Wholesaling Vs Retailing: What’s The Difference?
- What Is Wholesaling?
- Major Types of Wholesalers
- What Is Retailing?
- Types of Retailers
- Wholesaling Vs Retailing
- FAQs (Frequently Asked Questions)
When we talk about wholesaling vs retailing, we can easily differentiate between the two in terms of who is on the receiving end. In wholesaling, a company buys goods in bulk from a manufacturer to resell them further, whereas, in retailing, an end customer purchases the products.
Both wholesaling and retailing play a significant role in a supply chain. It’s all connected. First, a company manufactures an item; sells it in bulk to a wholesaler, who then sells it to a retailer. The retailer further sells it to the end customers.
In simpler terms, a wholesaler always buys goods in bulk from the manufacturer, sells them to the retailer, who then delivers them 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 refers to 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 large quantities, splits them into smaller lots, repacks them further, and sells them to the next party.
One key aspect of wholesaling is that it focuses more on the number of goods over their quality. This business does not require any publicity, marketing, or advertisement. Though, the company’s large scale calls for considerable capital investment. The operations are entirely dependent on the clients your business has.
Wholesale business customers are spread in various cities, towns, and states. If you get into a wholesale company, you’ll end up with most of your goods on credit. Your purchase price will remain less as the profit margins are usually low.
Major Types of Wholesalers
The wholesalers that purchase products directly from the manufacturer are called merchant wholesalers. There is no restriction on the channel where these products are ultimately sold, offline or online. These wholesalers are commonly used in the FMCG industry or the agriculture industry.
Specialized wholesalers are those wholesalers who deal in specialised products only. For example – a used car wholesaler sells directly to other used car dealers.
As the name suggests, full-service retailers provide complete services to retailers. They generally operate in the retail market and deal in consumer durables or engineering products, taking responsibility for everything except the servicing of the product.
Limited Service Wholesalers
This type of wholesaler has a small turnover and sells products through a limited number of channels. For example, a wholesaler purchases products, stocks them and sells them online.
What Is Retailing?
Retailing refers to selling goods in smaller lots, without any purpose of further resale, to the end customers. Retailers are 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 because the retailer incurs many additional expenses. Expenses such as marketing costs, shipping and logistics costs, employee salaries, and warehousing costs are all included in the retail price of a product.
To become a successful eCommerce retailer, you need to consider the following factors:
- The look and feel of the store
- Product displays
- Quality of products
- Customer support
- Delivery speed
These factors have to be given much importance in a retail business, as they leave a profound impact on the customers’ minds.
Types of Retailers
The best thing about a convenience store is that it is located close to residential areas and hence, easily accessible to the customers. However, it’s relatively small and offers a limited range of groceries, FMCG products, etc.
Compared to convenience stores, departmental stores are larger. This is because various departments, such as food, apparel, beauty & personal care, are under one roof.
A supermarket has even more space than a departmental store, offering even more categories of products. These also include home decor, electronics and much more.
Needless to explain, a shopping mall is a space enclosing a combination of various retail stores. These retail stores share the area and do business individually. For a customer, everything is easily accessible in a single place. This results in a better shopping experience for someone who wants to purchase multiple products of multiple categories.
Retail chain refers to a chain of exclusively designed and promoted stores that deal in particular goods and services. These stores sell the same products under the same brand name, but multiple such stores are located in different regions. For example, jewellery stores by Tanishq.
Franchisee is an easier way of entering the retail sector. In a franchisee, a sizeable supporting organisation licenses a store to be owned and operated by you on its behalf. For example, Domino’s, Burger King, etc.
As the name suggests, a speciality store is a shop that offers a particular category of products such as medicines, stationery, food items, etc. The reach of this kind of store is limited to one specific retail market.
Factory outlets are those retail stores that sell the products directly to the customers at relatively low prices, without the involvement of any middlemen. Manufacturers own and operate these outlets. For example, the factory outlets of Reebok.
Wholesaling Vs Retailing
By now, you must have understood the basics of wholesaling and retailing. Coming to the point, how different are the two? This table will help give you a clear picture:
|Point of Difference||Wholesaling||Retailing|
|Meaning||A wholesaler purchases products in bulk from a manufacturer.||A retailer purchases products from a wholesaler and sells them further in small quantities to the end customer.|
|Need For Promotion||Less||More|
Why Choose Wholesaling?
Wholesaling is a suitable business model for you if your goal is to build a large customer base without much effort. You will be able to grow your business faster if you’re into wholesaling, as your products will be accessible to more customers. Once you capture an audience for your products, retailers will prefer you for their business and will stock up on more of your products.
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 products in various outlets. It can allow a wide range of consumers who might otherwise not have been aware of your products to build a relationship with your brand.
The wholesaling business model will also enable you to dropship. Dropshipping is a method where a merchant sells a product but doesn’t own the inventory. A retailer receives the order, and the wholesaler dispatches it directly to the end customer. This method gives you the advantage of retaining ownership while an expert retailer handles the front end of things.
Wholesaling makes expanding into global markets much faster and easier. Any growth and expansion are defined primarily by your relationship with those clients who buy goods from you. If they sell globally, so will you, as you’re just getting the goods to where they need to sell them.
From another point of view, you will be shipping goods internationally in a few large containers instead of sending hundreds of small retail packages when selling via wholesale. Depending on your workflows and product costs, this could be a cheaper way of selling internationally.
Benefits of Retailing
The retailing business model is ideal if you want to retain complete control of your product lines and establish a close 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 potentially changing needs.
Targeted Consumer Base
Retailing lets you specifically target a tailored consumer base. 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, an online shop, or a mix of both. An 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 to get a sense of their preferences and habits, and your business can respond quickly. Reporting and analysis are also easy. You’ll be able to see who your best customers are, so perhaps you could target them with a personalised offer.
On the other hand, you can also see which customers haven’t bought from you in months; you may want to send them a personalised email to get them to buy from you again.
Total Control Over the Brand
Having control allows you to ensure that your brand identity isn’t diluted or damaged. You’re in control of where your product is seen, how it’s presented, and what other products it’s displayed with. You are in control 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 a retail strategy, you can decide for yourself the price you will sell your product and its profit margin. The entire profit will be yours and won’t be shared with a wholesaler.
Now that you know about wholesaling and retailing in detail, it’s up to you to choose the right model for your business. Considering the wholesaling vs retailing debate, both have their pros and cons. Before choosing one, understanding how each of the two works is important.
Evaluate how much control you would want over your brand, how much face-to-face contact you wish to have with the customer, how much money you have in your bank to invest, and many more such factors. We hope this article will help you make an informed decision, and we’re happy to help you get started. Do let us know in the comments section below.
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