Retail vs Wholesale
The difference between retail and wholesale has to do with the quantity of the product each sell and to whom they sell. Wholesale is the vital link between manufacturers and the end consumers. It is the presence of wholesalers that lets manufacturers breathe a sigh of relief as they can sell their entire lot that they have manufactured in one go to a person and get back to business and production. One just cannot imagine the plight of the manufacturers if there had been no wholesalers. Because, if there were no wholesalers, then manufacturers would have had to wait for the next production cycle until they sold their stock directly to customers. From wholesalers, products reach retailers who sell them at a greater margin to end consumers. Though the chain of manufacturer – wholesaler – retailer – end consumer looks similar, there are many differences in retail and wholesale that will be discussed in this article.
What is Wholesale?
A person who engages in wholesale business is known as a wholesaler. A wholesaler buys in bulk from a manufacturer for retail shopkeepers. When it comes to the quantity, a wholesaler buys in bulk (he can never hope to get a single piece of a particular variety). A wholesaler can store the products anywhere as it is not end consumers who buy in retail, but shopkeepers who buy from him. These shopkeepers are interested more in their profit margin and not the place from where they are purchasing. When it comes to paying, terms are not so lenient for wholesalers as they have to purchase in cash and then pass the products to retailers in credit. The margin of profit for wholesalers is too small in comparison to retailers. A wholesaler gets 5% at best. Yet a wholesaler makes more money as he sells products in a higher quantity than a retailer who has to bear all the expenses of retail to sell one product at a time.
What is Retail?
The person who engages in retail is known as a retailer. Retailer buys from a wholesaler for end consumers. When it comes to the quantity, a retailer has more freedom as he has to buy according to his needs and requirements depending upon his stock at his retail store. A retailer always has an eye on both the MRP (Material Requirements Planning) as well as his margin while buying from a wholesaler. Though his margin, if it is more, pleases him, he is worried if the MRP is getting higher. That is because then he finds it difficult to sell to the end consumers. Retail space is always in the front, and lots of expenses are involved in maintaining the space as it has to be presentable to attract end consumers. To attract end customers, the retail space has to be attractive. A retailer does not buy goods from wholesaler strictly in cash and he gets a period of 30-45 days for clearing the invoice depending on the nature of business. Retailers often get a profit margin in excess of 50% on a single piece.
What is the difference between Retail and Wholesale?
When it comes to retail and wholesale, there is the difference in the purpose of buying, to whom each is selling, and the quantity and variety.
• Both wholesale and retail are vital cogs in the chain from the manufacturer to the end consumer.
• The wholesaler sells to the retailers. A retailer maintains costly front space to sell to the end consumers. In other words, a wholesaler buys in bulk from a manufacturer for retail shopkeepers whereas retailer buys from a wholesaler for end consumers.
• The major difference between wholesale and retail is that retail space is always in the front and lots of expenses are involved in maintaining the space. This is because it has to be presentable to attract end consumers. However, a wholesaler can store the products anywhere as it is not end consumers who buy in retail, but shopkeepers who buy from him.
• The profit margin of a wholesaler per piece may be too small than a retailer but he actually makes more money as he sells in higher quantities than a retailer.
Images Courtesy:
- The Birmingham Wholesale Markets by star-one (CC BY-SA 2.0)
- Batelco Retail Shop by Masdestructive (CC BY-SA 3.0)
