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If there’s an overarching truth to the wholesale industry, it’s the fact that demand fluctuates — always. Whether it’s an economic factor coming into play or simply the changing of the seasons, fluctuations in average demand are a challenge for any wholesale business.
However, you don’t need to leave temporary drops in demand entirely up to fate. There are many ways to offset these dips. Although most of them require some preparation, they are well worth the effort since they’ll help your business weather the storm — and could even lead to more robust profits once demand returns to normal.
1. Diversify your product offerings
It’s relatively common for demand to fluctuate for a single product, mainly depending on market conditions, time of year, or other factors. What’s more rare is the drop in demand for multiple products in different categories at the exact same time.
As such, one creative way to deal with natural dips in demand is to expand your product offerings. A diverse portfolio of products can help maintain positive revenue streams if one specific product category or business segment experiences a dip.
2. Leverage your data effectively
One clear way to offset demand drops is to evaluate your products, sales, and inventory. The goal, of course, is not to overstock anything since storage and insurance fees for unsold inventory can add up. If you want to maximize the efficiency of your inventory, consider specialty software built for that purpose.
These inventory management systems can help you track which products sell and forecast demand more effectively. If you use these data insights correctly, you can plan for expected demand drops — and even weather some unexpected ones.
3. Source wholesale financing
Demand drops almost always mean drops in cash flow, which can impact your business operations. Wholesale loans are one way to help mitigate the financial burdens of a temporary drop in demand since they can help keep your business afloat during a financially stormy period.
By strategically using the funds from wholesale financing — such as the kind offered by ForaFinancial.com — you can maintain your company’s payroll, expenses, and product acquisitions, even when demand dips unexpectedly.
4. Explore different sales channels
Sometimes, a drop in demand is less tied to a product and more to a sales channel. If one of your products experiences a temporary dip in demand, you should check to see if an alternative sales channel might help offset the decrease.
For example, if you sell mainly to other companies through direct sales, it might be worth looking into wholesale e-commerce. As a wholesale business, you likely focus on B2B sales, but a dip into direct-to-consumer for a small company segment could help keep your finances in the green.
5. Keep your key customers close
There are very likely to be vital customers on your roster who don’t follow the typical supply and demand patterns. These customers may even continue purchasing from you through slower periods. As with anything in sales, relationships are key. So, it pays to foster them.
During a temporary drop in demand, consider communicating with your most robust customers. You may even convince customers to continue putting in a steady flow of orders with custom discounts or payment plans. The goal is to keep customers loyal and engaged with your business through any period.
6. Explore alternative or flexible staffing
Flexible staffing arrangements are one way to help mitigate any potential side effects from a drop in demand. In the long term, hiring and laying off large amounts of staff isn’t recommended. Instead, we would opt for an option that makes staffing flexible and easy to arrange during slow periods.
For example, you can offer part-time work or temporary furloughs to some employees during the slower seasons. Better yet, you can offer to cross-train some of your top performers so they can handle other tasks. The benefit is increased retention alongside the ability to handle demand dips.
7. Maximize your efficiency
This option is highly recommended since it allows you to maintain profitability while increasing the odds that your business will emerge stronger after demand picks back up. Look at how you can optimize your business operations.
Whether implementing cutting-edge automation technology or making strategic cuts in your overhead expenses, becoming leaner is often a boon for any sort of company. When demand is slow, this is especially true.
Demand drops are inevitable but don’t have to be catastrophic.
Fluctuations in demand are inevitable for the wholesale business, but they don’t have to be detrimental. With the right steps, you can ensure your business is well-prepared to weather any demand storm.
