Updating & Upgrading Wholesalers/Distributors for Growth

May 23, 2025

by a searcher from Eastern Kentucky University in St. Petersburg, FL, USA

Hello all, I am in the final stages of negotiating to purchase a security/controls electronics wholesaler/distributor and would appreciate thoughts and input on the growth areas proposed to get a sense of how much lift is truly available and the actual effort needed to accomplish them. The proposed primary levers for growth are: -The classic expanded sales & marketing, of course... -Do larger warehouses equate to more revenue? Seller's valuation hinges on the larger warehouse that was added last year will result in higher revenue. -Is adding e-commerce and online inventory availability worthwhile? Currently, the website has no actual products listed or real-time availability. No online ordering capability, etc. Just walk-in pick-ups and onsite orders. I would love to hear from others in wholesaling/distribution to understand their experience with these and other growth levers.

Reply by a searcher
from The University of Arizona in Gilbert, AZ, USA

^redacted‌ thanks for the mention. First thing first, are you a 3pl hold inventory that isnt yours or are you a sales and distribution company that buys your own inventory. If you are the later than the bigger warehousing will be added costs and unless you find more avenues for sales, they will actually hurt you. Now the bigger warehousing could open another avenue for profit by selling 3pl services to other companies. If you are considering that, then you 100% could grow the business that way. Id be happy to help you model those services as they are generally highly in demand in many metros. Ecom is a completely different beast. You will need a different level of wms and shipping programs than you have now. You know what the cost basis is for your items, if you see margin there, go for it, but as a middleman you very likely are going to be competing against your supplier or have restrictions on your pricing. Generally, unless you are the manufacturer ecom isnt going to add much to you sales mix. If you have a unique offering or an exclusive distribution right then ecom could be helpful, but it might also cannibalize your current business if your margins are lower online.

Reply by a searcher
from State University of New York (SUNY) in Buffalo, NY, USA

All good comments above. I’ll throw my two cents in as a distributor of a niche category of product. Many of the highlighted levers are going to be hard to assess from the outside looking in, specifically expanding sales & marketing and e-commerce. If you can get a customer list you can do some research on white space. Even if there are a lot of new customer targets, you need to have a good reason why those customers will switch to you. Relationships and a track record matter in B2B. Many won’t switch to save a couple of bucks. In other words, why does this company deserve to win? Is that applicable outside of current service area. May also want to ask which customers seller would want to target next and try to figure out why they haven’t done it already if seller says it will be easy to do. Finding new customers with a concerted outbound calling effort is going to be the best bang for your buck in growth. E-commerce could make sense, but it isn’t always easy to stand up a website with all of your SKUs. Having real time pricing and availability online can be a lot harder than it seems if there’s any kitting or complexity involved. If biz doesn’t have customers on standard pricing already this can be challenging as you have to post uniform pricing (or make it a request a quote type item, which defeats the purpose of e-commerce in some respects). We highlighted e-com as an opportunity for our business and a year and a half later we haven’t made much progress. Low hanging fruit is outbound calling efforts, which is where we focused. Having valuation hinge on a larger warehouse is questionable unless they were bursting at the seams at the old one. Have they seen a dramatic uptick in revenue since moving in? Maybe their product availability and SKU count went up when they moved? If not they added a lot of fixed costs which is not what you want when acquiring. If availability is paramount there could be good reason to get a larger space, but now the inventory you manage is going to be much larger. That’s more cash required to be reinvested in the biz. Two other growth levers / optimizations that may exist are inventory optimization and product line expansion. The biz we bought managed inventory by tedious paper processes and gut feel. We’ve grown sales significantly and were able to reduce inventory requirements. Happy to talk through how we were able to do this offline, but there are tools available to automate this. Another way to grow is add complementary product lines and make sure existing customers know you carry this. We put together a basic product line card and sent to all existing customers. Good response from customers and plan on surveying customers at the end of the year to see what else we can provide that they use to see if we should start carrying.

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