Difference Between Wholesale and Retail

Difference Between Wholesale and Retail

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Rashmi
Rashmi Karan
Manager - Content
Updated on May 26, 2023 17:45 IST

Learn about the differences between wholesale and retail trade and their characteristics to understand the concepts better.

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Wholesale and retail are two important segments of the supply chain industry. Wholesalers sell products in bulk to retailers, who then sell them to consumers. The main difference between wholesale and retail is the type of buyer. Wholesalers sell to businesses, while retailers sell to consumers. Let us explore the difference between wholesale and retail, starting with their basics.

What is Wholesale? 

Wholesale is defined as one of the intermediate activities in the distribution chain of goods, which consists of purchasing and selling products in large batches between commercial organizations.

Wholesale trade is practised or carried out by companies that handle high volumes of products. In such cases, the intervention of third parties, such as distributors, is often necessary to distribute the product to places with a demand for the same. These companies supply the stores where these products are sold in large quantities.

The distribution networks of wholesale companies generate competitive advantages when there is an excellent knowledge of the market and great acceptance of the brand. Putting the products in the indicated markets will be an advantage for companies that can buy to “resell.”

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What is Retail? 

In the opposite case, the activity dedicated to marketing goods to final consumers is retail. This type of trade is the final activity of the distribution chain. Retailers sell goods in smaller quantities to the end users, for example, departmental stores, supermarkets, stores, food supplies, and stores selling electrical appliances and technological items.

Types of Retailers –

Retailers can be classified in many ways; below, we classify them according to the product line;

Speciality stores: Such stores are specialized in a specific product category. Speciality stores usually have a large assortment.

Convenience stores: Small store that sells daily convenience products.

Departmental stores: Wide variety of product lines.

Discount stores: Offers standard merchandise at reduced prices for high purchase volumes.

Reduced price retailer: They offer lower prices than other retailers, usually resulting from an agreement with the manufacturer due to excess stock, irregularities, etc.

Supermarkets: Supermarkets meet the daily household needs of consumers.

Superstores: Larger than supermarkets. They offer edible and non-edible products for routine purchases.

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Wholesale vs. Retail

Listed below are some differences between wholesale and retail –

Wholesale  Retail
Products are sold to other stores in the retail industry, not the consumer. The end user purchases the product directly from the retail store
B2B B2C
No consumer-facing activity involved Significantly concerned with offering an excellent customer experience
Not concerned with any brick-and-mortar space Need a well-planned and designed physical location for sales of goods
Fewer number of wholesalers in an industry The number of retailers is comparatively higher than that of wholesalers
Less competition Face high competition 
Offer products at a lower price when bought in bulk Retailers sell products at a higher cost after they purchase from the wholesaler

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Characteristics of Wholesale

  • Wholesale trade is based on buying and storing merchandise in large quantities and then selling it in batches to other groups.  
  • Wholesalers are not manufacturers but third parties who deal with marketing their products after buying them at a price much lower than the market price. This entails an economic advantage achieved by producing the transaction in conditions of large volumes of merchandise. Although in the case of the primary sector (agriculture, livestock, and fishing), the producers may act as wholesalers, selling their goods to distributors and intermediaries.
  • Goods are not sold to the final consumer but to an intermediary, who distributes the product to the shops, making it available to the final customer.
  • More remarkable ability to sell large quantities of the same product.
  • Wholesale trade requires less investment in marketing.
  • Operating expenses are lower compared to retail.
  • Most of the work is concentrated on managing the merchandise manufacturing process, always having large quantities of the same product in stock.
  • It is essential to manage the logistics of transport and distribution of merchandise effectively.
  • Maintains a relationship with the executives of the intermediary companies that buy their products wholesale.
  • Due to its business model, wholesalers can negotiate lower prices with manufacturers.

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Characteristics of Retail

  • Retailers profit by finding products that match their business goals and choosing the most competitively priced suppliers. 
  • Retail serves as the last link in the distribution chain. It can promote, stop or alter the manufacturer’s or wholesaler’s marketing actions and influence sales and final results. 
  • Retailers buy large quantities from manufacturers or wholesalers and sell individual units in small quantities to the general public.
  • Access and understanding the extensive experience of user tastes and habits.
  • You can sell products at a higher price per unit in retail sales.
  • By maintaining direct contact with the end customer, you have the advantage of knowing the needs and preferences of the consumer.
  • Thanks to direct consumer feedback, retailers can redesign marketing strategies.
  • Retail offers more excellent marketing opportunities for the same product, from sampling to promotional offers.
  • There are more options in digital solutions for retail, such as online stores.

Is there a third option?

Although it has historically been based on retail vs wholesale trade, new technologies and globalization have given rise to a new phenomenon growing by leaps and bounds.

Today it is possible to sell your products in a retail environment while you sell them wholesale. This lets you interact directly with customers and see your products sold at other retailers.

It is straightforward for a distributor to sell their product for less, especially since the wholesaler will not have all the retail expenses. The hybrid model appears to be a desirable option for those who can cover all the links in the chain.

FAQs

What are the benefits of wholesale?

The benefits of wholesale include purchasing goods in bulk at a lower price, selling goods to a wider range of customers, and profiting from the difference between wholesale and retail prices.

What are the challenges of wholesale?

The challenges of wholesale include - The need to have a large amount of capital to purchase goods in bulk, Having a strong marketing strategy to reach businesses and Managing inventory carefully to avoid stockouts or overstocks.

What are the benefits of retail?

The benefits of retail include - Selling goods directly to consumers, Profiting from the difference between wholesale and retail prices, Build relationships with customers.

What are the challenges of retail?

The challenges of retail include - The need to have a physical location to sell goods, compete with other retailers, and manage inventory carefully to avoid stockouts or overstocks.

About the Author
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Rashmi Karan
Manager - Content

Rashmi is a postgraduate in Biotechnology with a flair for research-oriented work and has an experience of over 13 years in content creation and social media handling. She has a diversified writing portfolio and aim... Read Full Bio