SEED Plan for Wholesale Trade

Ever wondered how manufacturers produce goods in huge quantities sell to consumers who purchase maybe one or two products at a time? How is inventory managed? How are consumers assured availability of a product all the time? This important link between the manufacturers and retailers is the Wholesale Trade Industry. Wholesale companies typically procure goods in bulk from manufacturers and make them available to retailers who then take care of breaking down the bulk into smaller units that suit the needs of end consumers.

Wholesale Trade Companies

The Wholesale Trade Industry procures products from the manufacturing sectors of various industries such as agriculture, manufacturing, mining, and information industries and distributes them to downstream markets. These goods could be either durable ones such as furniture, various machinery, and equipment, metals, minerals, etc., or non-durable ones such as fruits, vegetables, and meat. In the US, the non-durable wholesale trade forms more than 50% of the industry.

What’s important about Wholesale Trade Companies?

Companies of the Wholesale Trade Industry are crucial to the economy because they act as intermediaries between producers and consumers and simplify the entire supply chain. These companies also take up the responsibility of providing technical support installation & repair services, and customer service especially for products such as consumer durables. They sometimes employ dedicated personnel to visit customers and troubleshoot problems.

Jobs in the Wholesale Trade Industry are strenuous, especially those dealing with perishables such as fruits and vegetables where employees need to work long hours to ensure timely receipt and dispatch. On average, every worker in this industry works 40 – 50 hours a week. The minimum qualification required for such jobs is a high school diploma. In the case of skilled positions in sales and marketing, higher qualifications may be needed.

The Wholesale Trade Industry is an inevitable part of the entire demand and supply cycle. Some of their specific roles are:

• Provides a regional source for bulk goods purchase for government and private institutions
• Provides a national network of distributors for the manufacturers and ensures smooth supply and availability of products
• Stores goods until consumer demand drive them to sale
• Good source of employment for unskilled labor

Forecast for the Wholesale Trade Industry

The future looks bright for the wholesale trade industry, with a CAGR (compound annual growth rate) of 9.7% for the industry in 2021, as reported by Reportlinker. This is supported by a similar forecast of 8.1% by Interindustry Economic Research Fund. These results show that with the recovery of the economy in 2021 after the downturn from COVID-19, the wholesale trade sector is expected to thrive with increased trade and movements of goods.

Types of Wholesale Trade

Companies in the Wholesale Trade Industry are broadly classified into two types based on their ownership and operations patterns:

• Agents and brokers: These companies procure goods from other brands and push sales based on a commission system. These companies neither produce nor own the products in any way. These are common in the electronic markets.
• Merchants: These types of companies mostly deal in non-durable goods. However, merchant wholesalers in the durable market are also not unheard of. They have their network of offices and salespeople and buy and sell goods on their account.

Wholesale Trade Industry Statistics

By number of firms:

The Wholesale Trade industry is dominated by companies with 0 – 9 employees. Close to 74% of the workforce is engaged in these small-sized companies. The second most preferred category of firms is those employing 10 – 19 employees. These employ 11.54% of the entire Wholesale trade industry’s human resources. This category is closely followed by firms employing 20 – 49 employees at 8.21%. The least of them are large companies employing more than 500 personnel.

According to this data tracked over five years between 2013 and 2017, it is clear that the Wholesale trade industry mostly comprises firms that operate with less than 10 employees.

By number of employees:

Meanwhile, on average close to 43% of the workforce preferred employment in large companies operating with more than 500 employees. There has been an upward trend in this pattern since 2013. The next two preferences seem to be companies with 20 – 49 employees at 12.12% and those with 0 – 9 employees at 10.45%.

Overall, employees of the Wholesale trade industry seem to prefer employment in large companies, which makes ESOPs in Whole Trade more geared towards larger firms with a higher employee head count.

Top Jobs/ Average wages per job:

The classifications for these occupations often overlap one another, so total employment size % may result in a larger number than 100% for all jobs.

In terms of average salaries across various profiles, the Wholesale trade sector posted a 4% growth between 2017 and 2019. The average salaries of employees in this sector were $56,970 in 2017. By 2019 this reached $59,110.

The five most promising job profiles in this sector are:

• Transportation and Material Moving Occupations
• Sales and Related Occupations
• Office and Administrative Support Occupations
• Sales Representatives, Wholesale and Manufacturing
• Material Moving Workers

Transportation and Material Moving Occupations employ about 25% of the entire workforce. Since 2017 average salaries in this profile posted annual growth of 2.5-3% for the next three years. What was $35,550 in 2017 increased by 5.34% and reached $37,450 by 2019.

Sales and Related occupations are the second most sought after job profile in the Wholesale trade sector. This employs 22.98% of the Wholesale trade workforce. Between 2017 and 2019, the average salaries of this job increased from $68,920 to $70,970 posting a growth of almost 2%.

This is closely followed by Office and Administrative Support Occupations that engage 17.46% of the workforce. However, in comparison to the sales and related occupations, this profile displayed substantial growth 10% between 2017 and 2019. The average salaries in 2017 and 2019 were $38,520 and $42,470 respectively.

Meanwhile, Sales Representatives, Wholesale and Manufacturing jobs showed a similar trend in employee engagement. In 2019, this profile engaged 17.45% of the workforce. The average salaries posted a positive growth as well. In 2017, this profile provided an average salary of $72,510. This grew by 3.06% and reached $74,750 in 2019.

The fifth most preferred job type in the Wholesale Trade sector is the Material Moving workers. Another close competitor is Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products. Both these jobs employed about 15% of the workforce each. However, the average salaries of Material moving workers showed a 8% increase between 2017 and 2019, while that of Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products profile posted a 4% growth.

Between 2017 and 2019, all other profiles of the Wholesale trade sector showed a positive trend in salaries except the following:

• Top Executives
• General and Operations Managers
• Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products

There was a dip of 3.87%, 3.56%, and 2.10% in the average salaries of these profiles respectively.

ESOP in Wholesale Trade

The wholesale Trade Industry in the US mostly operates through small companies employing less than 20 employees. Most of these companies are family-run and tend to pass on to the next generation of owners. Considering the continuity in business, an Employee Stock Ownership Plan (ESOP) might be a profitable consideration, provided there is a strong second line of management.

Why is offering ESOP a better option for Wholesale Trade companies?

Workers’ compensation in the Wholesale Trade Industry must be worth it for employees to stay invested in the job. Though most job profiles are desk jobs, those in the inventory transit section are prone to injuries and stress-related health hazards. Thus an attractive ESOP plan might help the employees to stay motivated and work for the company as if it was their own. Since ESOPs are offered as part of retirement benefits, employees can retire with considerable cash after selling their shares.

SEED by Eqvista – Plan for Wholesale Trade

SEED by Eqvista is an effective guideline that companies in the Wholesale Trade Industry can use to design ESOP. SEED includes provisions for all the following work class codes of this industry:

• Business to business electronic market wholesale
• Fresh fruits and vegetables wholesale
• Industrial supplies wholesale
• Clothing and furnishing wholesale

Companies in this sector can be of varying sizes. SEED suggests that based on the position of an employee in the company, equity rewards can either be granted as a 100% time based or as a combination of time based and milestone based in varying percentages. The suggested employee pool is 10% which can be extended to 20% in the case of large businesses. Vesting schedules are set at 3 – 4 years with the 1-year cliff. Milestone vesting is also suggested as part of the plan.

Interested in SEED plans for your Wholesale Trade Business?

It is a known fact the companies offering equity rewards motivate their employees to proactively work for the company, thus ensuring high profits eventually. However, equity distribution is easier said than done. In the initial stages, only the founders are the stakeholders. But as the company grows, more employees are recruited and strategic investors are brought on board to benefit company expansion. In this situation, it is better to automate the entire equity rewards process to avoid mistakes and embarrassment. Eqvista provides the best service in this category.

Here is a brief of all our services. Be sure to checkout our cap table software and how you can get a 409a valuation for your company. For further information about this product reach us here.