One of the first steps of opening any company is deciding whether your business will sell products through a wholesale or retail market. For many new business owners, deciphering between these two terms can be challenging. What are the main differences between retail and wholesale? Can a brand be both retail and wholesale? Which business model has a better rate of success? Continue reading to learn more about the differences between these two terms below.
What Is Wholesale?
So, what is wholesale, and how does it work? Wholesaling describes the process of obtaining products from a distributor and selling those products to a third-party business. In other words, when your business focuses on wholesale, this means that you’re not selling merchandise directly to customers.
For example, wholesale honey distributors will sell bulk honey products to restaurants, cafes, and other industries that use this product. These businesses then use or sell honey to sell to customers. Since wholesaling does not sell merchandise directly to customers, many companies that use wholesale models sell various products. For example, grocery stores are a significant wholesale market.
The Benefits of Wholesale
- Grows customer reach
- Improves brand recognition
- Sell in bulk
What Is Retail?
Unlike wholesale, retail relates to businesses that sell merchandise directly to customers. In a retail business model, businesses receive products from a distributor and sell these products in-store or online. Since retail businesses sell products directly to customers, these companies often have a specific brand and brand distribution warehouse. For example, luxury clothing stores are considered retail businesses.
The Benefits of Retail
- Personalized relationship with customers
- Higher price control
- Marketing control
Which Business Model Is Better for Your Products?
Sometimes, businesses struggle to decide between creating a wholesale or retail business. While these business models are flexible, choosing a focus when first establishing a company is essential. So, how do you know which model will work better with your business? The truth is that the answer to this question can vary. Depending on your company’s industry, products, and long-term goals, wholesale and retail business models may be a better option.
As a general rule of thumb, businesses that want to expand their network of customers and sell bulk shipments of products will be better suited using a wholesale business model. In comparison, companies that reach a targeted audience and control higher prices on select merchandise will have more success selling their products in a retail environment.
We hope this guide explaining the main differences between wholesale and retail has been a beneficial resource for your company. After reading through these distinctions, consider which model will give your business the most support and success.