Wholesalers, like their retail counterparts, incur many risks while purchasing inventory from manufacturers and selling it to their customers. However, there are some special considerations that a wholesaler must make.

If you're a wholesaler, here are some issues you must be aware of and ready for:

7 Risks Wholesalers Must Prepare For

1. Property damage

The key part of your business is having large amounts of inventory to resell to other companies, such as retailers. With this in mind, it is easy to see why damage to inventories can have a costly impact on businesses like yours.

Unexpected occurrences such as fire and flooding can wipe out a wholesaler’s stock in a matter of moments. It is important to have insurance and an emergency preparation plan in place in case of these incidents.

Read this article for more information about managing your warehouse risk


2. Inability to obtain supply

A wholesaler will be unable to resell products if they are having difficulty purchasing them from their manufacturers.

Property damage or a similar incident in the manufacturer’s factory can negatively affect your ability to do business for an extended period of time, so choosing your suppliers carefully and having a backup plan is key.

For help with choosing a supplier, check out our blog post on considerations for supply chain risk management. 


3. Legal penalties

It is safe to assume that most wholesalers will enter into contracts to purchase their goods from a manufacturer and to sell them to a retailer. If these contracts are not performed according to their terms, whether it is the fault of the wholesaler or not (for example, if an accidental fire in a warehouse destroys some inventory that is meant to be delivered), they can be held liable in court for damages to the other party and have to pay a large compensation fee.


4. Product liability

Although not responsible for the production of a product, wholesalers and retailers can still be held liable for the sale of items that are later determined to be defective or unsafe. You should take every possible precaution to make sure a product is being sold in good condition, but prepare for the worst! 


5. Theft

As in any business with physical inventory, theft is a very common occurrence that costs businesses thousands, if not millions, dollars a year.

Employees are responsible for a large number of stolen goods, but for wholesalers, there is also the concern of others stealing products during transport. Ensure that you have strong security measures in place. 


6. Equipment breakdown

Broken equipment such as transport trucks, heating equipment, cooling systems, or freezers can result in undelivered or damaged inventory. Regularly monitoring equipment performance and fixing any issues promptly, rather than responding afterwards, can help mitigate this risk.


7. Incident tracking

As your business and industry become more and more digitized, it is crucial that you update the way you store your information and manage your risk. Storing your data in isolated spreadsheets or paper files is no longer sufficient, as it can lead to important data falling through the cracks.

Your competitors are streamlining their processes and saving thousands of dollars by maintaining operational agility and preventing costly losses. Why shouldn't you? 

While some of these claims may seem obvious, being aware is not enough. You must take action to fully prepare yourself against damages and losses. Analyzing past occurrences and taking steps to promote better practices in the future is the only way to manage these seven wholesaler risks.

If you need a system to manage this type of information, why not try ClearRisk? Our software provides a claims system that is easy to update, maintain, and allows you to see what type of claims your hard-earned money is being spent on, so you can take proactive risk-management measures. Want more information? Learn more below. 

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