What is wholesale? What is retail? And how are they different?
If you’re planning to start your own business selling goods, it’s important to know the answers to these questions. Fortunately, you’ll find them right here.
In the following guide, we clearly define both of these business models. And we provide examples of how each one works. Lastly, we compare the main difference between wholesale and retail so you’ll never have to wonder again.
To learn everything you wanted to know about wholesale vs retail, read on.
What Is Wholesale?
First, wholesalers typically acquire the products they sell by buying them directly from distributors, such as farms or factories. However, there are some wholesale companies who produce their own products.
When they do buy from distributors, they buy products in very large quantities at a low price-per-item. That way, they can sell to their own customers at an exceptionally low price.
Normally, wholesalers are business-to-business companies. For instance, they may sell their goods in bulk to retail stores who, in turn, sell them to customers. Or they may sell commercial/janitorial products to various businesses.
However, there are some wholesalers who sell directly to consumers. Nor do they always sell in bulk.
In fact, many wholesale companies use a combination of these tactics. For example, a company may sell wholesale men’s clothing in bulk to retail stores and also sell individual items to consumers.
What Is Retail?
Retail businesses, on the other hand, sell exclusively to individual consumers. Retailers also buy in large amounts, either from distributors or wholesalers.
But they significantly increase the price-per-item when they sell these products to their own customers. That’s how they make a profit.
They normally sell products in small lots rather than by the hundreds or thousands. That’s because the retail business model is not designed to accommodate such large orders.
For one thing, their items are specifically priced to be sold in small lots. It would be impractical for a customer to pay such a high price per item for a bulk order.
Secondly, selling items in bulk would deplete their stock of those items. Then, other customers would be frustrated over the item shortage. We all remember what a problem this was when retailers ran out of cleaning/hygiene items once COVID-19 hit.
The Difference Between Wholesale and Retail
As you can see, the main difference between wholesale and retail is their business models. Retailers follow a very specific pattern of buying in bulk and then selling in small lots at a higher price. Wholesalers have a much looser business model that allows them to sell in bulk to businesses or consumers, or even other wholesalers.
Which Business Model Is Right For You?
Now that you know the difference between wholesale and retail, which business model will you choose? Either way, use the information above to consider what type of business you want to start.
Next, check out our other helpful guides. For instance, we can teach you some money-saving budget hacks or show you the most important things to look for when buying clothes online. Find these and other great posts on our Shopping blog (under the Consumer Resources tab in our menu).