Wholesale and retail are both sales operations; the latter conducts direct sale, while the former conducts sale via a connecting link. This Buzzle article enlists the difference between wholesale and retail.
“My advice to new creative entrepreneurs has always been to structure your pricing so that – at wholesale, you are doing back-flips over your prices every time you sell even ONE of them. Then, double that price to arrive at your true retail price.”
― Marlo Miyashiro, Creative Arts Consulting
Sales transactions have never been a cakewalk. There are different ways in which one can sell products. The items that you buy at stores – groceries, clothes, accessories, electronics, etc., may have gone through a number of media before actually being displayed at the store for sale. Wholesale and retail are two entities that are a part of this sales distribution channel. Though both of them focus on optimum product sale, there is a difference in the way the functions are executed. The wholesale vs. retail comparison given in the paragraphs below will help eliminate certain doubts.
Wholesale
- The meaning of wholesale is to resell goods/services to the public.
- This business involves using an agent to sell merchandise to industrial and commercial users.
- Goods may be externally purchased or may be produced by wholesalers themselves.
- If you buy a large quantity of vegetables at a lesser price, you have probably purchased it directly from the wholesalers.
- They do not make a very huge profit, but comparatively, they have lesser expense as well.
- Generally, in the U.S., they are not charged sales tax. The wholesale tax may be required, however.
Retail
- Retail is the process of selling goods to the public.
- No agent is required here; retailers sell goods to the public directly (or online).
- Goods are purchased from wholesalers, displayed in stores, and then sold.
- When you buy vegetables from grocery stores, you are buying them from retailers.
- They do make a decent profit, though it is largely dependent on the sale and their personal expense.
- Retailers are generally required to pay sales tax.
Wholesale Vs. Retail
| Transaction | |
| Manufacturers are the ones who make the goods, which are sold to the wholesalers. Wholesalers sell them to other distribution channels. Thus, goods are resold at every step. | Retailers purchase goods from wholesalers. Very rarely, they may purchase goods from the manufacturers. These goods are then sold to the customers. They do not go through another re-selling step. |
| Quantity | |
| They purchase goods in a bulk quantity from the producer. They are sold in a large quantity as well. | Retailers buy goods in a large quantity, but not everything is sold to the public. They sell products in small amounts. |
| Product Quality | |
| The wholesaler has to buy bulk amounts from the manufacturer. Therefore, he cannot point out or comment on the quality of goods. | A retailer may be able to select quality products with careful precision, since he directly sells to the consumer. Also, he does not necessarily purchase in bulk. |
| Communication | |
| Wholesalers can communicate directly with the producers. | It is very rare for retailers to communicate directly with the producers. Most of the sale is conducted via wholesalers. |
| Scope | |
| It has a huge, wide scope. It spreads over towns and cities throughout the nation. | It has a limited scope; it remains in a particular area. |
| Price | |
| It always costs lesser. That is the very principle it is founded upon – less price, more goods. | Comparatively, it costs more. At every distribution channel, the price changes. It is highest at the level of retail business. |
| Conducting Sales | |
| Wholesalers need to have good entrepreneurial skills and business acumen. They need to have a certain level of salesmanship or charisma, since the sale does not take place directly in front of the consumers. | A certain level of sharp business technique is necessary to conduct sales so as to attract potential customers and help them buy the product. |
| Types of Products | |
| Wholesalers mostly deal with a special type of product. | Retailers deal in all kinds of products. |
| Payment | |
| Most of the transactions take place on a credit basis. The payment is made after the goods are sold. | The transactions take place on a direct cash basis. Payment is made directly to the retailers. |
| Location | |
| Location is not very important to wholesalers. They can be located anywhere, since they do not face customers directly. | Location is very important to retailers, since they need to face potential consumers and help effective sale of goods. |
| Capital | |
| They require a huge capital to begin with, primarily because more number of goods are sold for a lesser price. However, they need not pay for rent and associated costs. | The initial capital requirement is not so huge. However, they have to pay for rent, repairs, maintenance, utilities, etc. |
| Post-sale Service | |
| Wholesalers do not provide any sort of post-sale service, or home delivery service, or any other facility. | Retailers provide post-sale service, home delivery service, as well as other facilities. |
| Distribution Link | |
| It is the primary distribution link between producers and distributors. | It is the last distribution link. |
| Bulk Purchase | |
| Since the quantity is purchased in bulk, the business can benefit from the related economy. It has a tax-exempt status too, provided the right license is available. | It cannot avail any bulk purchase economy benefits. Also, retailers are required to pay tax. |
Wholesalers and retailers can both function as middle links, as we have seen from the information above. After all, when the wholesaler purchases goods from the manufacturer and sells it to the retailer/distributor, he acts as a middleman too. Ultimately, what matters to both of them (and most of the distribution channels) is how much business was conducted and how much profit was earned during sale.