Why Indians Prefer Wholesale Business to Retail Business?
With the constant evolution in the today's world, there are significant changes in the supply chain system too. This modern system paves way for multiple ways to give the products to the consumers.
Wholesale business and retail business are two different form of todays market. Read on to this article to understand the basic differences between the wholesale and retail businesses and find out which system works better for you.
What is Wholesale?
In simpler words, wholesale is the a business where we buy the good directly from the manufacturers or distributers in bulk, and sell them to other businesses. Wholesale operates in Business to Business (B2B) type of business.
This model of business can occur in two cases. One is a business sells the goods in large quantity to other businesses. The other one is a business where you buy the products from the manufacturers and sell to the other businesses.
Wholesale Pricing
If you are wondering what a good wholesale price can be, it actually depends on which industry you are wanting to do buy products and what products you choose.
However, you can understand the meaning of the wholesale price without much research in the field. In simpler words, the wholesale price is determined by the manufacturers or wholesalers for a bunch of products.
That group of products will cost a huge amount of money for the merchant. However, if you want to break down the pricing per unit, the wholesale price is approximately the faction of the cost of retail price.
Retail Pricing
Retail pricing is the cost the customers are willing to pay for the goods at the retail stores.
Retail prices are the final price where a product is sold to the customers. This also means that the consumers do not resell the products but they can consume them.
Wholesale and Retail Examples
In wholesale, let's say a wholesaler spends one lakh rupees for 100 units of shirts. The total of ₹1 Lakh is the wholesale batch price, but the wholesale unit price can be of ₹1000 per unit. This is comparatively a lot cheaper than the retail price.
Now, for instance, let's say the retailer estimates his retail price per shirt at ₹5000. That is the profit margin of ₹4000 per shirt when you subtract the retail price and the wholesale price.
If the merchant wants to sell all the 100 shirts, she would make a total profit of ₹4 lakhs.
Is Wholesale Cheaper than Retail
There are many reasons why wholesale cheaper than retail price. The retailers are business to customer based business model.
They serve their products directly to the consumers. This service involves many things such as earning knowledge in the industry and products, retail location, accessibility, and other significant things that makes the consumer comfortable to choose the best products for cheap.
On the other hand, the wholesalers make profit by the purchase of the bulk products at the same time. In this business, the merchant do not need to worry much about the location and the convincing the consumers.
When a wholesale company is purchasing the products directly from the manufacturers, the prices are only little higher when selling it to the other businesses.
Difference between wholesale and retail
| Wholesale | Retail |
|---|---|
| Business to Business model of business | Business to Customer model of business |
| Buys the business in bulk from the manufacturer | Buys from the wholesaler in required quantity |
| Involves minimum marketing | Involves relatively more marketing such as advertising posts |
| Mostly one wholesaler has one particular product | Most of the retailers have many products in that specific industry |
| Requires warehouse, minimum labors, less utility bills, etc., | Requires more staffs, rents, utility bills, etc., |
Is it Better to Sell Wholesale or Retail
It is a good question, because selling wholesale gives you an option to reach a wide range of audiences. You do not need to worry about individual sales and increase profits.
When you are a wholesale merchant, you are free to work on increasing the profit of your brand, developing new ideas, etc., in other words, you have more time for your business.
When you are selling directly to the customers, you need more marketing team, correct location, supporting staffs, learn the customer habits. However, in wholesale business, you do not need to worry about the above mentioned categories.
Finally, when you choose to do the wholesale business, you can use your time valuable which drives profits.
Can a business be both a wholesaler and a retailer
Yes! A wholesaler can do retail business too. There are both pros and cons in taking your business to next level. In fact, you can showroom all your products in the shop and create loyal customers.
You have opportunity to reach out to wider audience in your market and at the same time, you can build online platform too.
Conclusion
By the end of the day, it is you who have to decide which business model suits best for you based on your requirements and availability.
If you enjoy being creative and staying in direct contact with the consumers, then you can opt for retail business. In retail business, you are responsible to stay in maintaining the consumer relations, wholesale dealer, supply chain demand, etc.,
If you are wholesaler, you can enjoy the benefits of not dealing the different types of customers but only dealing with various businesses. As a wholesaler, you do not need to worry about the organizing the operations, and maintaining the storefronts.
If you can proactively manage the supply chain, good communication skills with the business networks, then wholesale can be one of the best business models for you.
