The image below demonstrates how manufacturers sell their products for a lot less than retailers. In other words, the product is sold at twice the price it was bought for.
Remember, the business still needs to pay for expenses such as staff wages, property rent, utilities, insurance, and taxes. Well, based on the fact that wholesalers buy products for less money than retailers, it might appear as if wholesaling is less expensive than retailing, right?
So, it can be a lot more expensive to start a wholesale business because you need a lot of capital. In general, the retail business model is far more competitive than the wholesale business model. And competition can be tough. As we just learned, it can be much harder to start a wholesale business because generally, you need quite a lot of capital. Remember, you need to purchase large amounts of goods, store them over time, and sell them to retailers on credit to be paid at a later date.
For example, Associated Wholesale Grocers serves more than 3, independently owned supermarkets and grocery stores alone.
With so many competitors, retailers must do everything they can to stand out. Take department store Bloomingdales that regularly advertises on Facebook:.
Instead, wholesalers rely more on traditional outreach and business partnerships. Wholesaling has fewer expenses to track and worry about. With such large clients and the majority of their income coming from repeat business, they need to focus on warehousing, shipping, and fulfillment. Both wholesale and retail businesses need to spend time managing things like inventory, cash-flow, and staff.
Finally, location is extremely important to both wholesale and retail businesses — just for very different reasons. Retailers need to be where consumers spend the most time, such as high streets and shopping malls. These locations are typically extremely expensive per square foot because of the demand. For this reason, it helps to be located next to a large intersection of highways or near an airport. There are many different types of wholesale businesses. This type of wholesaler purchases and stores large quantities of products then resells smaller quantities for a markup.
The first and foremost reason behind this is the advertisement cost, and the profit margin is high. Moreover, they include other expenses in the price of goods on a proportionate basis, like the rent of premises, salary to the workers, electricity expenses, etc.
Due to extreme competition, it is quite difficult to retain customers for a long time, so the retailer should know the techniques of handling different kinds of customers. Moreover, the goodwill of the retailer depends on these parameters.
By virtue of this, the retail business person always goes with the quality products. They reject the defective or inferior quality products and pick the best one.
The points goiven below elaborates the fundamental differences between wholesale and retail trade:. Whenever a product is produced, it does not come to us directly. There are so many hands, through which a product passes, and finally, we get it from the retail shopkeeper. In wholesale, mild competition can be seen, but in retail, there is a cut-throat competition, so it is very tough to retain and regain customers.
Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Key Differences Between Wholesale and Retail The points goiven below elaborates the fundamental differences between wholesale and retail trade: Wholesale means the sale of goods in voluminous quantity, at a low price.
The business of selling goods to end consumers in small lots at a profit is known as Retail. Wholesale creates a link between the manufacturer and retailer whereas Retail creates a link between wholesaler and customer.
There are wide differences between wholesale and retail price of a particular commodity, i. In wholesale business, there is no requirement of an art of selling the goods which are a must in case of retail business.
The size of a wholesale business is larger than a retail business. This may be a brick-and-mortar shop, an online shop, or a mix of both. You can get to know your customer base in great detail.
Reporting in your business system is also very handy here — with the various customer, sales , and product reports, you can quickly see what your best sellers versus no sellers are.
When developing your retail strategy, you can decide for yourself what price you are going to sell your product for and at what profit margin.
Take into consideration all the above factors that have been mentioned before selecting the business model. Evaluate how much control you would want to have over your brand, how much face-to-face contact with the customer you want to have, how much money you have in your bank to invest, and many more such factors. Hope this article will help you in making an informed decision. Do let us know in the comments section below. Your email address will not be published.
Table of Contents hide. Retailing 3. Wholesaling Retailing Meaning Wholesaling is the process where the wholesaler purchases products in bulk from the manufacturer. Retailing is when the retailer purchases products from the wholesaler and sells it further in small quantities to the end customer.
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