Is There Anything You Can Do to Offset the Increase in Wholesale Prices?

Wholesale have been rising on a host of goods and services, and inflation looks poised to remain high throughout 2022 and beyond. This can spell potentially greater challenges for small-business owners and operators faced with the rising costs of doing business.

Thankfully, a few simple shifts in strategy and planning may be helpful. The key is simply to think about planning further ahead, consider thinking more creatively about how you finance purchases and consider where opportunities to make the most of current products and pricing opportunities exist. 

Consider Offset Rising Wholesale Prices by Prepaying for Materials

Know that your business will be in need of certain raw materials in coming months? Consider buying them today, before prices rise—preferably in bulk, with an applicable discount, and (ideally) on a credit card that offers cash back or rewards points to further offset these expenses. If you’re having trouble gauging future demand, you can try to (a) negotiate rights to return unused goods (b) create a plan to resell any untouched items or (c) forecast for three scenarios (worst, best, and baseline) and purchase accordingly. Depending on your line of work, and intended business purpose, these purchases may also offer additional tax savings (be sure to check with a qualified accounting professional), especially if these materials are utilized within the next 12 months.

Secure More Flexibility in Financing and Production

Alternatively, if you can’t afford to make a big up-front buy or risk holding onto unsold inventory, you can seek to mitigate back-end costs. For example, you might work to offset a rise in wholesale prices by purchasing items in smaller production runs, negotiating better credit terms with vendors or buying up last year’s remaindered inventory for pennies on the dollar. Many firms are also bringing production capabilities in-house to cut costs or turning to online inventory management tools and analytics software to better track customer buying and purchasing patterns, rightsize restocks and shift to more on-demand order fulfillment.

Other options include working to source new suppliers, making the leap to substitute parts and goods or seeking to make in-kind trades (such as swapping your own goods and services in trade for others). As a hedge against future uncertainty, many firms are also asking customers to put down larger deposits up front and using these funds to secure wholesale buys, rather than put their own capital at risk.

 When wholesale prices increase, it can put the squeeze on your business. But you don’t always have to tighten your belt or rush to pass price increases onto customers if you’re more creative about finding ways to slash expenses elsewhere.

— Scott Steinberg

Explore Ways to Cost-Effectively Innovate and Cut Expenses

No one likes to cut corners. But at the same time, it also pays to consider if there are simple changes you can make that can reduce your costs without compromising on quality. For example, you might reduce package sizes, explore alternate shipping and storage options or consider switching out one ingredient or material for another. Similarly, rather than build everything yourself from scratch, perhaps you might outsource the building and assembly of various wholesale components used in your production process, or purchase preexisting white-labeled products from another provider and stamp them with your own branding.

To offset rising wholesale prices, it’s also not uncommon to see companies recycling and reutilizing unused wholesale stock in new and novel ways. For example: There are only so many scented candle and lotion variants known to man, but there are an infinite number of ways to rename and repackage them. Last year’s Lavender Fields could easily be this year’s My Lavender Crush.

Look for Ways to Partner and Collaborate

In a world where customers are exposed to thousands of brands daily, every business is faced with a common challenge: How do you stand out to clients at a glance, be more memorable and command a premium in customers’ mind? Noting this, wholesale suppliers may be willing to negotiate a price break, or more flexibility in credit or ordering, if you’re willing and able to offer them helpful exposure. Often, the best way to do this is to speak with your wholesale sales rep to find out what new products, solutions or technologies they’re looking to prioritize, and then crafting branded or co-branded promotions to help raise awareness for these offerings.

Similarly, another common strategy you can use to cut costs is to find out what items they’ve over-ordered and are holding too much stock of in inventory, and offering handy ways to help take it off their hands. Some variations on these strategies even split the difference. Case in point: Your wholesaler may be willing to cut you a price break and deal on a wholesale item that you need now if you’re willing to put in an order on a good that they’ll be stocking and looking to promote in the future.

When wholesale prices increase, it can put the squeeze on your business. But you don’t always have to tighten your belt or rush to pass price increases onto customers if you’re more creative about finding ways to slash expenses elsewhere. Just remember, however: In times of great disruption, nothing tends to remain static—least of all customer taste or demand. Plan for tomorrow today and take time to think through how you might handle scenarios such as unexpected wholesale price hikes long before they occur.

Photo: Getty Images

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