In this article, learn about
The basics of wholesale retailers
Sam’s Club and Costco examples
How to thrive in wholesale
Common pitfalls
Understanding Wholesale Retailers
Retailers exist along a spectrum of specialization on one end and particularization on the other. Major retailers like Walmart are designed to be a one-stop shop for customers by offering a wide variety of products—from mulch to basketballs—all under one roof.
On the other hand, specialized retailers like ACE Hardware cater to more specific customer needs. These specialized stores typically carry a deeper inventory within a narrower product category compared to generalized retailers, though often at a higher price point.
Wholesale retailers entered the market as a way of trying to cut customer costs by providing much larger quantities of items (i.e. “wholesale”) in a single purchase. Some retailers, like Costco, set out with this business model from the beginning. And others, like Sam’s Club, came about as a result of a great one-stop-shop retailer, Walmart, wanting to capture a bigger chunk of the one-stop-shop market.
Related Reading: Sam's Club Merchandise Category Numbers
Suppliers in Wholesale Retailers
Suppliers are always trying to adapt their business models to that of each of their retailers customers, both shoppers and retailers. This means having flexible profit margins and flexible expectations for total sales numbers. It also means learning how to monitor these two numbers in each of their major retailer customers to make sure that, where sales volumes are low, profit margins are high, and where profit margins are low, sales volume is high.
This process is the basic cost analysis strategy for becoming a wholesale supplier. A good question to ask when considering taking the first steps towards becoming a wholesale supplier is: do we have the capacity and desire to increase our sales volume and lower profit margins?
Similarly, many suppliers desire to get their items in Walmart because the opportunity to expand their sales volume is so irresistible. However, many suppliers–usually smaller ones–crash out of Walmart when the scale proves to be too much to handle.
Maintaining Walmart’s EDLP standards can be really difficult when trying to scale.
That being said, taking the step into Walmart is similar to taking the step into wholesale in that it usually entails a large uptic in sales volume and a dip in profit. Suppliers who are prepared to increase their product supply for increased sales, and who are prepared to accept and deal with painful compliance fines and deductions that come along with that, tend to succeed.
How to Become a Wholesale Supplier
Aside from being able to adapt quickly to a high-volume sales model, CPG companies interested in entering a wholesale retailer must go through a process similar to other retailers. It helps to have a presence in large retailers already.
Wholesale Retailer Example: Sam’s Club
For example, Sam’s Club has an elaborate set of processes laid out to become a supplier. That being said, even CPG suppliers who fit the mold still have to compete for spots like they would in any other retailer.
First, Sam’s wants prospective suppliers to look over the Supplier Checklist. This document is the same as the checklist for becoming a regular Walmart supplier, but there are minor differences in the process for Sam’s.
The checklist covers a fairly broad range of topics including but not limited to:
Tax Information
Product Submission
Contacts
Product & Brand
Logistics
Agreements
DSV and Owned Contacts
Item Setup
From there, Sam’s suggests exploring some of their affiliated agencies for “diverse supplier certification,” like the National Minority Supplier Development Council (NMSDC) or the Women’s Business Enterprise National Council (WBENC), among others.
From there, they recommend that suppliers register their business with RangeMe, a service that, among other things, helps connect suppliers with buyers in Walmart and Sam’s Club. This process begins with submitting product listings to Sam’s Club Merchandising.
Sam’s Club Supplier Requirements
Walmart and Sam’s Club also have detailed supplier requirements listed out, including insurance, audits, certifications, and more. Some key requirements for becoming a Walmart/Sam’s Club supplier include:
A Federal Taxpayer Identification Number (TIN)
Dun & Bradstreet Registration
GTIN/UPC Numbers
Factory Capability & Capacity Audit (FCCA)
Going into Walmart or Sam’s is a huge threshold for CPG suppliers. As such, it comes with a significant amount of preparation. Many of these requirements overlap with other major retailers, as such, they are usually a road block to smaller suppliers looking to break into Walmart or Sam’s Club.
Wholesale Retailer Example: Costco
Applying to become a Costco vendor is a similar process. At the Costco Vendor Inquiries Website, CPGs can find the best way to get started. On this website, they advise to contact the “appropriate division office,” listing out each of the below reasons and their addresses and contacts.
Costco Regional Divisions Map
Costco’s regional divisions are listed on their website and are broken down as follows:
Bay Area Region (BA): Northern California and Nevada (except Las Vegas)
L.A. Region (LA): Southern California (except San Diego) and Hawaii
Midwest Region (MW): North and South Dakota, Nebraska, Kansas, Missouri, Iowa, Minnesota, Wisconsin, Michigan, Illinois, Kentucky, Indiana, and Ohio
Northeast Region (NE): Vermont, New Hampshire, New York, Massachusetts, Connecticut, Rhode Island, New Jersey, Pennsylvania, Delaware, Maryland, District of Columbia, and Virginia
Northwest Region (NW): Alaska, Washington, Oregon, Idaho, Montana, and Utah
San Diego Region (SD): San Diego, Arizona, New Mexico, and Colorado
Southeast Region (SE): Tennessee, North Carolina, South Carolina, Georgia, Alabama, Mississippi, Florida, and Puerto Rico
Texas Region (TE): Texas, Oklahoma, Arkansas, Louisiana
Costco Regional Division Office Contacts
Furthermore, each major region has a regional division office with contacts that should be sought out for food and sundry items vendors.
1. Northwest Region
1530 11th Ave NW
Issaquah, WA 98027
425-313-8100
2. Northern California Region
2820 Independence Drive
Livermore, CA 94550
925-456-7200
3. Los Angeles Region
11000 Garden Grove, #201
Garden Grove, CA 92843
714-534-7080
4. San Diego Region
4649 Morena Blvd.
San Diego, CA 92117
858-812-1400
5. Texas Region
1701 Dallas Parkway
Suite 201
Plano, TX 75093
972-246-3000
6. Midwest Region
1901 West 22nd Street
Second Floor
Oak Brook, IL 60523
630-581-6200
7. Northeast Region
45940 Horseshoe Drive
Suite 150
Sterling, VA 20166
703-406-6800
8. Southeast Region
3980 Venture Drive NW
Suite W100
Duluth, GA 30096
770-905-8800
International inquiries have their own regional office contacts separate from the continental United States office contacts.
On the website’s left navigation are other links that will be helpful to prospective Costco suppliers, like:
Supplier Diversity
Logo Request
Handling Graphics (Pictograms)
Under Supplier Diversity, Costco lists a few high-level requirements for their suppliers:
Passing industry audits
Ingredient traceability
Packaging & pallet requirements
EDI/EFT capabilities
Liability insurance
Pros and Cons of Being a Wholesale Supplier
The best way to think about the pros and cons of being a wholesale supplier is to consider the abovementioned tension between high-volume sales and lower profit margins.
Some of the benefits of being a wholesale supplier are:
Higher sales volume
The potential for a longer-term partnership with a stable retailer
More predictable/stable sales and sales projections
Cheaper marketing costs: most wholesale retailers depend less on in-store advertising.
Some of the potential downsides of being a wholesale supplier are:
Tighter profit margins: the increase in sales volume sometimes comes with a decline in the profit margin for CPG suppliers.
Different (sometimes more complex) packaging requirements: selling wholesale usually means having to become an expert in bulk packaging.
The potential of delisting: selling products in any retailer involves the possibility of not being able to keep up with demand and/or not being able to sell enough products; similarly, in wholesale, delisting is a very real possibility. It also may be hard to get back into a wholesale retailer after delisting.
Best Practices for Wholesale Suppliers
Wholesale suppliers have to be able to stay agile to perform well without large profit margins. Generally, wholesale suppliers do the following:
Maintain consistency in quality and supply
Adapt to the retailer’s needs and feedback
Build strong relationships with buyers
Run and develop marketing support and in-store promotions
Manage chargebacks and compliance
Common Pitfalls & How to Avoid Them
Similarly, suppliers who struggle to stay competitive in wholesale retailers tend to do the following:
Underestimate demand and supply chain issues
Not understand the retailer’s pricing strategy/strategies
Fail to meet compliance and vendor standards
Fail to remain adaptable to shopper trends
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