Wow! It’s crazy to have lived through and experienced the evolution of the cannabis industry first hand over the last 4 years. When we first started out, wholesale flew off the shelves (think Illinois today) and product was sold almost before it was even harvested or produced. Now, mature markets have seen surges in competition and often look for whatever sales channels there are to get in more stores to increase sales.
One avenue that is continually growing, albeit when a state provides the license type, is the utilization of a wholesaler or distribution company and their vast resources and relationships to sell wholesale. In this post we are going to explore some of the Pros and Cons that come with using a wholesaler or distributor for sales.
Let’s begin with the good, because in today’s world we need more good.
Storage – Most distribution companies will store your inventory at their warehouse. By not having to store wholesale, more square footage within your facility can be utilized for production, more production = more revenue.
Sales – By handling all sales processes, a distributor allows you to remove the need to staff sales employees. This will reduce overhead and taxes, allowing you to focus on the aspects of your company you most enjoy – producing great products. You’ll also be able to lock in an established price with the distributor, and typically aren’t as impacted by wholesale cannabis price fluctuations.
Transportation – No more driving all around town to deliver product and collect payments! Not only does this reduce costs, but also reduces the potential theft threat.
While there are benefits to utilizing a wholesale cannabis distributor, there are some potential drawbacks that are important to understand and assess before making a decision.
Brand Ownership – For companies that have worked hard to build a brand, you’re now putting that brand trust in the hands of the distributor and their team to represent your product(s). You’re trusting that the distributor conveys to the retailer and consumer the important and unique aspects of your company and your products.
Product Conflicts – Typically, you have little sayl over what other cannabis brands or products a wholesale distributor carries. It’s important to understand how much control you have to prevent a distributor from bringing on competing cannabis products and brands.
Potentially Smaller Margins than Selling Directly – Most distros are charging around 20% of which a portion could be made by the producer, if they sold direct. The question of how much you’re really saving comes down to sales and transportation overhead.
Lack of Transparency – We often hear that wholesale cannabis distributors can be slow to provide inventory and sales data coming back, which makes production and understanding market coverage more difficult.
As a platform that supports both individual wholesale producers and distributors/wholesalers alike, we believe that a business must decide what is best for them. To learn more about how Apex Trading can help you with inventory, order and buyer management, please sign up for a quick demo here.