If you sell wholesale, you know that managing this side of your business can be a challenge. In the past, email and spreadsheets were the go-to tools, but as the business world evolves, it’s clear that they’re no longer sufficient. Wholesale marketplaces like Faire have emerged as a popular option, but is it the right fit for your business? In this article, we’ll discuss the advantages and disadvantages of selling on wholesale marketplaces versus using software to manage your customers directly. By the end, you’ll have a better understanding of which approach is best suited for your wholesale business.
One potential issue with using a wholesale marketplace is that you’re essentially buying orders rather than building long-term relationships with customers. While you may see an initial spike in sales, you’re not developing relationships with your customers that can lead to repeat business and sustained growth over time. If you’re looking to build a loyal customer base, you may want to consider using software to manage your wholesale customers directly. This allows you to build personal relationships with your buyers, which can lead to more repeat business and better long-term success for your wholesale business.
Another potential issue with wholesale marketplaces is that it is often against their terms of service to contact customers outside of the platform. While this may seem like a minor inconvenience, it can be a major hindrance to building long-term relationships with your customers. By communicating directly with your buyers, you can build a rapport with them and better understand their needs and preferences, which can help you tailor your products and services to better meet their needs.
Furthermore, by relying solely on a wholesale marketplace to connect you with customers, you’re essentially handing over control of your sales and marketing to a third-party platform. If the marketplace were to change its policies or algorithm, it could drastically impact your sales overnight. To maintain control over your business and build lasting relationships with customers, it’s important to consider alternative methods for managing your wholesale operations, such as using software to work with and manage your customers directly.
Another potential issue with wholesale marketplaces is that their business model is often built on acquiring new customers for their sellers. Marketplaces make money on first orders with new retailers, and lose money when your existing orders, creating an incentive for them to sell your customers to your competitors. This means that even if you build a strong relationship with a customer through the marketplace, there’s always a risk that the marketplace will promote your competitors to that customer in order to make more money.
Additionally, because marketplaces are focused on acquiring new customers, they often prioritize the needs of new sellers over those of existing sellers. This can result in a lack of support and resources for existing sellers, which can be especially frustrating if you’ve been loyal to the marketplace for some time. By working directly with your customers, you can build stronger relationships and ensure that your needs and priorities are being met, rather than relying on the whims of a third-party platform.
When you’re just starting out, the idea of not having to pay any up-front costs can be very attractive. However, as your business grows, the costs of using wholesale marketplaces can add up quickly. When you’re selling a million dollars or more in wholesale, the fees can be hundreds of thousands of dollars. This can make you extremely reliant on the marketplace, which is not always ideal.
It’s important to remember that when you’re using a wholesale marketplace, you’re essentially renting a customer base. While this may be a good way to get started, it’s not a sustainable long-term strategy. As your business grows, you need to start thinking about building relationships with your customers, so that you can keep them coming back. When you’re using a marketplace, you don’t have direct access to your customers, which can make it difficult to build those relationships. This is why it’s important to consider the long-term costs of using a wholesale marketplace, and to think about how you can build relationships with your customers over time.
In conclusion, wholesale marketplaces like Faire can be a good option for new wholesale sellers who need initial customers and have high-margin products. However, they also come with drawbacks such as the lack of long-term relationships and the potential for high fees at scale. Ultimately, the decision of whether to use a wholesale marketplace or not depends on your specific business needs and goals. Another option is to work with your customers directly using software designed for that purpose. In our next article, we will explore this option in more detail and help you determine if it may be a better fit for your wholesale business.