Many businesses wonder what really sets wholesale business and retail companies apart from one another, so we’ve dedicated an entire chapter in this article to take you through the pros and cons of each business model in more detail.
Retail Vs Wholesale Explained | Difference between Retail & Wholesale
What is wholesale?
Wholesale or wholesalers are companies that sell goods or services to other businesses rather than the end-user. For example, a company that sells fruit and vegetables to different grocery stores in the area would be considered a wholesaler. Most wholesalers sell bulk products at a low price and offer the buyers of these products discounts the more they purchase. A wholesaler may simply sell goods to another company for direct sales to consumers or the wholesaler may also manufacturer the goods being sold.
What is retail?
Retail refers to the sale of services or goods in a way that is received directly by the end-user. An example of a retail business is a department store. Patrons of department stores can enter the store and purchase goods directly in that store without going through a third party. A retail business is one that distributes its final products directly to its customers. Most retail businesses sell a small number of services or goods, especially in comparison to wholesale companies.
Differences between retail and wholesale
The following are several key differences between retail and wholesale:
1. Who purchases the goods or services
A key difference between retail and wholesale is who purchases the goods being sold. In a retail setting, the end-user or consumer is purchasing the product directly from the retail store. On the other hand, a wholesaler sells goods to other stores in the retail industry rather than the consumer.
Retailers are considered B2C companies, or business-to-consumer companies. This means that the products offered by retailers are directly available for purchase by consumers. Wholesalers are considered B2B companies, or business-to-business organizations. This means that the wholesaler sells goods to another business rather than to a single consumer.
2. Concern for customer experience
Another major difference between retailers and wholesalers is that retailers are significantly concerned with customer experience, whereas wholesalers typically are not. Many retail companies sell goods in a brick-and-mortar location, online or both, and they work hard to ensure their business presence attracts customers and compels them to make a purchase with the business. The retail companys physical presence, customer service and marketing efforts all play a role in the customer experience, and retailers spend much of their time and money on ensuring these factors are effective.
On the other hand, wholesalers are typically not customer-facing entities, which means they do not directly interact with customers and are not seen as a physical presence by consumers. For this reason, wholesalers are far less concerned with customer experience.
3. Level of competition
Retailers often face much higher competition when compared to wholesalers. There are often several similar retailers that offer the same or similar products, so retailers must act competitively to attract customers to their store rather than lose business to a competitors retail offerings. For example, a customer may shop around at several stores before deciding which store to purchase from.
Wholesalers, on the other hand, tend to have less competition. Whereas there are often hundreds or even thousands of similar retailers in an industry, there may only be a small number of wholesalers in that same industry. Because there are so many more retailers than there are wholesalers, wholesalers typically do not face the competitive issues retailers do when finding companies to sell their goods.
4. Price of goods sold
In general, retailers typically sell a product for a higher price than what they purchased it for from the wholesaler. Wholesalers typically offer their goods at a lower price when bought in bulk, allowing retailers to make a profit when selling these goods in their retail store. Wholesalers typically offer their products for a much lower price so that retailers can purchase these products in large quantities.
5. Control over product
Retailers tend to have more control over their products regarding how its sold, when its sold, how much its sold for and where its sold. Retailers also have the opportunity to directly interact with consumers to gain feedback and insight into how the product is performing and being received by customers.
Wholesalers have less control over their products when it comes to when and how they are sold in a retail setting. This is because once a retailer has purchased goods from a wholesaler, the wholesaler no longer has a say in what is done with those goods.
6. Number of expenses
Retailers typically have several more expenses compared to wholesalers. Retailers must take into account advertising, marketing and other ways to attract customers, all of which cost money and require time. They must also account for retail overhead, such as the cost of rent and employee wages. Wholesalers typically dont face these types of expenses as the only customer they are concerned with is the retailer. And, because wholesalers move product in bulk, overhead costs and shipping expenses are typically cut down.
7. Customer interaction
Retailers interact directly with customers much more frequently than wholesalers. Ways in which retailers deal with customers include by talking to customers face-to-face in a physical retail location, answering customer questions and concerns and processing returns and exchanges for customers.
Wholesalers do not interact with the end-user on a regular basis because the goods sold by wholesalers are sent directly to the retailer. This means that the only consumer a wholesaler typically interacts with is the retailer.
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