |
| Marketing and Promotional Support | Co-op Advertising | Retailers may request funds to support advertising efforts for the supplier’s product. | The Supplier agrees to contribute up to 50% of advertising costs, provided the Retailer submits proof of expenses. |
| Retailer-Specific Discounts | Exclusive promotions or temporary markdowns negotiated with specific retailers. | The Supplier will provide an exclusive 15% discount on seasonal promotions for the Retailer. | |
| In-Store Placement | Negotiations for premium shelf space, endcaps, or online visibility in exchange for marketing fees. | The Supplier agrees to pay a one-time $5,000 fee for premium endcap placement in the Retailer’s stores. | |
| Contract and Legal Terms | Exclusivity Clauses | Some retailers request exclusivity within a region or for a specific time period. | The Supplier grants the Retailer exclusive distribution rights for the product in the Northeast region for 12 months. |
| Termination Conditions | Defines circumstances under which either party can end the agreement. | Either party may terminate this agreement with 60 days' written notice if terms are not met or payment defaults occur. |
Prepare Your Operations
Before the first order even comes in, ensure you can meet the retailer’s requirements. Retailers usually have vendor compliance guidelines covering areas like packing, labeling, EDI (Electronic Data Interchange) for orders and invoices, and delivery appointment scheduling. Make sure you can comply—failure to follow their processes can result in chargeback fees or even jeopardize the relationship.
Common requirements include:
- Barcodes (UPC/EAN) on each item and carton
- Specific carton labeling (e.g., product code, quantities, expiration dates for perishables)
- Pallet configuration standards
- Sending an ASN (Advance Ship Notice) upon shipment
Working with large retailers may require investing in systems or third-party logistics (3PL) partners who are already familiar with these standards. While it can seem overwhelming, your retailer’s vendor support teams and third-party services can provide guidance. Treat these operational needs as part of the cost of doing wholesale—budget accordingly in terms of both time and money. Reliable, compliant suppliers build reputations that help them earn and retain shelf space.
Build the Relationship
Landing the account is just the beginning. To create a successful long-term partnership, stay proactive in communication and support. Maintain regular contact with the buyer or category manager—share updates on sales performance, consumer feedback, and promotional ideas. Offer to train store staff if needed, especially for technical or premium products. Provide marketing materials, signage, or demo support to help them merchandise your product effectively.
Responsiveness is also key: reply promptly and professionally to inquiries or issues. Always deliver on your commitments—if you agree to participate in a promotion or provide displays, follow through. Wholesale is a relationship-driven business, and the more trust and value you bring to the retailer, the more likely they are to recommend your product or protect your shelf space when competitors emerge.
Some brands even co-develop exclusive SKUs or white-label versions of their products with key retailers as a sign of strategic partnership. While that may come later, it illustrates the mindset: treat your retail partners as extensions of your own team, and work together toward mutual success.
As your business grows, consider dedicating a wholesale account manager or team to nurture these relationships. If you’re early-stage and wearing multiple hats, still carve out time to check in—not just to sell more, but to gather feedback and build rapport. Over time, strong retail relationships can become a competitive edge that’s difficult for others to replicate.
Preparing and Scaling Wholesale Operations
Selling wholesale is a major shift in scale and complexity from direct-to-consumer sales. To succeed, your business must be prepared operationally and strategically. This section outlines how to get ready and continue scaling as you grow.
Production and Inventory Readiness
Ensure your manufacturing capabilities can handle large orders, often in the hundreds or thousands of units. Coordinate with your manufacturer about lead times and production flexibility. Consider building inventory in advance for major launches—but balance this with the risk of overproduction. Use sell-in forecasts from retailers (store count, shelf facings) to estimate inventory needs, and prioritize responsiveness to reorders. Avoid stockouts by maintaining a buffer where feasible.
Packaging and Barcoding
Comply with retail packaging standards, including scannable UPC barcodes (purchased through GS1). Packaging should be durable for transit and ideally shelf-ready—e.g., shippers that convert into displays. Use case pack quantities that meet retailer preferences (typically 6 or 12 units). Label cartons clearly with required details like item codes, quantities, and PO numbers. These small details prevent issues at distribution centers and help ensure smooth receiving.
Retail System Compliance (EDI)
Most large retailers use EDI for order transmission and invoicing. Set up an EDI solution—either in-house or via a third-party provider—to manage purchase orders, acknowledgments, ASN (Advance Ship Notice), and invoices. Use a checklist to track each order’s status from confirmation through shipment. Retailers measure vendor reliability using metrics like OTIF (On Time In Full), so build systems that support dependable order fulfillment.
Logistics and Warehousing
Wholesale fulfillment typically involves palletized shipments via LTL (Less than Truckload) or FTL (Full Truckload) freight. Make sure your warehouse or 3PL can handle these requirements—both in terms of space and equipment (e.g., pallet jacks, shrink wrap). Retailers often require delivery appointments and strict receiving protocols. You’ll need paperwork like a bill of lading (BOL) and advanced shipping notices (ASN). Use an inventory system to track allocations and avoid overcommitting across channels.
Pricing and Terms Structure
Set a clear pricing model. Know your MSRP, wholesale price, and distributor pricing—then validate that margins work for you and everyone in the supply chain. Define minimum order quantities, reorder discounts, and payment terms (e.g., 2% off for early payment). Create a wholesale catalog or line sheet with SKUs, prices, and terms. If working with distributors, allow for their margin (typically 10–20%) when calculating your lowest viable selling price.
Promotions and Trade Marketing
Retailers expect suppliers to support product launches and drive in-store velocity. Budget for promotions, such as invoice discounts, demo support, and co-op advertising. Trade spend can exceed 20% of revenue in some categories. Plan in advance to manage cost and align with retailer calendars. Provide point-of-sale materials where allowed. Supporting your product at retail builds trust and encourages expansion opportunities.
Managing Fulfillment and Compliance
Every shipment is high stakes. Ensure order accuracy and on-time delivery. Invest in processes like barcode scanning and fulfillment checklists. Retailers track fill rate and penalize late or short shipments. Stay aligned with each retailer’s routing guide—common violations like incorrect pallet height or missing labels lead to chargebacks. Create internal checklists for each account to stay compliant.
Handling Returns and Defects
Clarify policies with retailers for returns and damaged goods. Some may expect full credits without returns; others require physical return. Monitor sell-through and collaborate with retailers to improve performance. Establish processes for inspecting returned goods, issuing credits, or documenting losses. Budget for a small percentage of return-related losses.
Scaling Logistics
As wholesale volume grows, assess whether your logistics setup can scale. Regional 3PLs can reduce delivery times and freight costs. Larger volumes may justify switching from LTL to FTL shipments. Coordinate production around order clusters to increase efficiency. Track inventory closely to prevent both stockouts and excess inventory.
In short, wholesale readiness means aligning every part of your operation—from production to fulfillment—with retail expectations. Once these systems are in place for one retailer, they can often be replicated across others, making future growth more streamlined.