Before you start a business, it is very crucial for you to understand the difference between wholesale and retail in order to determine which option is better for your business goals and objectives. Many people out there use the terms ‘wholesale’ and ‘retail’ interchangeably. However, there is an obvious difference between them. So, in this article, we will help you to understand the complete difference between wholesale and retail. Aside from the differences, this blog has some additional concepts about them as well which are as follows.
Definition Of Wholesale
The term wholesale generally refers to the selling of goods or merchandise to the customers like retailers, industries, and other businesses in bulk, at cheap rates. The wholesaler simply purchases the goods, break them into small parts, repacks them, and sells them to the retailer. In wholesale, a wholesaler sells the goods to the retailer who sells them to the customer. Also, a wholesaler may also sell the goods directly to the customer.
In the wholesale business, a wholesaler generally does not focus on the location and appearance of the shop, and the display of products as he sells only a specific type of goods to his customer(retailers and other businesses), who purchase the products for the purpose of resale and profit. Moreover, a wholesaler is more interested in the quantity, not the quality of the products. For starting a wholesale business, an individual is required to have a considerable investment in hand. This kind of business generally does not requires promotion, publicity, and advertisement.
Types Of Wholesale
The three major types of wholesale are:
- Merchant Wholesaler- Merchant wholesaler refers to wholesalers who purchase large amounts of goods, stock them, and then sell them in smaller quantities to third parties like retailers, wholesalers, etc.
- Agent/Brokers- They do not own the goods they are selling but a bargain on the behalf of the wholesaler so as to get the best rate and commission for each sale.
- Sales and Distributors- They are the sales team and distributors who represent the manufacturers in getting the products out in the market of wholesale.
Definition Of Retail
Retail simply means selling products in small units or small lots. In other words, when the products are sold in small quantities to the final consumers or customers, for the purpose of consumption not for the purpose of resale, then this type of business is known as retail. Retailers play the role of middlemen between wholesalers and customers.
The profit margin in the retail business is high because retailers purchase products at cheaper rates and then sell them to their customers at a higher price. The price at which a retailer sells the products includes some other expenses like salaries for the workers, electricity bills, rent of premises, etc. In order to retain stability and customer engagement in the market, retailers should know different techniques and tactics for handling different types of customers.
Types Of Retailers
The three main types of retailers are:
- Department Store- It is a retail establishment(acts as a combination of small retail stores) that offers a wide variety of goods.
- Supermarkets- They offer and provide a range of food and beverage goods only to the customers. The goods they supply are related to home, fashion, electrical products, etc.
- Convenience Retailers- They provide a limited range of goods at premium rates because of the added value of convenience.
Wholesale Vs Retail(Comparison Table)
| Basis For Difference | Wholesale | Retail |
| Meaning | Wholesale refers to the sale of goods in bulk and at a low price | Retail refers to the sales of goods at higher rates and in limited quantity |
| Cost | Low | High |
| Competition | Less | High |
| Business Size | Large | Small |
| Advertisement Required | No | Yes |
| Business Outreach | Spread across different areas, cities, or states. | Limited space |
Key Difference Between Wholesale And Retail
Some of the key differences between wholesale and retail are as follows.
- The term wholesale generally refers to the selling of goods or merchandise to the customers like retailers, industries, and other businesses in bulk, at cheap rates. On the other hand, when the products are sold in small quantities to the final consumers or customers, for the purpose of consumption not for the purpose of resale, then this type of business is a retail business.
- Wholesale makes a link between producer and retailer. On the other hand, retail connects wholesalers and customers.
- While the wholesale business does not require a person with some special skills or the art of selling, a retail business requires the good art of selling.
- The size of the retail business is smaller than the wholesale business.
- There is no requirement for publicity, promotion, and advertisement in the wholesale business. On the other hand, the retail business requires marketing in order to draw customers’ attention.
- Wholesale business is spread in different areas, cities, and states in terms of outreach. On the other hand, retail businesses comparatively have confined outreach.
Conclusion
So with the above explanations, we can simply conclude that a product actually passes through many hands, and finally, we get that product from a retailer. Both of them play a very significant role in the market. The term wholesale generally refers to the selling of goods or merchandise to the customers like retailers, industries, and other businesses in bulk, at cheap rates. On the other hand, when the products are sold in small quantities to the final consumers or customers, for the purpose of consumption not for the purpose of resale, then this type of business is a retail business.
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