what is wholesaling and what are wholesalers?
wholesaling is the process of selling goods to other businesses, rather than directly to retail customers. in other words, wholesaling involves the sale of goods to a party other than the end consumer.
a wholesaler is a business that provides its goods wholesale. for example, a large business that sells and distributes groceries to different supermarkets is a wholesaler.
wholesales involve a business buying goods in large quantities from a wholesaler and then selling smaller quantities to customers. generally, wholesale goods are sold in bulk at a cheaper-than-retail price to other businesses, who then sell the goods to the end customer.
what should i do when setting up and running a wholesale business?
register your business with all necessary organisations
this is not specific to wholesalers but is still an important point. as soon as you decide to set up as a wholesaler, you need to choose a business structure and go through the process of registering your business.
you will then need to register with hm revenue & customs (hmrc) for the applicable business taxes (eg corporation tax). while not technically necessary at the start, it may be advisable to also register for vat.
if you are planning to take on employees, then you will need to register as an employer with hmrc. you may need to set up a workplace pension scheme and arrange for employees to be auto-enrolled into it.
get any necessary insurance cover
which insurance cover you will need will depend on what specific business activities you are performing. as a rule of thumb, however, most wholesalers are likely to need public liability insurance and insurance for any vehicles used on public roads. if you have employees, you will also need employers’ liability insurance.
it can be highly advisable to get more than the minimum level of insurance coverage. this is, however, entirely at your discretion rather than a legal requirement.
register with customs
if you are delivering goods outside of mainland uk, you will need to register for customs. if you are only delivering to northern ireland, then you just need an xi-eori number. if you are delivering to the european union (eu) then you need a regular eori number.
you will also need an xi-eori/eori number if you are importing goods from ni/the eu yourself (as opposed to via a supplier).
note that you need an eori number even if you are not vat registered. it is required for customs declarations on goods’ shipments.
arrange payment infrastructure
realistically, modern wholesalers need to be able to accept payment cards. this means arranging a suitable contract with a payment service provider. as a part of this, you will be required to accept (and adhere to) their terms and conditions.
these terms and conditions are typically based on the applicable laws and regulations. this means that you need to be sure that you understand them and take them seriously. breaking them could not only put you in breach of contract but also open you up to more serious issues, up to and including criminal prosecution.
part of these terms and conditions will include an obligation to submit to a dispute resolution process. this is also known as a chargeback process. it’s highly advisable for wholesalers to learn about this process in detail and to know how to protect themselves from chargebacks. it is, however, also worth noting that it may be possible to dispute the outcome of the chargeback process in a court of law.
comply with data protection requirements
as a wholesaler, it’s practically guaranteed that you will handle personal data. if nothing else, you will probably have the work contact details of some of your suppliers’ employees. you may also have personal data of your own customers.
if you have employees, you will definitely have personal data for them. this may include particularly sensitive information such as financial and medical details.
this means that data protection should be high on your list of concerns. you will very likely need to register with the information commissioner’s office (ico). if you are handling the personal data of eu residents, you may also need an eu data representative. even if you technically don’t, it can still be advisable to have one to ensure that you stay in full compliance with the law.
get appropriate business licences
most wholesalers will require some form of business licence. business licences for wholesalers generally fall into 2 types:
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licences relating to the products you sell, and
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licences relating to the activities you perform
the government provides a business licence finder. this can be a very convenient way to find out what business licences you will need. as business licences are typically administered at the local authority level, your local authority’s website should provide you with the information you need.
certain products are subject to licensing restrictions. as a rule of thumb, if an item is restricted in any way, you probably need a licence to sell it. obvious examples of this include:
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alcohol
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pesticides
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controlled medicinal products
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fireworks and explosives
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firearms and ammunition
you may have noticed that tobacco and nicotine products are not on this list. currently, there is no requirement to have a business licence to sell these. they are, however, subject to special controls on storage, handling and sales. for more information, see the government’s guidance on selling and storing tobacco products.
as well as thinking about what products you sell, think about what activities you intend to perform. you might be surprised how many of them require a business licence. for example: using cctv
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disposing of waste (especially packaging waste and electrical waste)
do wholesalers need to comply with consumer protection laws?
depending on how you run your business (eg if you also sell directly to consumers), you may be subject to any or all of the following pieces of legislation that determine which rights consumers have when they make purchases:
in short, all these acts and regulations essentially require you to treat your customers reasonably. for example, your customers need to be clearly aware of what they are (and are not) buying. they need to know the price of the item(s) and what conditions, if any, are attached to the sale.
any documentation presented to the consumer must be written in clear terms and in good faith. in other words, wholesalers must not attempt to mislead their customers or be aggressive towards them.
for more information, read consumer rights.
for more information on laws relevant to wholesalers, read e-commerce, e-commerce between businesses, doing business with consumers and contracts for customers. remember to make the relevant terms and conditions for your business. do not hesitate to ask a lawyer if you have any questions.
