A guide to retail vs wholesale: what's the difference?

By Indeed Editorial Team

Published 16 June 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Identifying the differences between retail and wholesale when starting a business is critical in determining which choice is most suitable for a company's objectives and requirements. It's also vital to consider a variety of factors when determining which option appears most ideal for you. If you're interested in business development, understanding the difference between retail and wholesale can be useful. In this article, we compare retail vs wholesale, including definitions for both terms, detail their key differences and discuss the benefits of choosing both.

Retail vs wholesale definitions

To understand retail vs wholesale differences, it's useful to first become familiar with what each of these terms means, which you can find out below:

What is retail?

A retail sale refers to a sale of services or commodities in which the end-user directly receives the product or service in question. A clothing shop makes for a good example of a retail establishment. Customers at clothing shops choose products to buy by entering the store and making purchases directly from the retailer, rather than through a third party. It's a retail business where a company distributes its finished items directly to its consumers. When compared to wholesale enterprises, most retail businesses provide a limited range of services or products to their customers.

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What is wholesale?

Wholesale refers to companies that sell their products or services to other enterprises rather than directly to consumers. For example, a corporation that distributes fruit and vegetables to several different grocery shops in the region is a wholesaler in this context. The majority of wholesalers sell goods in bulk at a relatively cheap price and provide consumers with these products at discounted rates. Usually, a wholesaler sells items to another business or company for resale to customers and therefore doesn't engage in retail activities.

Related: What is retail experience? (Importance and responsibilities)

Key differences between retail and wholesale

The most significant distinction between retailers and wholesalers is that wholesalers purchase large quantities of items from manufacturers and keep them on their premises. After that, they offer them to shops in lower quantities to make a profit. In contrast, retailers purchase smaller numbers of bulk goods from wholesalers than manufacturers, or from the wholesalers themselves. Some of the key differences between retail and wholesale distribution include the following:

Responsibility for purchasing the products or services

One significant distinction between retail and wholesale includes who really purchases the goods or products. In a retail context, the end-user or customer acquires the goods directly from the retail shop. Conversely, a wholesaler sells items to other retailers in the retail sector rather than directly to the general public. In addition, retailers often find themselves categorised as B2C (business-to-consumer) companies, whereas wholesalers often find themselves classified as B2B (business-to-business) organisations. This means that the supplier sells goods to other businesses instead of to a broad range of consumers, as opposed to a retailer.

Related: How does retail work? (Including definition, types and tips)

Interest in the customer's experience

Another notable distinction between retailers and wholesalers is that retailers place a high value on the user or customer experience, whereas wholesalers typically don't prioritise this as much. The majority of retail businesses offer their products at physical bricks-and-mortar shops, on the Internet or in both locations, and they work hard to ensure that their business presence draws customers and persuades them to purchase from the company.

The physical presence and marketing activities of a retail organisation all contribute to the overall customer experience, and merchants invest a significant amount of time and resources into ensuring that these components are successful. Conversely, wholesalers don't interact with customers on a face-to-face or regular basis as they don't directly approach customers. This leads to wholesalers being significantly less concerned with the entire customer experience than retailers.

The intensity of the competition

When compared to wholesalers, retailers may face significantly more competition. Often, there are multiple identical stores that sell the same or similar items and, therefore, merchants work hard to attract people to their shop rather than risk losing business to the retail offers of a rival. In many cases, a consumer browses around numerous different shops before picking the retailer from which they want to make a purchase.

In contrast, wholesalers may find themselves encountering less competition. When compared to a retail business, where there are numerous similar or almost identical merchants, there's often only a limited number of wholesalers which supply all of them. Given the larger number of retailers compared to wholesalers, wholesalers often don't face the same level of competitive difficulties that retailers do when looking for companies to purchase their goods.

Related: Retail Manager Cover Letter: Tips and Examples

The items' selling price

Retailers offer a product at a higher price than the price at which they got it from a wholesaler or distributor. Typically, wholesalers provide their products at a lower price when purchased in bulk, enabling retailers to earn a profit while selling these products in their retail shops. Wholesalers also generally sell their items at a much lower price to encourage retailers to acquire significant quantities of these products.

Related: 10 essential retail skills

Control over the product's distribution

Retailers prefer to retain more control over their items regarding how they sell them, when they sell them, how much they sell them for and where they sell them. Retail stores can engage directly with customers to get feedback and obtain insights into how the goods function and how customers feel about them. When selling their products, wholesalers have far less influence over their products' final destination. Once a retailer has acquired or purchased products from a distributor or wholesaler, the supplier loses all control over what happens to those commodities.

Types of costs

When compared to wholesalers, retailers often incur several additional costs. For instance, retailers consider the costs of advertising, marketing and other methods of attracting consumers, all of which demand resources and effort on their part. They also factor in other retail expenses, such as the expense of retail space and staff compensation.

The only consumer that wholesalers are concerned with is the retailer, which means they don't worry about these kinds of charges. Instead, wholesalers might have higher shipping costs if they source materials or items from abroad. They may also spend more on warehouse space and have higher production costs if they make their own items.

Customer interaction

Compared to wholesalers, retailers typically interact with customers much more frequently. Retailers deal with consumers in a variety of ways, including face-to-face conversations at a physical retail shop, resolving customer queries and handling exchanges and refunds for customers. Since the items that wholesalers supply go straight to the shop or associated storage space, wholesalers don't regularly interact with the consumer. The retailer is typically the sole customer a wholesaler interacts with in any way.

The benefits of wholesale

Being a wholesaler can grant organisations access to a varied selection of outlets and the ability to reach a significant number of customers. Offering goods on a wholesale basis provides a larger consumer base through multiple retail partners, allowing the wholesaler to focus on sourcing and production activities. Increasing interest in a product and offering competitive prices makes the wholesaler more appealing to retail establishments and helps get more sales. When retailers experience strong demand for the wholesaler's goods, they're more likely to want to buy and sell them.

Wholesalers can therefore reach a greater number of customers than a single retailer. Instead of forcing customers to buy their goods only from a single retailer, whether it's an e-commerce site or a physical shop, customers can purchase the product in several locations.

Related: Why work in retail? 8 reasons retail can be rewarding

The benefits of retail

Operating as a retail store is an excellent choice for businesses who want to maintain total control over what they sell and the experience of the customer or end-user. They're also able to more quickly adapt to the demands of consumers by sourcing items from multiple distributors and wholesalers. Additionally, retailers can choose the marketing channels to utilise and employ various methods for selling to different types of consumers.

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