Each business owner has a vision for their company, and this vision drives the path to success. As entrepreneurs cast the vision for their business’s future and strategically plan, an important question can determine the path of the organization: To be a wholesaler or not to be a wholesaler? Or would retail work better instead?
But what’s the difference between becoming a wholesaler versus a retailer, and how does a company know which will work best for their product distribution, target market, and overall business model? Understanding the differences, as well as the advantages and disadvantages of each, can help you make an informed decision and set up your supply chain and other merchandising logistics. Let’s get started.
The Differences Between Wholesalers vs. Retailers
There are several differences between running a wholesale business versus a retail business. One key differentiator is in the type of buyer. Simply stated, the process goes like this: The manufacturer makes the product, then wholesalers purchase that product in large quantities, and finally sell part of their bulk to retailers who sell to consumers. Wholesalers are the buyers from the manufacturers, while retailers are usually the buyers from wholesalers.
What is Wholesale?
Wholesale is a method of selling larger quantities of products at lower prices to retailers. Retailers then mark up the cost to sell to consumers. Wholesalers buy in bulk from manufacturers and are still able to make a profit, since the manufacturers sell at a lower cost and wholesalers can mark up products from their wholesale rates to sell to retailers. Occasionally, the middle step is eliminated and the manufacturer sells directly to the retailer, becoming the wholesaler.
What is Retail?
In a retail method, businesses sell products directly to the end user. Products are chosen to sell in-house at a brick-and-mortar location or through e-commerce methods like drop-shipping. These products are purchased in bulk at a discounted rate through a manufacturer, distributor, or wholesaler and then sold at a higher price to consumers. Retail acts as the endpoint in the supply chain as the product reaches its final destination — the consumer.
How Does a Business Choose to Be a Wholesaler or Retailer?
Ultimately, when deciding how to sell a product or products, there are two main choices — wholesale or retail. When looking into the best way to manage your product to your customers, there are a few things to consider:
- Which is the best option to reach your target market?
- Does one option fit your business’s overall brand identity and the products you’ll be selling?
- How much inventory will you have to sell?
Once these questions are answered, you’ll have a better vision of how to achieve the selling of your product. However, that’s likely not enough information to determine if you’ll be a wholesaler or retailer. Knowing the potential benefits and challenges of wholesaling and retailing will help to solidify your preference.
Benefits and Challenges of Wholesaling
Simply understanding the differences between wholesale and retail may not be enough to decide which fits your company best. Looking at the specific benefits and challenges each option offers will provide more clarity. The benefits of wholesaling include:
- Broad Brand Awareness
- Access to Wholesale Pricing
- Lower Fulfillment Costs
- Increased Scalability
Although the benefits of becoming a wholesaler are great, you’ll want to consider the challenges that come with the territory as well. These include:
- Taking on the Competition
- Investing in Large Quantities
- Procuring Warehouse Space
- Managing Logistics of Bulk Orders
Benefits and Challenges of Retailing
Though becoming a wholesaler has many advantages, retailing has its own set of benefits. These are:
- Tailoring to Your Market Channels
- Building a Personal Connection with Consumers
- Controlling the Brand Identity
- Adjusting Pricing Strategy
Like many things, some challenges accompany the benefits. In choosing retail, these challenges include:
- Meeting the Needs of Different Consumers
- Efficiently Distributing Products to All Consumers.
Can a Company Choose to Do Wholesale and a Retail?
At this point, you might still be on the fence. Both wholesaling and retailing might seem like the right choice for your business, and both may fit with the strategy and logistics for your company. However, with multiple sales channels, there will be more to manage like inventory, pricing, warehousing, fulfillment, consumer satisfaction, and the like. This omnichannel retail strategy will need attention to keep it running smoothly and efficiently, keeping you and your customers happy. Smart Warehousing does just that and more.
What Smart Warehousing Can Provide Fulfillment For Your Wholesale or Retail Business
Whether you’re a start-up company or a seasoned business looking to grow, Smart Warehousing is a flexible and efficient supply chain management system tailoring services to the needs of individual businesses. With years of experience, 38 nationwide locations, 12 million square feet of warehouse space, and close to 100% two-day shipping anywhere in the United States, Smart Warehousing knows the ins and outs of the supply chain.
Retail, wholesale, and e-commerce fulfillment services are seamlessly managed from strategic warehousing with real-time inventory management to specialized storage and shipping. So, no matter which business model you choose to distribute the product, Smart Warehousing can help make your vision a success. Get in touch with our team today.