Wholesale looks deceptively familiar to a brand that already sells online. You still ship boxes, you still invoice, you still forecast. What changes is who holds the leverage, how long you wait for cash, and how many ways a large customer can pay you less than the number on the purchase order.
This guide walks the whole channel: how retailer economics differ from direct-to-consumer economics, how to build a price architecture that survives a buyer meeting, what a purchase order actually commits you to, how routing guides and compliance manuals turn packing into a rules-based exercise, and why chargebacks quietly eat the margin most brands assume they earned. It is written for operators at consumer brands doing between $1m and $50m in revenue who are adding or fixing a wholesale business.
In short
- Wholesale is a cash-cycle decision, not a revenue decision. You fund inventory, ship it, then wait 30 to 90 days, so a growing wholesale book consumes working capital even when it is profitable on paper.
- Price architecture comes before the first pitch. The standard structure is a wholesale price near 50% of suggested retail, which means your landed cost has to sit around 20% to 25% of retail for the channel to work.
- Buyers buy a line sheet, not a story. Case packs, minimums, lead times, ship windows and terms belong on one page, because a missing field is the most common reason a promising meeting produces no purchase order.
- Compliance deductions are a real cost center. Routing guide violations, late shipments, label errors and short ships are billed back automatically, and a brand that ignores them can lose several points of margin per season.
- Channel conflict is managed with policy, not with hope. Assortment splits, launch timing and a written minimum advertised price policy keep your own store and your retail partners from competing on the same item at the same price.
What changes when a retailer becomes your customer
In direct-to-consumer, your customer is an individual who pays before you ship. In wholesale, your customer is a company with a procurement process, a merchandising calendar, a vendor compliance department and an accounts payable team that treats your invoice as one line in a queue. The transaction is no longer a checkout event. It is a commercial relationship with paperwork at every joint.
The first shift is timing. A D2C order converts demand into cash the same day. A wholesale order starts with a buyer committing to units for a delivery window that may be four to eight months out, which forces you to produce against a promise rather than against observed demand. That is closer to a manufacturing business than to a storefront, and it rewards brands that already understand supplier lead times from the sourcing side of the business.
The second shift is control. Once your product sits on a retailer’s shelf, you no longer decide how it is displayed, discounted, bundled or described. You influence those things through agreements and through the quality of your relationship with the buyer, not through a dashboard. Brands that come from marketplace selling often find this harder than brands that started in physical retail, because the feedback loop is slower and far less granular than the reporting they are used to on platforms covered in our complete guide to selling on global e-commerce marketplaces.
The third shift is concentration risk. A thousand consumers leaving is a trend you can see coming in cohort data. One account representing 30% of revenue choosing not to rebuy next season is a cliff, and it usually arrives in a single email. Concentration is the single most common structural weakness in a young wholesale book, and it is worth measuring from the first season rather than the third.
The units of work are different
D2C teams optimize sessions, conversion rate and contribution margin per order. Wholesale teams optimize doors, sell-through rate per door, reorder rate and fill rate. Those metrics are not interchangeable, and a team that reports only revenue will not notice that its product is shipping into stores and then sitting there.
Sell-through is the number that decides whether you get a second order. If a retailer buys 600 units for 60 doors and sells 120 in the first eight weeks, the buyer sees a slow item regardless of what your own channel is doing. Most specialty retailers look for something in the range of 60% to 70% sell-through over a season before they treat a line as proven, though the bar varies widely by category and price point.
Wholesale economics on a single unit
The clearest way to understand the channel is to run one unit through both paths. The numbers below use a $100 suggested retail price and a $22 landed cost, which is a realistic structure for a brand that has already negotiated volume pricing with its factory.
| Line item | Direct-to-consumer | Wholesale |
|---|---|---|
| Price received | $100.00 | $50.00 |
| Landed product cost | $22.00 | $22.00 |
| Payment processing | $3.20 | $0.00 |
| Customer acquisition | $25.00 | $2.50 (sales commission) |
| Pick, pack and outbound freight | $9.00 | $1.80 (bulk carton) |
| Returns and refunds provision | $8.00 | $0.50 |
| Compliance deductions and allowances | $0.00 | $3.00 |
| Contribution per unit | $32.80 | $20.20 |
| Contribution margin | 32.8% | 40.4% |
| Days from cash out to cash in | Roughly 5 to 15 | Roughly 120 to 180 |
Two things stand out. Wholesale delivers a higher percentage margin on a much smaller absolute number, because you are selling the acquisition and fulfillment work to the retailer in exchange for half the retail price. And the cash cycle is an order of magnitude longer, which is why wholesale growth and cash crises so often arrive together. Treat the table as a template to fill with your own figures rather than as a benchmark, since category, freight terms and deduction rates move every line.
Wholesale pricing, keystone margins and MAP policies
Wholesale pricing is built backward from the shelf. You choose a suggested retail price the market will bear, then work down through the retailer’s required margin to the wholesale price, then down through your own required margin to a target landed cost. If the target landed cost is not achievable, the product does not belong in wholesale, and no amount of selling effort fixes that. Our walkthrough of the wholesale price list margin calculation runs that subtraction line by line for a first season.
The traditional structure is keystone pricing, where the retailer doubles the wholesale price to reach retail. A $50 wholesale price becomes a $100 shelf price, giving the retailer a 50% initial margin. Keystone is a starting convention rather than a law, and it varies by category: gift and home often hold at keystone, apparel and accessories frequently need more, and some grocery and consumable categories work on considerably less.
Who needs which margin
The further a channel sits from the end consumer, the more layers of margin the retail price has to carry. Selling through a distributor rather than direct to retailers adds a layer that has to come out of your share, not out of the shelf price.
| Channel | Typical discount off suggested retail | Your price on a $100 item | What the partner absorbs |
|---|---|---|---|
| Your own store | 0% | $100 | Nothing; you carry all costs |
| Independent specialty retailer | 50% | $50 | Store costs, staff, local marketing |
| National chain or department store | 50% plus allowances and markdown support | $42 to $48 effective | Scale distribution, plus deductions billed back to you |
| Distributor or wholesaler | 60% to 65% | $35 to $40 | Warehousing, sales coverage, retailer credit risk |
| Off-price or liquidation | 70% to 85% | $15 to $30 | Clearing dead inventory, with brand risk attached |
Build this grid once, in a spreadsheet, and do not improvise from it in a meeting. Brands lose the most money in the moment a buyer asks for “a little better than your standard” and a founder agrees on the spot. Every exception you grant becomes the reference price for the next negotiation, because buyers talk to each other and terms leak.
Getting landed cost low enough
If wholesale requires a landed cost around 20% to 25% of retail, most brands have to revisit sourcing before they revisit pricing. That usually means larger production runs, longer lead times, simplified packaging or a different factory tier. The negotiation levers are the familiar ones from importing, and our walkthrough of negotiating MOQ and price with suppliers in practice covers how minimum order quantities and unit price trade against each other.
Landed cost also has to include duty, freight and any brokerage, not just the factory invoice. A brand that quotes a wholesale price off the ex-works number and then discovers a tariff line it had not modeled has sold a season at a loss. Duty rates and classifications change, and the authoritative reference for US importers is the Harmonized Tariff Schedule maintained by the United States International Trade Commission, with US Customs and Border Protection publishing the rulings that govern classification in practice.
Minimum advertised price policies
A minimum advertised price policy, usually shortened to MAP, sets the lowest price at which a reseller may advertise your product. It governs advertising, not the price the retailer actually charges at the register, and that distinction is the heart of why MAP is used so widely. The purpose is to stop a race to the bottom in search results and marketplace listings that destroys margin for every partner including you.
MAP sits in a genuinely complicated area of competition law. In the United States, the Federal Trade Commission and the Department of Justice treat unilateral policies differently from agreements between a supplier and a reseller to fix resale prices, and state law adds further variation. In the European Union, the European Commission has repeatedly fined manufacturers over resale price maintenance under its vertical agreements rules, so the analysis differs again by jurisdiction.
The practical takeaway is procedural rather than legal. Brands that use MAP successfully write the policy down, distribute it identically to every reseller, monitor advertised prices, and apply consequences consistently. How you structure and enforce such a policy is exactly the kind of question to put to counsel before the first season rather than after a dispute, for reasons covered in the section on legal information near the end of this guide.
Line sheets, catalogs and the buyer meeting
A line sheet is the single document a wholesale business runs on. It is not a lookbook and it is not a brand deck. It is a dense, unglamorous reference that lets a buyer build an order without emailing you a question, and the brands that treat it as a design exercise rather than an operational one lose orders to brands that do the opposite.
Every line sheet needs the same fields for every item. A buyer scanning twelve brands in an afternoon will skip the one that forces them to hunt. If a field is missing, the buyer either guesses or moves on, and both outcomes are bad for you.
The fields a buyer expects
- Style number and item name, stable across seasons so reorders do not create ambiguity.
- Wholesale price and suggested retail price, stated side by side so the buyer can see their margin without arithmetic.
- Case pack or inner pack, meaning how many units come in the smallest sellable unit.
- Minimum order value and minimum per style, because these shape the whole order.
- Lead time and ship window, expressed as a date range rather than a vague “4 to 6 weeks”.
- Payment terms offered, including any prepay discount.
- UPC or GTIN per variant, which most chain retailers require before an item can be set up.
- Carton dimensions and weight, needed for freight quoting and for warehouse slotting.
- Country of origin and material composition, which feed the retailer’s own compliance and labeling obligations.
Keep the line sheet in a spreadsheet as the source of truth and export the presentation version from it. Brands that maintain the pretty PDF by hand eventually ship the wrong price to somebody, and correcting a price after a purchase order is issued is a conversation you do not want.
How the buyer meeting actually goes
Most first meetings run 20 to 30 minutes and cover less ground than brands expect. The buyer is deciding three things: whether your product fills a gap in their assortment, whether you can ship reliably, and whether the margin works against the space the product will occupy. Brand story matters, but it matters as support for those three answers rather than as the pitch itself.
Come with a proposed assortment rather than a catalog. Suggesting six specific items for their store, with a reason for each, moves the conversation to quantities much faster than asking the buyer to choose from forty. It also signals that you have looked at their shelves, which is the cheapest credibility you can buy.
Bring evidence of sell-through if you have it. Data from your own store counts, as does data from comparable retailers, and even a sharp read on which sizes or colorways move fastest is useful. Buyers are professional risk managers, and evidence is the only thing that lowers their perceived risk.
Common reasons a good meeting produces no order
The most frequent is a minimum that does not fit the retailer. A specialty store with four linear feet cannot take a $5,000 opening order, and a brand that will not break its minimum simply loses the door. Consider a lower opening order with a higher price, which protects your economics while letting small accounts start.
The second is an unclear ship window. A buyer planning a spring floor set needs to know the goods land in a specific two-week band, not “in the spring”. If you cannot commit, say so plainly and offer the earliest window you can hold, because a missed delivery costs more relationship equity than a conservative promise.
Where buyers actually find brands now
Trade shows still matter, but they are no longer the front door. Most buyer discovery in the last several years has moved to always-on digital wholesale marketplaces, to buyer-facing social accounts, and to referrals from other retailers and from sales agencies. A wholesale strategy built only around two shows a year will be slow and expensive.
Digital wholesale platforms let a retailer browse, check terms and place an order without a meeting. The mechanics resemble consumer marketplace selling in some respects and differ sharply in others, particularly around net terms and returns. If you are already selling across consumer platforms, the operational discipline transfers well, and the channel comparison logic in our breakdown of fulfillment models for sellers applies here too: whoever holds the inventory holds the cost and the control.
The four discovery paths, compared
| Path | Typical cost to you | Speed to first order | What it is good for | Main drawback |
|---|---|---|---|---|
| Trade show | $5,000 to $40,000 per show | Weeks | Meeting many buyers at once, category credibility | High fixed cost, concentrated in two seasons |
| Digital wholesale marketplace | Commission, often in the low to mid teens on first orders | Days | Steady flow of small independent accounts | Less control over presentation and pricing visibility |
| Sales agency or rep group | 7% to 15% commission on shipped orders | Months | Access to regional chains and established buyer relationships | Quality varies enormously; you inherit their priorities |
| Direct outbound | Staff time only | Months | Named target accounts you actually want | Low hit rate without a warm introduction |
Most brands end up running two or three of these at once, with different account tiers assigned to each. Before committing budget to any of them it is worth taking time to analyse brand distribution strategy at the competitors already sitting in the doors you want. Use digital platforms for the long tail of independents, use an agency or direct outbound for the accounts that will move real volume, and use shows to service the relationships you already have rather than to prospect cold.
Making your own site work as a wholesale front door
A visible wholesale page with a short application form converts more buyers than most brands expect. Buyers frequently research a brand’s consumer site before responding to an email, and finding no wholesale information reads as a brand that is not ready. Put terms, minimums, lead times and a contact on one page, gate the full line sheet behind a simple form, and respond within one business day.
Purchase orders, terms and the cash gap they create
A purchase order is a commercial document with consequences, and it is worth reading every one rather than treating it as a confirmation email. The PO states quantities, prices, delivery windows, ship-to locations, payment terms and, by reference, the retailer’s vendor manual. That reference is the part brands miss, because it incorporates dozens of pages of operational requirements into an agreement you have just accepted.
In the United States, contracts for the sale of goods are governed largely by Article 2 of the Uniform Commercial Code as adopted by each state, and a retailer’s PO terms interact with that framework in ways that matter when something goes wrong. The Uniform Commercial Code is a useful orientation, though the operative text is your state’s enactment and the specific terms on the document. Read your POs, and have counsel read the vendor agreement of any account that will represent a meaningful share of revenue.
The fields worth checking on every PO
- Ship window, with both the earliest and latest acceptable delivery dates, since shipping early can be as chargeable as shipping late.
- Price per unit, matched against your line sheet rather than assumed correct.
- Freight terms, meaning who pays and who controls the carrier.
- Ship-to destinations, because a distribution center order and a store-direct order are very different fulfillment jobs.
- Payment terms and any stated discount, for example 2% off if paid within 10 days.
- Cancellation and substitution rights, including whether partial shipments are accepted.
- Referenced vendor manual version, which you should download and keep with the order.
What net terms cost you
Net 30 means payment is due 30 days after the invoice date, or sometimes after receipt of goods, which is not the same thing. Add production and transit time and the true gap between paying your factory and being paid by your customer routinely reaches four to six months. That gap is the real constraint on wholesale growth.
| Arrangement | Cash received | Approximate cost of the money | Who carries the risk of non-payment |
|---|---|---|---|
| Prepay or credit card at order | Immediately | Processing fees, plus any discount you offer | You carry none |
| Net 30 with a 2% early-pay discount | Day 10 if taken | 2% of invoice, which annualizes steeply | You, until paid |
| Net 30 to net 60 | Day 30 to 60, often later in practice | Your own cost of capital | You |
| Invoice factoring | Within days, typically 80% to 90% advanced | Often 1% to 3% of invoice value per month | Depends on whether the facility is recourse |
| Trade credit insurance | Unchanged; pays out on default | A premium priced on your customer mix | Insurer, within policy limits |
Rates in that table move with the credit market and with your own financial profile, so treat them as shapes rather than quotes. The decision is rarely about the cheapest option and usually about whether you can fund the next production run at all. A factoring cost that looks expensive against a bank line is cheap against a cancelled order.
Credit checking is not optional
Extending net terms is lending money, and small retailers fail regularly. Run a credit check on new accounts, start new relationships with prepay or a low credit limit, and raise the limit after two or three clean payment cycles. Keep a simple aging report and act on it at 15 days past due rather than at 60, because the earliest conversation is always the easiest one.
Fulfillment: cartons, labels and routing guides
Wholesale fulfillment is a compliance discipline. A chain retailer’s routing guide specifies how goods must be packed, labeled, palletized, documented and delivered, down to label placement measured in inches from the carton edge. Meeting those requirements is not optional, because the penalties are automatic and are deducted from your invoice without a conversation.
The typical requirements cluster into five areas. Carton content rules govern how many units and which variants go in a box. Labeling rules govern the carton label format, often a GS1-128 barcode with specific data fields. Advance ship notice rules require an electronic document transmitted before the truck arrives. Palletization rules govern stack height, pallet type and shrink wrap. Appointment rules govern how and when a carrier books a delivery slot at the distribution center.
Build the pack spec before you produce
Retailer requirements often affect the product itself, not just the box. Individual polybag requirements, hangtag placement, price ticketing and inner pack counts all have to be built into the factory’s work order. Discovering a ticketing requirement after goods land means paying a third-party logistics provider to rework the shipment, which can cost more than the freight did.
Freight terms deserve the same advance attention. Whether the retailer controls the carrier or you do determines who books, who pays and who owns the risk in transit, and the vocabulary is the same set of Incoterms importers already use upstream. Our explainer on shipping Incoterms decoded for retail buyers is a useful refresher before you agree to anything on a PO.
Cross-border wholesale adds a compliance layer
Selling wholesale into another country introduces customer-of-record questions, import duty, product labeling rules and often registration obligations that do not exist domestically. Whether you or the retailer acts as importer of record changes who files, who pays duty and who is exposed if a classification is challenged. The groundwork is similar to what any exporter faces, and our guide to cross-border tax and duty setup for first exports covers the registration and documentation basics.
Requirements in this area change frequently and differ by market. The European Commission publishes current customs rules through its taxation and customs union pages, and US requirements sit with Customs and Border Protection, so verify any specific figure or deadline at the official source before you build it into a quote.
Chargebacks and compliance deductions explained
A chargeback in wholesale has nothing to do with the card-network dispute of the same name. Here it means a deduction a retailer takes from your invoice because something about the shipment failed to meet the vendor requirements. The retailer does not ask permission, does not usually explain in detail, and pays you the reduced amount.
Brands new to chain retail are consistently surprised by the scale. A season that looked like a 40% margin on paper can land several points lower once deductions clear, and the deductions arrive months after the shipment, which makes them hard to connect to the operational cause. The only defense is to treat deduction data as an operational feedback loop rather than as a finance problem.
The categories you will actually see
| Deduction type | What triggers it | How it is usually billed | How to prevent it |
|---|---|---|---|
| Late shipment | Delivery after the PO’s latest ship date | A percentage of the order value, sometimes escalating | Quote conservative windows; flag slippage early and request a window change in writing |
| Early shipment | Arrival before the earliest date, which disrupts the floor set | Flat fee or refusal at the dock | Hold goods at your warehouse rather than shipping ahead |
| Label or barcode error | Wrong format, wrong placement, unscannable code | Per-carton fee | Test-scan a sample carton against the current routing guide every season |
| Missing or late advance ship notice | The electronic notice did not arrive before the truck | Flat fee per shipment | Automate transmission from your warehouse system rather than sending manually |
| Short ship or overship | Quantity delivered differs from the PO | Adjusted invoice plus a handling fee | Cycle-count before pick; never substitute without written approval |
| Packing or palletization violation | Wrong carton counts, stack height or wrap | Per-carton or per-pallet fee | Write a one-page pack spec per account and post it at the pack bench |
| Markdown allowance | Negotiated support for clearing slow inventory | Agreed percentage, deducted later | Agree the cap in writing before the season, not after |
| Co-op advertising or new store allowance | Contractual programs in the vendor agreement | Percentage of sales | Model it into your wholesale price from the start |
Two of those lines are not compliance failures at all. Markdown allowances and co-op advertising are commercial terms you agreed to, and the mistake brands make is failing to price for them. If an account’s total allowance load runs at 8% of shipped value, your effective wholesale price is 8% lower than your line sheet says, and every margin calculation should reflect that.
Disputing deductions
Chargebacks are disputable, and a meaningful share of them are wrong. Retailers apply automated rules to imperfect data, and duplicate deductions, misapplied fees and deductions against the wrong PO are common. Brands that dispute systematically often recover a noticeable portion of what was taken.
Disputes are won on documentation, so the discipline has to start at the shipment rather than at the deduction. Keep the routing guide version in force on the ship date, the advance ship notice transmission log, the signed bill of lading, the carrier delivery receipt and photographs of palletized cartons. Without those, you are arguing from memory against a system of record.
Set a threshold and a cadence. Reviewing deductions monthly and disputing everything above a set dollar value keeps the work bounded, while chasing every small fee usually costs more in staff time than it recovers. Track recovery rate by account, because an account with a persistently high and undisputable deduction rate may simply be unprofitable.
Managing channel conflict with your own store
Channel conflict is what happens when your own store and your retail partners compete for the same customer on the same item. It is inevitable to some degree, and the brands that handle it well do so through explicit choices about assortment, timing and price discipline rather than by pretending the tension does not exist.
The sharpest form is price. If a buyer sees your site discounting an item 30% while their store carries it at full price, you have told them their margin is unsafe. Retailers watch this closely, and a brand that runs aggressive sitewide promotions while asking partners to hold price will lose accounts. Consistency is not just courtesy; it is the basis of the relationship.
Four levers that actually reduce conflict
- Assortment separation. Reserve specific colorways, sizes, bundles or exclusive items for wholesale accounts, and keep others direct only. This gives each channel something the other does not have.
- Launch sequencing. Give retail partners a window of exclusivity on new items, or run the reverse and test on your own site first, then bring proven winners to wholesale with sell-through data attached.
- Promotional calendar discipline. Publish your planned promotional periods to wholesale accounts in advance, and keep everyday pricing stable between them.
- Written price policy. A clearly documented minimum advertised price policy, applied identically to everyone including your own marketplace listings, removes most of the ambiguity that causes friction.
Marketplace listings deserve special attention because they are the most visible price on the internet for many products. A brand selling its own goods on a large marketplace at a discount is competing with its retail partners in the exact place their customers check prices. Deciding which items you list where is a wholesale decision as much as a channel decision, and the same trade-offs appear in our guide to selling on global e-commerce marketplaces.
Unauthorized sellers and grey market goods
Sooner or later your product appears on a marketplace listed by someone you have never sold to. It usually arrives through an account buying at wholesale and reselling, through liquidated inventory, or through a distributor’s downstream customer. The listing typically undercuts everyone and often ships older stock.
The realistic controls are commercial and administrative. Authorized reseller agreements that prohibit unauthorized channels give you contractual footing, lot coding lets you trace which account the goods came from, and a clear enforcement pattern discourages repeat behavior. Where trademark or listing-policy remedies apply, that is a question for counsel and for the marketplace’s own brand-protection process rather than something to improvise.
Building the wholesale operating stack
Wholesale breaks manual processes faster than D2C does, because each order carries more data and more rules. A brand can run a few dozen accounts on spreadsheets, but the failure mode is silent: prices drift, terms get misremembered, and nobody notices an overdue invoice until the next season. Platform-native tooling such as Shopify B2B company accounts pushes prices and terms into structured records instead of a shared file. Systems pay for themselves in avoided deductions long before they pay for themselves in efficiency.
The minimum viable system set
- One product master. A single source of truth for style numbers, UPCs, case packs, costs, wholesale prices and carton dimensions, feeding everything else.
- Order management that separates wholesale from retail. Wholesale orders need ship windows, partial shipment handling and terms, which most consumer carts do not model.
- Inventory allocation logic. Committed wholesale units must be reserved so your own site cannot sell them, which is the most common cause of a short ship.
- Accounts receivable with aging. Terms tracking, credit limits and a weekly aging review.
- Deduction tracking. Every chargeback coded by type and account, so the operational cause is visible.
- Electronic document capability. Larger accounts require electronic data interchange or a portal, and outsourcing that translation layer is usually cheaper than building it.
The reports that matter
Four reports will tell you almost everything about a wholesale book’s health. Sell-through by account and style shows whether goods are moving off shelves rather than into them. Fill rate shows whether you are shipping what you promised. Deduction rate as a percentage of gross shipped shows whether operations are under control. Revenue concentration shows how exposed you are to a single buyer’s decision.
For external context on how the channel is moving overall, the US Census Bureau publishes monthly wholesale trade data covering sales and inventories, which is a useful check on whether a soft season is your brand or your category. Read it as directional background rather than as a forecast for your own accounts.
Deciding when wholesale is the wrong answer
Wholesale is not a universal growth channel. If your landed cost cannot reach roughly a quarter of retail, if your product requires explanation that a shelf cannot provide, or if you cannot finance a 120-day cash cycle, the channel will consume attention and capital without returning much. Brands in that position are usually better served by improving direct conversion, which is a much faster feedback loop than a wholesale season.
The honest test is to run one account properly for two seasons and measure contribution after all deductions and all allocated operations time. Many brands discover that a handful of accounts are excellent and the long tail is roughly break-even, which is an argument for a smaller, better-serviced wholesale book rather than for abandoning the channel.
A note on legal, tax and compliance information
This article is general information and education about how wholesale operations work. It is not legal, tax or customs advice, and it is not a substitute for professional guidance on your own situation. Pricing policies, reseller agreements, purchase order terms, import classification and credit arrangements all carry consequences that depend on your jurisdiction, your contracts and your facts.
Before you set a minimum advertised price policy, sign a vendor agreement with a national account, or decide who acts as importer of record on a cross-border shipment, talk to a qualified professional: a commercial attorney for agreements and price policy, a licensed customs broker or trade attorney for classification and duty, and a tax advisor for sales tax, VAT and nexus questions. Rules and rates in all of these areas change, sometimes quickly.
Where this guide mentions a rule, rate or threshold, verify the current figure at the official source: the United States International Trade Commission for tariff schedules, US Customs and Border Protection for import procedure, the Federal Trade Commission and the Department of Justice for US competition law, the European Commission for EU customs and vertical agreement rules, and your state’s enactment of the Uniform Commercial Code for sales contract terms. Nothing here should be relied on as a current statement of the law.
FAQ on running a wholesale channel
What wholesale discount off retail is standard?
Fifty percent off suggested retail is the most common structure for independent and chain retail, which is where keystone pricing comes from. Distributors typically need 60% to 65% because they carry warehousing and sales coverage, and off-price channels take considerably more. The figure varies by category, so check what comparable brands in your segment publish before setting yours.
How much working capital does a wholesale channel need?
Plan for the full cycle from paying your factory deposit to collecting the invoice, which commonly runs 120 to 180 days. As a rough planning figure, funding a $500,000 wholesale season at a 22% cost of goods plus freight, ticketing and warehousing means several months of six-figure outlay before the first payment arrives. Model it as a cash flow schedule rather than as a single number.
Should I offer net terms to a brand new account?
Most brands start new accounts on prepay or credit card, then extend terms after two or three clean cycles. Extending terms is a lending decision, so run a credit check, set a credit limit rather than an open line, and keep an aging report you actually look at weekly. A prepay discount of 2% to 3% is a cheap way to make prepay attractive to the buyer.
What is the difference between a chargeback and a markdown allowance?
A chargeback is a penalty for failing to meet the retailer’s operational requirements, such as a late delivery or a mislabeled carton. A markdown allowance is a commercial term you agreed to, where you fund part of a price reduction on slow inventory. The first is preventable through better operations; the second should be priced into your wholesale number from the beginning.
How do I stop unauthorized sellers listing my product?
The practical controls are an authorized reseller agreement that prohibits unauthorized channels, lot coding so you can trace which account the goods came from, and consistent enforcement when you find a leak. Marketplace brand-protection programs can help with listing-level issues. Where trademark or contract remedies are involved, take it to counsel rather than improvising.
Is a minimum advertised price policy legal?
Price policy sits in a complicated area of competition law that differs by jurisdiction and by how the policy is structured and enforced. US authorities treat a supplier’s unilateral policy differently from an agreement with resellers to fix resale prices, and the European Commission has taken enforcement action over resale price maintenance under its vertical agreements rules. This is a question to put to a commercial attorney before the policy goes out, not after a dispute.
Do I need EDI to sell to a large retailer?
Most national chains require electronic document exchange, usually electronic data interchange or a vendor portal, for purchase orders, advance ship notices and invoices. You do not need to build it yourself; managed providers translate between your systems and the retailer’s for a monthly fee. Budget for it as a cost of entering chain retail rather than as an optional upgrade.
How many doors should I target in the first year?
Fewer than you want. A concentrated set of 20 to 50 well-serviced independent doors produces better reorder data and fewer operational failures than 200 doors you cannot support. Prove sell-through in a small footprint first, because a chain buyer will ask for exactly that evidence.
What single metric shows whether wholesale is working?
Reorder rate, measured as the share of accounts that place a second order within a season or two. It bundles product fit, sell-through, service quality and shipping reliability into one number. A high first-order count with a low reorder rate means the product is not selling through, which no amount of new prospecting will fix.