If you are thinking of starting a new wholesale or retail business, it’s important to understand the difference between them to be successful. If you think like a customer, we all have played a role in wholesale and retail business models our entire lives. Yet, it is common to find the two business models confusing or complex. To be able to understand them better, we have to first understand how they work and which business model is right for them. In this article, you will learn what they are and what’s the difference between them. So, let just dive in.
What’s Wholesale and how it works? Wholesale is a process of buying merchandise through bulk purchases from distributors or manufacturers. After the buying process is over, the wholesaler stores the goods purchased in warehouses, and the last step is to resell them not directly to the end-users but retailers. Wholesalers make a profit by purchasing in large quantities at a lower price and then, resell smaller amounts at a higher price.
What’s Retail and how it works? Retail is a process of buying merchandise in bulk but not as large quantities as wholesale. They usually buy their goods from wholesalers, manufacturers, or distributors whichever seems suitable for their business and sell them directly to end-users. That’s how they do their business by providing to the end-users. In other words, retail can be said to be the last segment in the supply chain by selling directly to the consumers. So, whenever you buy for your use, you are generally buying from a retailer.
The basic difference between wholesalers and retailers: • Wholesalers buy goods in large quantities from manufacturers or distributors and store them then sell the goods to the retailers in smaller quantities. • Retailers buy goods in smaller quantities from distributors or wholesalers and then sell them to the end-users. • Wholesale is a B2B model, they purchase from a manufacturing business and sell to a retail business. • Retail is a B2C model, they purchase from a wholesale business and sell directly to the end-user aka customers.
Wholesale Vs Retail:
Pricing: wholesale buys on a larger quantity which allows them to get the goods at a lesser price than retail. It might seem like wholesale are less expensive than retail and sure they are but, they get goods at less price because they buy in a much larger quantity than retail.
Competition: retail business models are far more competitive than wholesale businesses but wholesale businesses are harder to start due to higher capital requirements.
Marketing: the key difference is that retail depends much higher on marketing due to the high amount of competition. Product display also plays an important role in retail than in wholesale