Wholesale involves selling bulk Items to other businesses at a discounted cost. Retail involves selling items directly to consumers at retail cost.
One other way of clarifying the differences between wholesale and retail is by using the business wording “business-to-business” (B2B) and “business-to-consumer” (B2C).
- Wholesalers are B2B since they sell to other businesses.
- Retailers are B2C because they sell to individual shoppers.
The Way Wholesale Works
Wholesaling involves purchasing items in large quantities from distributors or manufacturers storing them in warehouses, and then marketing for sale to retailers, making a profit.
Wholesalers buy significant amounts of products at a time at a low cost and then sell the products in smaller amounts at a higher cost. For instance, a wholesaler could purchase a thousand bottles of water bottles from a manufacturer for two dollars per bottle. This would cost them two thousand dollars.
Then the wholesaler could sell fifty water bottles to twenty different retailers for six dollars a bottle—3x the price they initially bought each bottle for. After they deduct their expenses, like storage and delivery, they would be left with a profit.
Overall, Wholesalers:
- Purchase products from distributors and manufacturers in large quantities at a low cost
- Don’t sell straight to the consumer of the product
- Resell these products to other businesses in less quantities and at a higher price than they purchased them for
The Way Retail Works
A retailer purchases items in bulk from distributors, wholesalers, and manufacturers, then sells them to end consumers. They are the final business in the supply system.
Therefore, whenever you purchase something for your personal use as a consumer, you’re purchasing from a retailer. This includes grocery stores, hardware stores, and clothing shops. Additionally, retailers typically sell products individually.
For instance, a retailer could buy one hundred watches from a wholesaler at twenty dollars each. Following that, they could sell them to the public for fifty-five dollars each.
In Other Words, Retailers:
- Purchase goods in bulk from wholesalers or distributors
- Market and resell products individually to the public
Wholesaler Types
There are a lot of different types of wholesale businesses. Below are six of them:
- Merchant wholesalers.
- Sales and distribution for manufacturers.
- Discount wholesalers.
- Dropship wholesalers.
- Online wholesalers.
Retailer Types
There are a lot of different types of retail businesses. Below are six of them:
- Specialty stores.
- Online retailers
- Department stores.
- Supermarkets
- Convenience stores.
- Discount stores.
Is It Better to Buy Wholesale or Retail?
- Buying wholesale provides products at a lower cost per unit because of bulk purchasing. It’s easier for businesses or individuals requiring large quantities.
- Buying retail offers the flexibility of buying in smaller quantities and usually has a more diverse range of products, but often comes at a higher cost per unit.
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