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Wholesale vs Retail: Key differences

Apr 05, 2024

As your business grows into the e-commerce space, you’ll have to weigh many options and make big decisions. These decisions can largely impact the way you move forward with your business. This is true in the case of deciding what the conclusion of wholesale vs retail is.

To make the best decision for your business, you want to be well aware of the difference between wholesale and retail and what the pros and cons of each option are.

What is wholesale?

If you choose to go the wholesale route for your business, you’ll be selling your products to other businesses instead of directly to consumers. The process begins with buying products from manufacturers or distributors in bulk.

However, unlike retail, which is the act of directly selling to consumers, you’ll be operating under a B2B model and not going directly to consumers. Wholesale means that you’ll instead resell these products to other businesses, also known as retailers. Retailers will then be the ones selling to end-users.

While there are many things to consider about wholesale vs retail, one important thing to keep in mind is that as a wholesaler you’ll likely be selling your products with lower profit margins compared to retailers.

That being said, wholesalers also typically sell to retailers in bulk, meaning that given the number of products sold, you could rack up significant profits.

Another thing to keep in mind is that you don’t have to be the intermediary party between the manufacturer and retailer to be a wholesaler. If your business manufactures products, you can sell them to retailers and be considered the wholesaler in this scenario.

The same theory of selling in bulk at a lower price applies to manufacturers that are also wholesalers.

What is retail?

A term commonly used by many, retail often is associated with shopping. While in the context of wholesale vs retail, the term means something more specific, the association with shopping is for good reason, too.

Unlike wholesale, retail refers to selling directly to your consumer. In the supply chain, retailers are right at the very end before the product is in the hands of the consumers.

Retailers can either buy products from a wholesaler or directly from their manufacturer. Each purchase they make will likely be in bulk to get a discounted price. Then, the retailer will resell the product to end-users at a higher price to reap profits.

When a business chooses to sell retail, the business will have to ensure that they’re executing the correct marketing strategies to attract end-users to the product. Communicating with and persuading the consumers is key to getting the business going.

Advantages and limitations of wholesale

What you choose to do in the discussion of wholesale vs retail highly depends on what you’re looking for in your business. One key advantage to being a wholesaler is that when you’re striking up sale deals with other businesses, it’s likely that you’ll have a long-term invoice and contract in place.

This assures some stability for your business. With only a handful of customers with big bulk orders, you can ensure that you have paying customers to keep a positive cash flow.

Another benefit to becoming a wholesaler when it comes to wholesale vs retail is that scaling your business can also be easier to do as a wholesaler. For one, most wholesalers won’t have to worry about a lot of marketing expenses to get the word out to consumers.

With fewer expenses, the overall cost per unit for your products will be lower. Achieving scalability and doubling or even tripling your customer base is less complicated and potentially cheaper as a wholesaler. 

However, wholesale isn’t without limitations. For one, your initial investment for inventory needs to be sizeable to be able to sell in bulk.

You’ll also have to manage the stock you have on hand, which will likely be a large volume. This means investing in storage and warehouses, which could add to your costs.

Advantages and limitations of retail

Similar to wholesale, retail also comes with its own advantages and limitations. To put it simply, wholesale vs retail is stable bulk orders vs controlled profit margins and customer perception.

When you do retail, you’ll be building more personal relationships with your customers, who happen to be end-users of your product.

Retailers have it easier than wholesalers when it comes to controlling your brand image and how consumers perceive them. There are no intermediaries involved, meaning as a retailer you will be in full control of how you are presenting yourself to consumers.

How the product is being marketed and promoted is entirely in your hands. You have authority over your brand image and with first-hand consumer data, you can easily adjust the way you market to them—deciding on pricing included.

On the flip side, marketing to consumers can be difficult, as your consumers will have diverse backgrounds and needs. You’ll have to figure out strategies that can make your product appeal to different types of consumers.

Not only that, but you’ll also have to manage consumer expectations and satisfaction, which can get complicated given the sheer number of consumers you will have to touch base with.

Wholesale or retail: Which one to choose?

Ultimately, wholesale vs retail boils down to what suits your business better and where you see your business going. There’s no right or wrong answer, and it all depends on what you’re looking for.

However, a simple way to think of wholesale vs retail is as a decision of whether you want to adopt a B2B or B2C business model. The difference between wholesale and retail is more complex than that, but it’s a good starting point for deciding whether you want to go wholesale or retail.

Some things to consider when looking at your business and weighing wholesale vs retail include the size of your business and how long you’ve been in operation. Oftentimes, small businesses won’t have the resources to purchase inventory in bulk and invest in huge storage warehouses on top of that.

For smaller businesses, a retail-based business may make more sense. You can build your brand and engage with consumers better while maintaining a manageable size of inventory. Bigger businesses, however, will want to scale fast and may look at wholesale as a way to do that.

In some cases, businesses may even find it most beneficial to do both business models instead of choosing between wholesale and retail. While it can be complicated and requires a lot of great business management, the payoff can also be worth it.

This way, you’ll have the best of both worlds and be able to take advantage of both channels.

How Volopay can help

Regardless of what you choose when it comes to wholesale vs retail, some parts of your business will remain the same throughout. For example, both wholesale and retail businesses will have to purchase goods and services from other businesses to keep their business running.

Even manufacturing wholesalers will have to purchase raw materials from another business, too. 

To make the procurement and purchasing processes easier for both wholesale and retail businesses, Volopay offers a solution that can make vendor payments simpler, faster, and automated. You can create, settle, and reconcile payments in just a few clicks on the Volopay platform.

Once you’ve listed your vendors, paying manufacturers, distributors, or resellers can happen in a matter of minutes. With powerful accounting integrations, you’ll be all set for procurement.

Spend more time adapting business strategies and brainstorming on the best way to scale your business. Build better relationships with your customer base, whether they are retailers or end-users, and ramp up your sales.

In fact, when every tedious payment process has been taken care of by Volopay, disregarding wholesale vs retail and doing both will be a lot less hassle-free.

Easily manage invoices, vendor payments and track expenses with Volopay