Learn the Differences Between Wholesaling and Retailing
Many of you wonder what are the critical differences between wholesaling and retailing. In the entire supply chain sector, wholesale and retail play a significant role in the distribution process. When a company manufactures an item, it sells the item in bulk to the wholesaler, who then further sells it to the retailer. The retailer further sells it to the end customers.
In simpler terms, a wholesaler always buys goods in bulk from the manufacturer, sells it to the retailer, who then delivers it to ultimate buyers.
Wholesaling and retailing are the primary mediators of the supply chain. If any of these are missing, the entire supply chain may get disrupted. Read on to find out the significant differences between the two and which one can suit your business the most-
What is Wholesaling?
Wholesaling is the process of selling goods to consumers such as retailers, industries, or any other entity in bulk quantities and at lower prices. A wholesaler buys products from the manufacturer in huge lots, split into smaller lots repacked further, and sold to the next party.
One key aspect of wholesaling is that it does not focus on the quality of goods; instead, it emphasizes the quantity. This kind of business does not require any publicity, marketing, or advertisement. However, there is a considerable capital investment required as the size of the company is large.
Customers of a wholesale business are spread in various cities, towns, or even in different states. Most goods are sold on credit to the customers of the wholesale business. The price of purchase on wholesale is lower as it consists of less profit margin.
What is Retailing?
Retailing is the process of selling goods in smaller lots, without any purpose of further resale, to the end-customers. Retailers can typically be called the middleman between wholesalers and end-users, as they purchase goods in bulk from wholesalers and sell them further to buyers at higher prices.
The prices are comparatively higher in retailing because there are many additional costs in this kind of business. Expenses such as marketing costs, shipping and logistics costs, salary to employees, electricity expenses, warehousing costs are all included in the retail price of a product.
To become a successful retailer, there are several factors that eCommerce business owners have to consider. Location of the shop (if you have a brick-and-mortar store), the look and feel of the store, product displays, quality of products, customer support, delivery speed are a few of the factors that has to be given much importance in a retail business, as it leaves a profound impact on the customers’ minds.
This table will give you a clear picture of the differences between the two types of business models –
Why can Wholesaling be the Right Choice for You?
If you want to reach a large customer base without much effort into marketing and advertising, wholesaling can be the right business model for you. You will be able to grow your business much faster if you’re into wholesaling, as your products will be accessible to a larger audience. And once you capture more audience, retailers will get more attracted towards your business as they will see a solid like for your goods amongst customers. Hence, they would like to stock up more of your products.
Here are a few benefits of wholesaling –
Creates Brand Awareness
Wholesaling builds awareness for your product. Instead of consumers having to purchase exclusively from a particular shop, be it virtual or brick and mortar, consumers can see your product in various outlets. It can allow a wide range of consumers who might otherwise not have been aware of your product to build a relationship with it.
Opt for Drop-Shipping
The wholesaling business model allows you to dropship. Dropshipping is a method where the merchant sells a product but doesn’t own the inventory himself. You receive the order directly, and you dispatch it straight away to the end customer. This method gives you the advantage of being a retailer, while an expert retailer handles the front end of things. You retain the ownership of the inventory.
Expand your Business Internationally
When selling goods via wholesale, it’s much faster and easier to expand into global markets. Any growth and expansion are defined primarily by your relationship with those clients who buy goods from you. If they sell globally, then so will you as you’re just getting the goods to where they need to sell them.
From another point of view, when selling via wholesale, you will be shipping goods internationally as one large container instead of sending hundreds of individual retail packages. Depending on your workflows and product costs, this could be a cheaper way of selling internationally.
Why can Retailing be the Right Choice for you?
The retailing business model is ideal if you want to retain complete control of your product lines and enjoy having a hands-on relationship with your customers. There is a lot to think about if you’re in this position, but you can respond to your customers’ demands and their potentially changing needs.
Targeted Consumer Base
You can specifically target a tailored consumer base. By being the retailer, you can personally select the most likely channels to reach customers who need and want your product. This may be a brick and mortar shop or an online presence instead of, or in addition to, your physical shop. The important thing here is to ensure you’re reporting on these sales channels so that you can make changes quickly if needed.
You can get to know your customer base in great detail. You’re dealing with them directly so that you can get a sense of their preferences and their habits, and your business can respond quickly to that. 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.
You’ll also be able to see who your best customers are, so perhaps you could target them with a personalized offer? On the other hand, you can also see which customers haven’t bought from you in, say, three months; you may want to send them a personalized email to get them to buy from you again.
Full Control Over the Brand
Having control allows you to ensure that your brand identity isn’t diluted and isn’t damaged. You’re in control of where your product is seen, how it’s presented, and what other products it’s displayed alongside. You are in the power of the product’s marketing to ensure that the messages being put out to the world are consistent with how you want your product to be viewed.
Price and Profit Margin
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. All of that profit will sit directly with you and won’t be shared with a wholesaler.
Now it’s up to you to choose the right model for your business. 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.